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(Disclaimer - Below is a general write up
prepared on 1st Nov, 2012 for overall guidance only. Please
consult before relying on same)
- www.CAnaresh.com
-
Naresh
Shah & Co (NSC)
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CA
Naresh Shah - 02264500000
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BASIS OF
DIFFERENCE
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Partnership
firm
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COMPANY
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LLP
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Registration
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Optional with the registrar of `firms
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Compulsory with ministry of
corporate affairs
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Compulsory
with ministry of corporate affairs
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Documentation
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Partnership deed
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Memorandum articles to be filed
with ROC
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Incorporation Documents (LLP
agreement etc) is required to be filed.
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Minimum no
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2
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2
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2
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Maximum
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10 or 20 (depending on banking
activity)
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50
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No limit
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DSC
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Not compulsory but preferable to
have
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Required
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Required
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Compliance
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Managing partners
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Designated partners
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Directors/secretary
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Nomenclature
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No words, generally M/s. stated at
start
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Name to contain 'Limited' or
'Private Limited' as suffix
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Name to contain 'Limited Liability
Partnership' or 'LLP' as suffix
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Submission of main documents
regarding LLP
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Partnership deed to be made and
registered with Registrar of firms
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Articles are to be filed at the
time of incorporation. Private company must have Articles. In case of public
company, provisions of Table A apply if there are no Articles.
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LLP Agreement is required to be
filed later. In absence of LLP Agreement, mutual rights and duties will be as
specified in first schedule to LLP Act. Thus, practically, each LLP must have
LLP Agreement, though not mandatory.
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Management of the Firm
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Generally Working Partners have
full powers
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Individual director or member does
not have authority in conduct of business of company.
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Designated Partner to look after
statutory compliances. Otherwise, all partners can look into affairs of the
LLP. However, LLP can delegate powers to some partners who may be designated
as 'Managing Partner', or 'Executive Partner' or any other name.
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Remuneration
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It is restricted as per 40(b) of
I. tax Act, 1961
Taxed as business income in hands
of recipient partner
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No Restrictions on remuneration to
director for pvt.ltd company as per Companies Act.
Remuneration taxed as salary in
hands of recipient partner
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It is restricted as per 40(b) of I. tax Act, 1961
Taxed as business income in hands
of recipient partner
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Interest
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Maximum limit - Interest
restricted as per 40(b) of Income tax act, 1961
Taxed as business income in hands
of recipient partner
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Maximum limit - No Restrictions on
Interest to director for pvt.ltd.company as per Companies Act.
Remuneration taxed as salary in
hands of recipient partner
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Maximum limit - It is restricted
as per 40(b) of I.tax Act, 1961
Taxed as business income in hands
of recipient partner
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8% presumptive taxation law
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Applicable
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Applicable
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Not-applicable
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Basic Income Tax rate (excluding
sur/cess)
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30%
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30%
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30% (no surcharge for LLP)
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Alternate tax (alternate to basic
tax stated above)
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Nil
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Its called Mat. Mat rate 18% +
applicable surcharge/cess
Applicable only if tax payable as
per normal tax is less than mat
Companies are liable to mat on
exempt incomes like long term gains & dividned income.
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Here, its called AMT. rate 18% +
applicable cess. Surcharge not applicable to LLP
Where regular tax is less than
amt, adjusted total income (ATI), ATI will
be total income and tax will be payable on this ATI
ATI is normal income plus chapter
VI(c) & 10AA deductions (for seepz
etc)
LLP not liable to pay AMT on
income exempt from tax
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Governing law in taxation
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Income tax act
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Income tax act
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LLP will be treated as partnership
firm under Income tax act, 1961
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TDS on remuneration to partner/director
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No
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Yes
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No
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TDS on interest to
partner/director
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No
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Yes
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No
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Deemed dividend / repatriation / withdrawal
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No Dividend distribution tax (DDT)
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Loan to directors/related parties
may invite income tax on dividend called DDT (which is currently 15% plus
applicable sur/cess)
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NO DDT as such. Prima facie,
withdrawal from LLP is easier than company.
