ELIGIBILITY:
- A Private Limited Company must have a minimum of two directors and a maximum of fifteen directors.
- It must also have a minimum of two shareholders and a maximum of two hundred shareholders.
- However, one person can act as both a director and a shareholder in the same company.
- At least one of the directors must be an Indian citizen.
COMPARISON:
Basis of Comparison |
Sole Proprietorship |
Partnership Firm |
Limited Liability Partnership (LLP) |
One Person Company (OPC) |
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No formal registration required (may register under local shops & establishment act). | Registered under the Partnership Act, 1932. | Registered under the LLP Act, 2008. | Registered under the Companies Act, 2013. |
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Usually uses the owner’s name or a trade name. | Must use a partnership name as per the partnership deed. | Must include “LLP” at the end of its name. | Must include “OPC Private Limited” at the end of its name. |
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Unlimited liability – the owner is personally liable for debts. | Unlimited liability of all partners (in general partnership). | Limited liability of partners to their contribution. | Limited liability of the single member to their contribution. |
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1 (single owner). | 2 partners. | 2 partners/designated partners. | 1 member and 1 nominee. |
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1 (only one owner). | 20 partners (except for banking firms). | No maximum limit. | 1 member only. |
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Not permitted. | Allowed in limited cases under FEMA. | Allowed with certain conditions (FEMA compliance). | Allowed with specific conditions (member must be Indian resident). |
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Not transferable; business ends with the owner. | Limited transferability – needs partner consent. | Easier transferability through agreement. | Transferable only by changing the nominee. |
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Income taxed as the individual’s personal income. | Partners taxed individually; firm also taxed separately. | Taxed as a corporate entity (30% + surcharge/cess). | Taxed as a private limited company. |
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Very minimal compliance and tax filings. | Must file income tax return and maintain accounts. | Must file annual return and statement of accounts with MCA. | Must file annual return, financial statements, and board reports with MCA. |
ADVANTAGES:
- Limited liability – Partners’ personal assets are protected as they are only liable to the extent of their agreed contribution.
- Separate legal entity – LLP is distinct from its partners, so it can own property, sue, or be sued in its own name.
- No minimum capital requirement – One can start an LLP with any amount of capital.
- Flexibility in management – Partners can decide internal rules through the LLP agreement without strict compliance.
- Lower compliance cost – Compared to private companies, LLPs have fewer formalities and regulatory filings.
- Perpetual succession – LLP continues to exist regardless of changes in partners.
- Tax benefits – profits are taxed only once at thee LLP level, and partners are not taxed again on their shares (unlike dividends in companies).
COMPLIANCES FOR A PRIVATE LIMITED COMPANY IN INDIA
To obtain a compliance certificate for a Private Limited Company, several key requirements must be fulfilled:
- The company must hold at least two board meetings in a calendar year. Each meeting should have participation from at least one-third of the total directors or a minimum of two directors, and the minutes of these meetings must be properly recorded.
- An Annual General Meeting (AGM) must be conducted every year, ensuring that no more than 15 months elapse between two consecutive AGMs.
- A statutory auditor must be appointed within 15 days of the company’s incorporation by filing Form ADT-1 with the Registrar of Companies (RoC).
In addition to the above, the company must also comply with other essential requirements, such as:
- Maintaining statutory registers of directors, members, and other key information.
- Ensuring that accounts are audited by a statutory auditor.
- Filing the Annual Return (Form MGT-7) with the RoC.
- Submitting the Financial Statement (Form AOC-4) for regulatory compliance.
These measures help ensure that the company remains legally compliant.