Difference between Limited Liability Partnership (LLP) and One Person Company (OPC)

Choice of Business- An Important Decision

Selection of the form of business entity is one of the most important decisions before starting a business. This decision is required to be revisited periodically as the business develops.

In this Edition we the difference between the two types of Business entity i.e.:

1. Limited Liability Partnership (LLP)

2. One Person Company (OPC)

1. Limited Liability Partnership (LLP) – Introduction

  • LLP is an incorporated partnership formed and registered under the Limited Liability Partnership Act, 2008.
  • LLP is an alternative business vehicle that gives the benefits of Limited Liability Company and flexibility of a partnership firm.
  • LLP contains elements of both ‘a corporate structure’ as well as ‘partnership firm structure’; it is many a times termed as a hybrid of a company and a partnership.
  • LLP is a separate legal entity which can continue its existence irrespective of changes in its partners.
  • LLP is useful for small and medium enterprises, in general, and for the enterprises in services sector, in particular, Owing to flexibility in its structure and operation.
  • LLP is also very suitable for professionals like company secretaries, chartered accountants, cost accountants, advocates etc. as it helps them to form multi disciplinary limited liability partnership firms.

2. One Person Company (OPC) – Introduction

  • Section 2(62) of the Companies Act, 2013 define “one person company” as a company which has only one person as member. OPC is a type of Private Company as per Section 2(68) and Section 3(1) (c).
  • Rule 3 of the Companies (Incorporation) Rules 2014 say, only a natural person who is an Indian citizen and resident in India:-
  • shall be eligible to incorporate a One Person Company;
  • Shall be a nominee for the sole member of a One Person Company.
  • Resident in India means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.
  • A person can incorporate only one “One Person Company”, at any point of time and the said person shall not be a nominee of more than a One Person Company.

Point of Differences

Difference Point LLP OPC
Applicable Law Limited Liability Partnership Act,2008 Companies Act,2013
Legal Identity LLP has a separate legal entity, separate legal existence that means limited liability of partners. OPC has a district legal entity There is only one person, Director.
Members Minimum –Two

Maximum-   No limit

Only One Person
Directors Two Designated Partners (of which one should be resident of India) Minimum –One

Maximum-  15

Share Capital No minimum requirement No minimum requirement, but if capital exceeds 50 lakh , OPC gets converted into Private Limited
Transferability

 

 Ownership can be transferred Ownership can be transferred to the nominee appointed in case of the director’s death or in capacity to contract.
Meeting of Board Not Necessary One meeting in each half year and gap of at least 90 days between the two meeting
Liability Limited Limited
Statutory Audit Unless partner’s contribution exceeds 25 lakhs or annual turnover exceeds 40 lakhs Compulsory
Annual Filing Annual accounts and Annual returns to be filed with ROC Financial Statements and Annual returns to be filed with the ROC
Nominee Not required One Nominee is required
Distribution of Profit Profit is exempt in the hands of Partners

No tax is to be paid on the distribution of profit by the LLP

Profit is exempt in the hands of Partners

OPC Private Company has to pay dividend distribution tax on dividend.

Name End with LLP End with OPC (Pvt. Ltd.)
Dissolution LLP liquidator is appointed to file the copy of the order to Tribunal with the registrar for LLP’s winding up Where the individual shareholder is not active and NOC is to be obtained from the creditors before winding up of OPC

The e-Forms to be filed for Annual ROC filling of OPC:

1. MGT-7 (Annual Return): To be filed with the ROC within 60 days from the date of Annual General Meeting (AGM).

2. AOC-4 (Financial Statements, Balance Sheet& P&L Account): To be filed within 180 days from the end of financial year.

The e-Forms to be filed for Annual LLP:

1. Form 11(Annual Return of LLP): To be filed within 60 days from the end of Every Financial Year.

2. Form 8(Statement of Accounts & Solvency of LLP): To be filed within 30 days from the end of 6 months from the closure of every financial year.

From the above comparison we can say that in the end the choice amongst the various forms of business entities depends upon many aspects such as objects of the proposed business, likely number of members, amount to be invested, scale of operations, state control, legal requirements, tax implications, advantages of one form of business over another, etc.

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Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Author- CS Aakansha Negi and can be contacted at csaakanshanegi@gmail.com

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