Difference Between Private Limited Company & Limited Liability Partnership

Posted by rajat sharma on August 17th, 2022

Private limited company is a company which is owned, controlled and financed by a private businessman. There is no government participation in them. Reliance industries, Tata Motors, Bharti enterprises are examples of Private Limited companies. Whereas Limited Liability Partnership is a Partnership in which the liability of the partners are Limited to the amount of capital contributed by them. Examples of LLPs include dental offices, auditing businesses, law firms, financial advisory services, business consultancies, and real estate agencies.

What is a Private Limited Company?

One of the most popular types of legal entities in India is a Private Limited Company (PLC). The Companies Act of 2013 governs private limited companies, which must have a minimum of two directors and two shareholders, one of whom must be an Indian citizen and resident.

To register a company in India, you must have the following minimums:

• Two Directors, one of the two directors, should be an Indian national or resident.

• Two shareholders, Directors, may also be shareholders.

• A registered office in India 

Private Limited Company Registration Process

The stages for pvt ltd company registration in India are as follows:

Step 1: RUN Name Approval 

To secure the company name, a request for approval of the company name must first be made to the Ministry of Corporate Affairs. The name approval application may present one or two names with business aims. You may submit one or two different names if name permission is declined. The MCA typically approves all name approval requests in less than five business days.

Step 2: Directors' digital signature:

Wet signatures are prohibited by the Ministry of Corporate Affairs in India. A digital signature certified by an Indian Certification Authority must be used on all signatures for filings with the MCA. Therefore, before incorporation, digital signatures from the Directors are mandatory.

Lawgical India may help secure a digital signature for the Directors from a recognized certifying body. The Directors must submit a copy of their identity document and successfully complete a video KYC process to receive a digital signature. A nearby embassy must apostille the provided passport and other documents if the Director is a foreign national.

Step 3: Submitting the Incorporation Application

Once the digital signatures have been gathered, you may submit the incorporation application in the SPICe Form to the MCA with all pertinent attachments. The company's Memorandum of Association (MOA) and Articles of Association (AOA) are filed with the application for incorporation. The Incorporation Certificate and PAN of the company are issued if the MCA deems the incorporation application to be complete and acceptable. The MCA typically accepts all incorporation petitions in less than five working days.

What is Limited Liability Partnership? 

A limited liability partnership is one in which each partner's liability is limited to the amount of capital they have invested. It is a body corporate with a separate legal identity from its partners. A partner's personal property is not held responsible for the firm's debts. Per the 2008 Limited Liability Partnership Act, such partnerships are required to register. It must keep yearly financial records that accurately portray its current situation.

Limited Liability Partnership registration process

The following are the steps in the LLP registration process:

Step 1: Obtain Digital Signature Certificate: 

Before beginning the Limited Liability Partnership registration process, you must request a digital signature certificate for each designated partner. These qualifications are offered by certifying agencies that the government recognizes. It is essential because all the documents required for online LLP registration are completed digitally and require the partners' digital signatures.

Step 2: Apply for a Director Identification Number (DIN):

All partners or those who intend to be appointed partners of the potential LLP must apply for a Director Identification Number (DIN) (DIN). Along with Form DIR 3, one must submit a scanned copy of all supporting documentation that a Chartered Accountant has authorized, Company Secretary, Cost Accountant, or Advocate.

Step 3: Reservation and approval of names: 

A free name search on the MCA website is required before quoting a name during the creation process. The system will present names that are very similar to those of the current LLPs. Only names that differ from those already in use and are not judged undesirable by the Central Government will be approved by the Registrar. At this point, picking a name that stands out from those currently in use is easier. 

Step 4: Incorporation of LLP: 

To incorporate a limited liability partnership, fill out an application. The form must be filled out completely and accurately. After being filled out, the form will be digitally signed by the person whose DIN is stated in the incorporation documents. A Chartered Accountant, Company Secretary, Cost Accountant, or Advocate also must sign it digitally. 

The LLP would be registered if the form were submitted and approved by the Registrar. A preset registration fee must be paid depending on the partners' investment in the potential LLP. It takes between 15 and 20 days to finish.

Step 5: File Limited Liability Partnership Agreement (LLP):

Create an LLC agreement that outlines the rights, responsibilities, and liabilities that exist between the LLP and the registered partners as well as among them. The LLP agreement must be submitted within 30 days of the incorporation date. You must print on stamp paper with a different value for each state.