CHOOSE YOUR BUSINESS

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Features Company Partnership firm LLP Sole proprietorship
Registration Compulsory registration required with the ROC. Certificate of Incorporation is conclusive evidence. Not compulsory. Unregistered Partnership Firm will not have the ability to sue. Compulsory registration required with the ROC No registration required
Name Name of a public company to end with the word “limited” and a private company with the words “private limited” No guidelines. Name to end with “LLP”” Limited Liability Partnership” No guidelines.
Capital contribution Private company should have a minimum paid up capital of Rs. 1 lakh and Rs.5 lakhs for a public company Not specified Not specified Not specified
Legal entity status Is a separate legal entity Not a separate legal entity Is a separate legal entity Not a separate legal entity
Liability Limited to the extent of unpaid capital. Unlimited, can extend to the personal assets of the partners Limited to the extent of the contribution to the LLP. Unlimited liability. Liability extends to the individual’s private property.
No. of shareholders / Partners Minimum of 2. In a private company, maximum of 200 shareholdersNow One person company is also allowed in new Companies Act, 2013 2- 20 partners Minimum of 2. No maximum. 1
Foreign Nationals as shareholder / Partner Foreign nationals can be shareholders. Foreign nationals cannot form partnership firm. Foreign nationals can be partners. NA
Meetings Quarterly Board of Directors meeting, annual shareholding meeting is mandatory Not required Not required. NA
Annual Return Annual Accounts, Annual Return and Disclosure of Interest to be filed with ROC No returns to be filed with the Registrar of Firms Annual statement of accounts and solvency & Annual Return has to be filed with ROC NA
Audit under act Compulsory, irrespective of share capital and turnover Not required Required, if the contribution is above Rs.25 lakhs or if annual turnover is above Rs. 40 lakhs. (u/r 24 of LLP 2009) Not required
How do the bankers view High creditworthiness, due to stringent compliances and disclosures required Creditworthiness depends on goodwill and credit worthiness of the partners Perception is higher compared to that of a partnership but lesser than a company.
Dissolution Very procedural. Voluntary or by Order of National Company Law Tribunal By agreement of the partners, insolvency or by Court Order Less procedural compared to company. Voluntary or by Order of National Company Law Tribunal
Whistle blowing No such provision No such provision Protection provided to employees and partners who provide useful information during the investigation process.
Taxation
Tax rate The income is taxed at 30% + surcharge+cess The income is taxed at 30% + cessNo Surcharge The income is taxed at 30% + cessNo Surcharge Slab RatesNo Surcharge
Tax on book profit 115JB(1) Chapter – XII-BA Company is required to pay a minimum alternate Tax (MAT) on its book profit, if the income tax payable on the total income, as computed under the income tax act  in respect of any previous year relevant to the assessment year is less than the MAT.Rate18.5% + Surcharge (5%) +Education Cess (3%)  i.e. 20%

 

Here book profit means as per Profit and loss accounts with some adjustment given in Expl 1 of Sec 115Jb(1)

No such tax Section 115JC Chapter XII-BA w.e.f. AY 2012-13, FY 2011-12Where the regular tax payable for a previous year by a limited liability partnership is less than the alternate minimum tax payable for such previous year, the adjusted total income shall be deemed to be the total income of such limited liability partnership and LLP shall be liable to pay income tax on such total income.“Adjusted total income shall be total income as increased by the deductions claimed under any section included in chapter VI-A C (deductions in respect of certain income and deductions claimed under section 10AA (Deduction available to SEZ units). 

Regular Tax means the tax payable under the income tax act for LLPs excluding the provisions of chapter 115JC.

 

Rate

18.5% +Education Cess (3%) i.e 19.05%

 

(Surcharge is not applicable on Limited Liability Partnership)

 

No such tax
Remuneration to Director/Partners Maximum 11% of the net profit Maximum Allowable remuneration

On First Rs 3,00,000 of book profit or in case of loss Rs 1,50,000 or at the rate of 90% of the book-profit, whichever is more
On the balance of book profit at the rate of 60%
Maximum Allowable remuneration

On First Rs 3,00,000 of book profit or in case of loss Rs 1,50,000 or at the rate of 90% of the book-profit, whichever is more
On the balance of book profit at the rate of 60%
Remuneration to Director/Partners – Taxable under which head Salary Business and Professional income Business and Professional income NA