Under the Companies Act of 2013, there are many types of entities. Which entity will be suitable for which business will be decided after considering various factors related to the business and its operation. The most common entities that most businessmen prefer are a Private Limited Company, a Limited Liability Partnership firm that is commonly or famously called an LLP and a One Person Company, which is a newly evolved kind of entity. To understand which entity out of these three will be suitable for your business, it is really important to compare Private Limited Vs. LLP Vs. OPC. From the perspective of a business, it’s really important to compare Private Limited Vs. LLP Vs. OPC.
What is a Private Limited Company?
Under Section 2(68) of the Companies Act of 2013, the definition of the Pvt. Ltd. Company has been given. These entities can be formed with a minimum of two directors, two shareholders, and one lakh paid-up capital. The entire process of registration of this kind of entity is online, and one can complete it with the help of an expert and experienced professional who can be a lawyer, company secretary or chartered accountant.
What is a Limited Liability Partnership Firm?
The name of the entity that is a Limited Liability Partnership firm suggests that it is a kind of partnership firm. In partnership firms, partners have all the liability, and they are not separate from the partnership firm, but here in LLPs, partners have limited liabilities, just like the companies incorporated under the company law. In short, it can be said that LLP is the evolved version of the partnership firms.
What is One Person Company?
You all must heard about proprietorship firms. These are the kinds of entities that can be started by a single person. But under this kind of entity, there were no benefits like separate legal status, limited liability, perpetual succession, etc. Hence, in 2013, the concept of the One Person Company evolved, and a new kind of entity was added under the company law. Now, a single person can incorporate his company with all the benefits available to the other entities under the company law.
Comparison Among Private Limited Vs. LLP Vs. OPC
There is confusion among Private Limited Vs. LLP Vs. OPC. Through the current blog, will try to clear everything regarding the Private Limited company, LLP, as well as OPC. For businesses in the current era it is really important to under these three types of entities so that accordingly they can register their business. Given below is a table where all the important aspects of Private Limited Vs. LLP Vs. OPC is given:
Particulars | Pvt. Ltd. Company | LLP | OPC |
Governing Law | Companies Act | LLP Act | Companies Act |
Tax Applicability | 22% + cesses and surcharges | 30% + cesses and surcharges | 22% + cesses and surcharges |
Minimum Directors | Two | No limit | One |
Minimum Shareholders | Two | No limit | One |
Controlling Authority | Ministry of Corporate Affairs | Ministry of Corporate Affairs | Ministry of Corporate Affairs |
Eligibility | One director must be an Indian citizen | Any individual or corporate body can become its partner | Only the director must be an Indian resident |
Minimum Authorized Capital | Rupees One lakh | No such limit | Rupees One lakh |
Liability | Limited Liability | Limited Liability | Limited Liability |
Transfer of Rights | Shares can be transferred | The economic rights of the partners can be transferred to LLP | In such types of entities, ownership can be transferred |
Registration Authority | Registrar of Companies | Registrar of Companies | Registrar of Companies |
Time Taken | 20-25 days | 10-15 days | 15-20 days |
Mode of Creation | Online | Online | Online |
Legal Status | Separate Legal Entity | Separate Legal Entity | Separate Legal Entity |
How to Choose among the Pvt Ltd Company, OPC or LLP?
If you are starting a new business and are confused about the suitable entity type for your business, then you are on the right platform. Given below are certain points with respect to Private Limited Vs. LLP Vs. OPC. This will help you to choose a suitable entity out of these three for your business.
- Private limited companies are suitable for those businesses which are planned to be big in future. Big here means if the owner of the business wants to expand its business in future. He or she does not want to be limited in a particular area.
- If you are a single person and want to start a business in India after registering it under the Companies Act, then OPC is the best option available for you. These entities have all the benefits like perpetual succession, limited liability, distinct legal entity, etc.
- If two or more partners want to start a business but also want to take all the benefits as a corporate entity, then they must choose a Limited Liability Partnership Firm. These firms are regulated by the Limited Liability Partnership Act of 2008.
Benefits of Pvt Ltd Company, OPC and LLP
Some of the key advantages or benefits of the Private Limited Vs. LLP Vs. OPC are mentioned below:
- These are the incorporated associations
- All three of them have separate legal entities, which makes them distinct from their members
- These are the artificial people who have all the rights available as a natural person
- Transferability of rights is possible in all these three types of mentioned entities
- Liability under these three types of entities is limited up to a certain extent
- They are formed for forever, which means they have perpetual succession
Disadvantages of Pvt Ltd Company, OPC and LLP
It is a general rule, or you say that a fact that everything has two aspects that are positive and negative. Similarly, when we talk about Private Limited Vs. LLP Vs. OPC also has both. Given below are some of the disadvantages of the above-mentioned three entities:
- The doctrine of lifting up the corporate veil is one of the disadvantages of Pvt Ltd Company, OPC and LLP
- Not able to determine enemies and friends
- Sometimes, misuse of such entities happens
- Fraud and improper conduct have been conducted by the agents of the company
- Tax evasion is possible
- A company cannot become citizens of India
- A lot of formalities while getting a registration
- Complicated registration procedure
- Time taking procedure of the registration or incorporation
Conclusion
When deciding between Private Limited Vs. LLP Vs. OPC, which is incorporated under the Companies Act of 2013, businesses should consider various factors. Pvt. Ltd. Companies are suitable for those with ambitious growth plans seeking to expand beyond regional boundaries. OPCs are ideal for single individuals looking for benefits like limited liability and a separate legal entity. LLPs are a great choice for partners who want corporate benefits while maintaining flexibility. All three entities offer advantages such as separate legal status, transferability of rights, and limited liability. However, they also come with disadvantages like potential misuse, complexity, and formalities. Therefore, the choice should align with the business’s specific goals, size, and structure.