Proprietorship vs Partnership vs PVT LTD-LLP for business - Professionals - Legal - TIK Share
1 Likes 1892 Views

Proprietorship vs Partnership vs PVT LTD-LLP for business


CA Pulkit Sharma

2013-11-05

Often we think why to go for a private Ltd and not do business as Proprietor or Partnership.

So the comparison will show you the difference between 3 and then you decide which one is better.

Points

PVT Ltd/LLP

Proprietorship

Partnership

Liability

Limited

Unlimited

Unlimited

Transparency

Yes

No

No

Regulated by any authority

Yes by ROC

No

No

Compulsory Reporting to Controlling Authorities

Yes

No

No

Primary Information available in public domain

Yes, available at MCA web portal

No

No

Compulsory Audit

Yes, as Companies Act every company must get its Accounts audited every year.

No

No

Investment Options

Open and easy to get but for LLP VC funding is difficult as its not possible to issue shares.

Closed

Closed

Trustworthy by Banks

High

Very Low

Low

Chances of Disputes among founders and Effect on Entity Structure

No effect on Entity, Shareholders can transfer shares anytime

Only single person so no dispute among founders

If dispute arises, the disposal would affect the continuation of Firm.

 

Please discuss other Differences and advantages that you think PVT LTD have.

CA Pulkit Sharma

2014-10-08

You can read the further details on the article published regarding business organisations.

Reply

Rahul Rai

2014-10-08

A great post to read. It is very difficult for laymans to understand the difference between different type of business entities.

The most confusing term is "Limited Liability". I think if pulkit can come up with a full length article on Limited Liability concept.

Reply

CA Pulkit Sharma

2014-10-08

Sure will try to write on limited liability concept.

Reply

Anushrut Khare

2014-12-27

Great post. But would like to know if we start with Proprietorship then structure our business then covert to Limited Liability. Can we do that? 

Reply

CA Pulkit Sharma

2014-12-27

Yes its possible to form a LLP and take over the business of proprietorship. But if you deal in commodities, VAT registration has to be taken fresh along with other registration, this doubles your expenses.

Reply

Anushrut Khare

2014-12-27

Great post. Can we know if we can first register for Proprietorship, structure our business, then convert to Limited Liability? As we are very short on funds now we have to be very cautious in financial situations. Moreover what's the approx. cost difference between the two registerations? 

Reply

Anushrut Khare

2014-12-27

My bad for posting it twice as it was showing error after I hit submit. 

Well, we will not be selling commodities. We will be "Affiliate Marketing" based i.e We will get some percentage of the selling price if someone is redirected from our site to vendor site like Flipkart or Amazon. So you think Proprietorship registeration will be better for a start? 

Reply

CA Pulkit Sharma

2014-12-27

Yes you can convert. Regarding cost part, for proprietorship registration there is no cost. You can start business on your name.

LLP registration costs 20,000 and cost may be high or low depending on the cost of professional you hire.

Other costs such as Tax registration is common for both and will not make a difference.

However if you convert your proprietorship later, cost registrations has to be taken again and cost impact would double.

Here is table to show you cost difference:

COST

LLP

Proprietorship

Registration

Around 20,000 (+- depending on professional fees)

Nil

Tax

Same(+-10%)

Same

Converting to LLP

Nil

Around 20,000 (+- depending on professional fees)

+

Tax registration again

Reply

CA Pulkit Sharma

2014-12-27

Yes start with your own name. You will requrie service tax registration once your receipts cross 9 Lakhs.

Reply

Anushrut Khare

2014-12-27

Ok thanks! Really helped. Will contact you for further querries.  :) 

Reply

CA Pulkit Sharma

2014-12-27

Sure, I regularly write on this site. Ready to help anytime.

Reply

Vaibhav Shukla

2014-12-27

Hi,

 

I'm from UP and sattled here in Bangalore with family.  Can I register my Proprietorship here?  Please also suggest where to register.

Regards,

Vaibhav

Reply

Vaibhav Shukla

2014-12-27

Hi,

 

I'm from UP and sattled here in Bangalore with family.  Can I register my Proprietorship here?  Please also suggest where to register.

Regards,

Vaibhav

Reply

CA Pulkit Sharma

2014-12-28

For proprietorship you dont have to register anywhere, just start your business. If you deal in commodities, you have to get VAT registration and if in services then service tax.

Service Tax registration is required if your receipts cross 9 lakhs in a year (April to March).

Reply

Vaibhav Shukla

2014-12-28

We are planning to come up with a website where we will be promoting some business (modelling and fashion) and charge for our services. 

Please tell me if I can start with propritership and also let me know if I need to register anything.  From now till march, i dont believe we will be profitable (forget about 9 lacs).

 

TIA,

Vaibhav

 

 

Reply

Vaibhav Shukla

2014-12-28

We are planning to come up with a website where we will be promoting some business (modelling and fashion) and charge for our services. 

Please tell me if I can start with propritership and also let me know if I need to register anything.  From now till march, i dont believe we will be profitable (forget about 9 lacs).

 

TIA,

Vaibhav

 

 

Reply

CA Pulkit Sharma

2014-12-28

I understand, its some sort of affiliating marketing. You can do it on your own name, no need to register. Once your business starts making profit, go for company or other registration.

However opting for company or proprietorship depend on many other factors listed on top.

Reply