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Difference Between LLP, Company & Branch Office & Small LLP

Sep 15, 2021 | Blog, Company Formation / Registration

LLP is one of the easiest types of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLPs are preferred by Professionals, Micro and Small businesses that are family-owned or closely-held. Since, LLPs are not capable of issuing equity shares therefore, LLP should not be chosen for any business that has plans for raising equity funds.

Post changes to FDI regulations on 10th, November 2015, 100% FDI in LLP is permitted under the automatic route. In most sectors, 100% FDI in LLP is allowed through the automatic route, and there are no FDI-linked performance conditions. In addition, LLPs will also be permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route. Therefore, FDI in LLP is now permitted, and NRIs or Foreign Nationals can start or invest in an LLP.

CONCEPT OF PRIVATE LIMITED COMPANY
A private company is a company which is owned by non-governmental organizations’ or a relatively small number of shareholders or members of a company. Usually, a private company does not offer or trade its shares to the general public on the stock exchanges, but rather the private stock of the company is owned and traded.

CONCEPT OF BRANCH OFFICE
Branch office implies an establishment set up by parent company to perform the similar business Doperations at different locations in India. As a Branch Office (“BO”) in India, foreign companies can conduct full-fledged business in India. BO can carry the same or substantially the same trading activities as carried out by their parent or group companies. However, BO is not allowed to directly carry out manufacturing activities though it is permitted to sub-contract these services to an Indian manufacturer.

RequirementsFor Branch Office
Net WorthMore than or equal to USD 100,000
Profit making track recordImmediately preceding 5 years

DIFFERENCE BETWEEN LLP, COMPANY AND BRANCH OFFICE

Basis of differenceCompanyLimited Liability PartnershipBranch Office
Law ApplicableCompanies Act 2013Limited Liability Partnership Act, 2008Companies Act 2013
Minimum share capitalNo requirement for minimum share capital.No requirement for minimum share capitalNo requirement for minimum share capital.
Members RequiredMinimum 2
Maximum 200
Minimum 2Maximum no limitNA
Directors requiredMinimum 2
Maximum 15
2 Designated Partners Maximum not applicableMinimum 1 Authorized Representative
Board meetingWithin 120 days of the previous board meeting.Not necessaryNot necessary
Profit Making track recordNANAImmediately preceding 5 FY
Net WorthNANAMore than Equal to USD 1,00,000 or equivalent.
Permitted Activities1.Export/Import of goods2. Rendering professional or consultancy services.3. Carrying out research work, in which the parent company is engaged.4. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. 
Statutory AuditMandatoryWhose turnover does not exceed, in any FY, 40 Lakhs, or whose contribution does not exceed 25 Lakhs, is not required to get its accounts audited.Mandatory
Management Managed by Directors in India.Managed by Directors in India.Managed by Authorized representative of parent company in India. 
Annual FilingAnnual statement of accounts & annual return with ROC. These are filed in form AOC 4 and MGT 7.Annual accounts and Annual returns to be filed with RoC. These returns are filed in LLP Form 8 and Form 11.Annual statement of accounts & annual return with ROC. These are filed in Form FC 3 and Form FC 4.
Transferability of sharesCan be transferred easily. It can only be restricted by Article of association.Can be transferred by executing agreement before a notary publicNA
Foreign Direct InvestmentEligible via automatic and government routeEligible via automatic routeEligible via automatic route.

LLP AMENDMENT BILL, 2021
NEW CONCEPTS:
The key components of MCA21 to be launched during Fiscal Year 2021-22 are:

SMALL LLP: It is proposed to create a class of LLP called as “Small LLP” in line with the concept of Small Companies. Such Small LLPs would be subject to lesser compliances, lesser fee or additional fee and lesser penalties in the event of default. Thus, lower cost of compliance would incentivize unincorporated micro and small partnerships to convert into the organized structure of an LLP and derive its benefits.

  • Earlier: LLPs with contribution less than or equal to Rs.25 lakh and turnover less than Rs.40 lakh are treated as small LLPs
  • roposed Amendment: Rs.25 lakh will go over to Rs.5 crores and the turnover size will be treated as Rs.50 crores.

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