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
2. One Person Company (OPC) – Introduction
Point of Differences
|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.|
Maximum- No limit
|Only One Person|
|Directors||Two Designated Partners (of which one should be resident of India)||Minimum –One
|Share Capital||No minimum requirement||No minimum requirement, but if capital exceeds 50 lakh , OPC gets converted into Private Limited|
|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|
|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.
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 [email protected]