Private Limited Company has perpetual succession. Private Limited Company has a common seal. Private Limited Company can possess property in its own name. Private Limited Company can file a suit in its own name and vice versa. Private Limited Company is run by its representatives known as directors, which are appointed by the members of the company at the Annual General Meeting. Key Differences Between Partnership Firm and Private Limited Company A partnership is an agreement between two or more persons who come together to carry out a business activity and share the outcome of this activity among themselves.
A company is an artificial person having the separate identity, common seal and perpetual succession which is formed and governed by a law. Private Limited Company or Partnership firm? Home » Private Limited Company or Partnership firm? Which one should you choose and go for?
Here is an overview for both the business entities: For a new business, the partnership structure is the simplest and most basic structure.
Advantages a Partnership has over a Company: A simple agreement between two or more people is the only pre-requisite to start a partnership firm.
For the Company, there are a few procedural formalities to be fulfilled. While it is only the partnership agreement that governs the partners. This is why the flexibility and freedom to take decisions is higher. Termination of a partnership firm is easier than the Company. It is so because of the agreement which is valid only between the partners regarding the closure is enough.
Company closure will require everyone to follow a proper winding up procedure has to be followed. The company holds a greater amount of credibility compared to other business structure due to its high compliance requirement. Raising funds is easier internally and even from external sources. This table will help you gauge and decide which structure is suitable for your business. Private limited Company Partnership firm 1. Both registered and unregistered partnerships are legal, but the registered entity is preferred.
This pass-through model ensures that the business is taxed only once, unlike other business models that get taxed more than once, such as C-corporations. For federal tax purposes, the single-member LLC is treated as a sole proprietorship. The most prominent benefit to a private limited company is protection from liability for the owner or owners. This means that the business is legally a separate entity from its ownership.
Debts or liabilities owed by the business belong solely to the business, owners or partners are not personally responsible for those debts or liabilities.
Personal assets or income are safe from default or collections on business debts. If the limited company is sued for any reason, whether by an employee or an external party, the the limited structure also provides protection from that liability. It should be noted that partners of an LLP may be held responsible for liabilities under certain circumstances, unless they are considered to be passive partners.
Businesses that are growing quickly and want to raise funds from investors and venture capitalists should become private limited companies.
Partnerships cannot offer investors a seat on their board of directors and would instead require them to become a full partner. A private limited company is required to register with the state, submit annual filings and tax returns, have quarterly board meetings, and file minutes from these meetings.
The business may also be subject to a statutory audit. Private limited companies have few tax advantages compared to other business entities.
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