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Which type of entity is better. Limited Company or LLP

Choosing between a Limited Liability Partnership (LLP) and a Private Limited Company hinges on multiple factors such as your business’s nature, future aspirations, and personal inclinations. Consider the following key aspects for each business structure:

Limited Liability Partnership (LLP):

  1. Flexibility: LLPs provide greater flexibility in management and operations, with fewer compliance requirements compared to private limited companies.
  2. Taxation: Typically taxed as partnerships, LLPs pass profits through to partners, who are then taxed at individual rates, offering advantages for specific business setups.
  3. Less Formality: LLPs involve fewer formalities in terms of meetings and compliance, making them well-suited for smaller businesses.
  4. Limited Liability: Partners in an LLP enjoy limited liability, safeguarding their personal assets from business liabilities.

Private Limited Company:

  1. Separate Legal Entity: A private limited company is a distinct legal entity from its owners, ensuring a clear separation between personal and business assets.
  2. Fundraising: Private limited companies find it easier to raise funds through equity investments by issuing shares to investors.
  3. Perpetual Succession: Companies benefit from perpetual succession, unaffected by changes in ownership, providing an advantage for long-term planning.
  4. Credibility: Private limited companies often boast higher perceived credibility, which proves advantageous in interactions with clients, suppliers, and stakeholders.
  5. Tax Planning: Private limited companies have more tax planning options, including various deductions and exemptions within the corporate tax structure.

In conclusion, there is no one-size-fits-all answer. The decision between an LLP and a Private Limited Company should align with your specific business requirements, long-term objectives, and personal preferences. Consultation with our expert advisor is recommended to grasp the implications of each structure on your business, enabling an informed decision tailored to your unique circumstances.

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Biswas Filing

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