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NRIs can invest?
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Yes, but on non-repatriation basis
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NRI & Non-NRIs can invest (no
compulsory need of any Indian resident)
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Yes, but one resident is required
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Raise public issue?
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No
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Yes
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No
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Status in eyes of stake holders,
banks etc.
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Not as high
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Highest
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Medium
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FDI
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Not possible on repatriation basis
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Possible except in agricultural,
real estate business,etc
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Possible except in agricultural,
real estate business and cases where conditions to be satisfied are not permitted,
etc.
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Provision relating to Redressal
(example- oppression on minority shareholders etc)
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No such provision generally
required
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Elaborate provision relating to
redressal in case of oppression and mismanagement
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No provision relating to redressal
in case of oppression and mismanagement. Generally, other laws of natural
justice have to be resorted to in this case.
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Specific Provision for nidhis/NBFC
etc.
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None in general
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Specific provisions relating to
nidhis, NBFC
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No specific provisions relating to
nidhis, NBFC
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Liability of partners
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As such, unlimited liability
Generally, joint and several
liability
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Generally, upto paid up share
capital
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Partners are not liable for each
other’s act, There is no concept of joint and several liability.
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Personal liability
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Generally yes
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Generally no personal liability
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Generally no personal liability
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Public inspection of yearly
accounts
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Accounts cannot be inspected as
such.
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Accounts can be inspected on mca
portal by paying small Rs.50
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Accounts can be inspected on MCA
portal by paying small Rs.50
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Famous for
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All small entities/start ups/old
entities
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For all
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Slowly getting famous. Perfect for
professional firms like CAs, CS, Doctors etc.
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Can it hold property as per
Registration Act?
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Yes
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Yes
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Yes, LLP can also hold property.
Registration
Act does not
recognize LLP as an entity to hold any properties. (However, Registration act may be amended in near future).
This is just a procedural problem as
LLP is a relatively new act.
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Tax Audit requirements
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Only if turnover exceeds rs.1
crore for businesses & Rs.25 lacs for professionals
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Only if turnover exceeds rs.1
crore for businesses & Rs.25 lacs for professionals
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Only if turnover exceeds rs.1
crore for businesses & Rs.25 lacs for professionals
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Other audit like annual statutory
audits
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No
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Yes
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Required only if turnoer exceeds Rs.40
lacs or contribution exceeds Rs.25 lacs
Plus annual return to be filed in
60 days of close of year
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Annual Registrar of company
filings of accounts etc.
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No
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Yes
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yes
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Change in Management
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Partners can retire as per
retirement deed
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Notice of change of director is to
be given by company.
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A partner who has resigned from
LLP can himself file notice of his resignation to ROC.
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Shares Certificate Etc
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Not required
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Share, share certificate, register
of members, transfer and transmission of shares etc. required.
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No requirement of share and share
certificate. Hence, no question of its issue, allotment, transfer,
rectification of register etc.
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Conduct of Business
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No meetings required
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Board meetings, general meetings
are required.
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No provision for regular meeting
of Board and members. Partners can decide when and how to meet, delegation of
powers etc. Provision is made that LLP should maintain minute book
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Treatment of Secured Loan
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Generally no requirement
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Charges are required to be
registered
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No provision for registration of
charges.
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Maintenance of Records
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No records, but accounts to be
generally maintained
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Elaborate records and registers
are required to be maintained
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No records and registers have been
prescribed, but general accounts to be maintained.
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Restriction on Board or Partner
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Generally partners are free to
enter into any contract
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Restrictions on Board regarding
some specified contracts, contracts in which directors interested,
investments, loans and guarantees to other companies
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Generally partners are free to
enter into any contract
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Disclosure
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No requirement except Accounting
standard (AS)18 mandates related party transactions
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Disclosures required of contracts
where directors are interested
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No requirement of disclosures
required of contracts where partners are interested, unless specified in LLP
Agreement.
However, AS 18 mandates related
party disclosures
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