Comparison of Proprietorship vs Partnership vs LLP vs Private Limited
When beginning a new firm, one of the first legal decisions an entrepreneur makes is to choose a business entity. With the passage of the Limited Liability Partnership Act and the Companies Act of 2013, business entities now have more options. As a result, the Entrepreneur or Promoter must grasp the benefits and drawbacks of each company organization before selecting the best one. Few For-Profit structures, such as a proprietorship, Partnership, limited Partnership, and private limited company, are suitable for most entrepreneurs. Proprietorship, Partnership, LLP, and Private Limited are the types of entities we are comparing in this article.
| Features | Proprietorship | Partnership | LLP | Private Limited Company |
| Registration | Proprietorship does not require any legal registration. | There are two types of partnerships: registered and unregistered. It is not necessary to note your collaboration. If your Partnership is registered, it is governed by the Partnership Act of 1932. | The Limited Liability Partnership Act of 2008 will be used to register LLPs with the Ministry of Corporate Affairs. | Under the Companies Act of 2013, a private limited company will be registered with the MCA or the Ministry of Corporate Affairs. |
| Name of the Entity | The Proprietorship Proprietorship after the Promoter’s choice is not required to obtain permission before using a name; nonetheless, trademarked names should be avoided. | The Promoters might name the Partnership. Although permission is not required before using a name, trademarked names should be avoided. | The Registrar of Companies must authorize the Promoter’s name. Promoters that are not identical or similar to those of another business or LLP, as well as names that are not objectionable or unlawful, would be permitted. The entity’s name will include the terms “Limited Liability Partnership” or “LLP” at the end. | The Registrar of Companies must authorize the Promoter’s name. Promoters that are not identical or similar to those of another business or LLP, as well as names that are not objectionable or unlawful, would be permitted. The entity’s name will conclude with the words “Private Limited Company.” |
| Legal Status of the Entity | The Promoter is the Proprietorship since the Proprietorship was established as a distinct legal organization. | The promoters are individually accountable for the Partnership’s liabilities. The Partnership is not recognized as a separate legal entity. | The LLP Act of 2008 defines a limited liability partnership as a separate legal organization. An LLP’s partners are not individually accountable for the LLP’s obligations. | The Companies Act of 2013 defines a private limited company as a separate legal entity. Its directors and Shareholders are not individually accountable for the company’s debts. |
| Liability of Members | The Proprietor has limitless responsibility and is accountable for the Proprietorship. | Limitless responsibility and are accountable for the Partnership’s results. | Partners are only accountable for the level of their contribution to the LLP and have limited liability. | Shareholders have limited responsibility and are only responsible for the value of their shares. |
| Minimum Number of Members | A single person can be a member of the group. | To form a partnership, you’ll need at least two people. | To form an LLP, you’ll need at least two people. | To form a Private Limited Company, you’ll need at least two people. |
| Maximum Number of Members | Only one individual may be a member. | There may only be a maximum of 20 partners. | A limited liability partnership (LLP) can have an infinite number of partners. | The maximum number of shareholders or members in a Private Limited Company is 200. |
| Foreign Ownership | Starting a Proprietorship is not permitted for foreigners. | Foreigners are prohibited from forming a partnership. | Foreigners can invest in a limited liability partnership (LLP) only with the authorization of the Reserve Bank of India and the Foreign Investment Promotion Board (FIPB). | In most areas, foreigners are permitted to participate in a Private Limited Company using the Automatic Approval procedure. |
| Transferability | It is not transferable. | It is not transferable. | The ownership can be transferred. | Ownership transfer can be done by way of the transfer of shares. |
| Existence | A Proprietorship business’s survival is contingent on the Proprietor. | The Partners are responsible for the Partnership’s affairs; if a partner, the relationship may be at risk of breakup. | The existence of an LLP is not contingent on the presence of its partners. Only voluntarily or by order of the Company Law Board may it be dissolved. | A Private Limited Company’s existence is not contingent on the presence of Directors or Shareholders. It may be disbanded only voluntarily or by Regulatory Authorities. |
| Taxation | Taxed as an individual, depending on the Proprietor’s total income. | Profits from a partnership are the Proprietor’s plus any relevant surcharges and cess. | Profits from an LLP are taxed at 30% plus any relevant surcharges and cess. | Profits from a private limited company are taxed at 30% plus any relevant surcharges and cess. |
| Annual Meetings | There are no legal requirements to hold yearly statutory meetings. | There are no legal requirements to hold yearly statutory meetings. | There are no legal requirements to hold yearly statutory meetings. | Board Meetings and General Meetings should be conducted on a periodic basis. |
| Annual Filings | There are no obligations to file an annual report with the Registrar of Companies. The Proprietorship’s | commitments to the Registrar of Companies for yearly reports. A partnership return is required for the Partnership. | Each year, LLPs must file an Annual Statement of Accounts and Solvency as well as an Annual Return with the Registrar. The LLP must also file an income tax return. | Every year, the Registrar of Companies requires Private Limited Companies to produce Annual Accounts and Annual Returns. The Private Limited Company must also file an income tax return. |
