What Is the Difference Between an LLP and a Public Limited Company?
Deciphering the business landscape requires understanding different organisational structures. LLP and public limited company (PLC) are common structures in this context. This article delves into the complexities of these structures and highlights distinctions between an LLP and public limited company. We kick-start this discussion with a brief understanding of an LLP.
Limited Liability Partnership (LLP)
Under the purview of the Limited Liability Partnership Act 2008, an LLP is a partnership encompassing two or more partners. Understanding that a partnership and a company are unique entities is paramount. In the LLP construct, each partner's success and losses depend on their actions and are not collectively shared.
Unpacking the Features of a Limited Liability Partnership
- Name: The chosen name for an LLP should terminate with 'Limited Liability Partnership or LLP. The name needs to be one-of-a-kind and should not infringe on any trademarks or contain offensive or illegal elements.
- Liability: In an LLP, the partners and the LLP's liabilities are distinct. The partners are not personally answerable for the liabilities of the LLP, making an LLP different from a public limited company.
- Number of Partners: For LLP(Limited Liability Partnership) registration, at least two partners are mandated. There is no upper limit to the number of partners an LLP can have, making it an attractive option for larger partnerships.
- Foreign Ownership: For a foreigner to invest in an LLP, they must receive prior approval from the RBI and the Foreign Investment Promotion Board.
- Survivability: The LLP, being a separate legal entity, continues to exist even after the departure or death of any of its partners.
- Transferability: There are no restrictions on the number of times the partnership of an LLP can be transferred.
Defining Public Limited Company (PLC)
Comparing an LLP and public limited company, a plc involves a more intricate process. With limited liabilities for its managers and owners, it necessitates mandatory public limited companies registered under the Companies Act 2013 with the Registrar of the Companies (RoC). PLC operates under stringent norms and regulations, distinct from an LLP.
Unpacking the Features of a Public Limited Company
- Name: Among LLP and Public Limited Company, a name should be unique and devoid of any offensive or illegal terms. The name requires registration with the RoC.
- Liability: In a PLC, shareholders' liability is limited to the face value of the shares they possess. The PLC, as a separate legal body, can acquire or dispose of any property or asset in its name.
- Number of Members & Directors: For public limited company registration, a PLC must have a minimum of three directors and seven members. The shares of the PLC can be freely transferred, offering greater flexibility.
- Survivability: LLP and Public Limited Company continue to exist even after the death or departure of any shareholders.
- Transferability: The ownership of a Public Limited Company can be effortlessly transferred using a share transfer form and the certificate to the buyer.
- Statutory Compliance: A PLC has to adhere to stringent statutory compliance rules and regulations, setting it apart from other organisational structures.
LLP Vs Public Limited Company: The Contrast
The structure, operation, and compliance of LLP and Public limited company show significant differences. While an LLP offers more flexibility and less compliance, a PLC offers the possibility to raise public funds but requires stricter regulations.
Whether you choose an LLP or a public limited company largely depends on your business's long-term goals, the desired control, and ownership structure. Understanding their unique features, advantages, and disadvantages is critical.
For an in-depth understanding and to ensure a seamless registration process, be it for public limited company registration or LLP registration, connect with the experts at Lawgical India. With their expertise and in-depth knowledge, they can guide you to choose the most beneficial structure for your business that aligns with your strategies and objectives.
FAQ's
Q: What is a Limited Liability Partnership (LLP)?
A: An LLP is a partnership model registered under the Limited Liability Partnership Act 2008. In an LLP, every partner is responsible for their own actions, success, and losses. The LLP registration requires at least two partners, and there's no upper limit. This structure is distinct from a public limited company, where there are shareholders and directors instead of partners.
Q: How does foreign ownership work in an LLP?
A: For foreign investment in an LLP, prior approval is required from the RBI(Reserve Bank of India) and the FIPB(Foreign Investment Promotion Board). This is in contrast to a Public Limited Company, where shares can be sold freely to foreign investors, subject to compliance with the regulations.
Q: How easy is it to transfer ownership in an LLP or a Public Limited Company?
A: In an LLP, there's no restriction on the number of times the partnership can be transferred. The ownership can be transferred easily based on the partners' needs and choices. In a Public Limited Company, ownership can be easily transferred by providing a share transfer form and sharing the certificate with the buyer.
Q: How does statutory compliance differ between an LLP and a Public Limited Company?
A: An LLP tends to have less stringent statutory compliance as compared to a Public Limited Company. A PLC must adhere to very rigid compliance rules and regulations, making it a more complex structure to maintain. This is an important aspect to consider when choosing between an LLP and a public limited company.
Q: How can Lawgical India help with LLP and Public Limited Company registration?
A: Lawgical India has a team of experts well-versed in the nuances of LLP and public limited company registration. They can guide you through registration, ensuring it aligns with your business goals and strategies.
