A COMPARATIVE ANALYSIS BETWEEN - PARTNERSHIP || LIMITED LIABILITY PARTNERSHIP || PRIVATE LIMITED COMPANY |
Nature | | PARTNERSHIP | | LIMITED LIABILITY PARTNERSHIP | | PRIVATE LIMITED COMPANY |
Structure | | Is not an entity but only a name by which the partners are known jointly | | A corporate Entity having perpetual existance | | A corporate Entity having perpetual existance |
Formation | | Formed by a Deed of Partnership | | Incorporation under MCA - process similar to Company formation | | Incorporation under MCA - process Company formation |
Conversion from one form to another | | Can be converted to LLP and to Pvt. Ltd. | | Can be converted to Pvt. Ltd. But not to Partnership | | Can be converted to LLP but not to partnership. Subject to restrictions under Income Tax Act on Pvt Ltd. Having turnoverr exceeding Rs.60 lakhs. |
Number of Partners | | cap of 20 partners | | No limit to the number of partners | | Cap of 200 Members |
Who can be partners | | Any Indl.| HUF | Firm | Company or any other person | | Any Indl.| HUF | Firm | Company or any other person | | Shareholding can be only by Indl - may be for and on behalf of another entity |
Life Span determined or perpetual | | Can be for a specific period or at will | | Can be for a specific venture | project | or to be determined on the happening of an event etc. | | It has to be perpetual and if to be wound up then thru court only |
Addmission / Removal of partners | | By writting fresh deed | | Similar to Appointment / Removal of Directors by uploading the forms | | By uploading F. No. 32 |
Constitution | | Partnership Deed | | Deed of Agreement Incorporation Certificate | | Memorandum & Articles Incorporation Certificate |
Partners Authority & Responsibility | | All partners have equal right and responsible | | Only Designated Partners have rights for policy making and responsible under the act | | Directors are policy decision makers and fully responsible for acts of ommission and commison under the act. |
Liability of Partners | | All Partners are fully liable including the personal assets | | Liability limited to the Capital Commitment, Excess capital to be treated as outside liability | | Liability limited to Share Capital Invested |
Compliances | | | | | | Under the new Companies Act, the compliances are very difficult to cope up. |
Balance Sheet formation | | No specific Schedule prescribed and no given format | | No specific Schedule prescribed and no given format | | Schedule VI prescribed format and disclosures with Directors Reports etc |
Audit Reports | Statutory Audits etc. | | No stautory Audit as in the case of Company Only Tax Audit if turnover exceeds Rs. 1 crore | | No stautory Audit as in the case of Company Audit compulsory if commited capital > Rs. 25 Lakhs Tax Audit if turnover > 1 Crore. | | Statutory Audit mandatory. Tax Audit if turnover > 1 Crore. |
Loans from Non-partners and outsiders | | No permission or resolution | | No permission or resolution | | Advance permission by filing resolution with MCA is required |
Transactions by Directors / partners | | No permission or resolution | | No permission or resolution | | Advance permission by filing resolution with MCA is required. Loan to Director/Sister Concern is prohibited under the act. |
Holding of AGM, EOGM, Directors Meeting etc and Resolutions to be passed | | No Requirement | | As may be decided by partners and specified in the Partnership deed | | AGM Mandatory EOGM for some special Directors Meeting - regulatory required and for special purposes extra |
Salary to partners | directors | | As provided in Partnership Deed - Fixed salary or Variable as per I Tax | | As provided in Partnership Deed - Fixed salary or Variable as per I Tax | | Resolutions to be passed for fixing salary and other benefits | perks and approval in certain cases from CLB |
Tax Impact | | Tax @ 30.09% on Net profit after interest and salary to partners | | Tax @ 30.09% on Net profit after interest and salary to partners | | Tax @ 30.09% on Net profit after interest and salary to directors Surcharge applicable on incomes > 1 crore |
Minimum Alternate Tax | | Applicable - AMT@ 18% | | Applicable - AMT@ 18% | | Applicable - MAT@ 18% |
Distribution of Profits after tax | | No tax of profits (after salary & Interest to partners) in the hands of partners | | No tax of profits (after salary & Interest to partners) in the hands of partners | | Dividend Distribution Tax @ 18% applicable but dividend not taxable thereafter |
Withdrawals by partners | | Yes permitted but capital should not run into (-) bal | | Yes permitted but capital should not run into (-) bal. In which case the LLP would be constrained to charge interest (if interest on capital is allowed in the deed. | | Can withdraw loans. But Dr. Bal in the shareholders or for their benefit to another firm | Indl etc - Deemed dividend sec 2(22)(e) {A very disturbing section} |