Limited liability and Sole Proprietorship are the two different aspects of business .Before starting any business an entrepreneur should keep in mind what should he/she prefer so that his/her business grow positively.
Here are some points which help you to define difference between LLP and Sole Proprietorship
Description
Limited liability partnershipis a business entity in which partners have limited liability and have a separate legal entity.LLP also provides the flexibility of internal structure .Any misconduct in the business is not the responsibility of one person .
Minimum 2 members are compulsory and Maximum 20 members can be there.
Sole Proprietorship, onlyone personcan be the member and it does not have a separate legal entity. There is no legal distinction between business and the Owner. Owner is responsible for all losses and profits.
Choice of Name
InLLPpromoters can provide the name and get it approved by the Registrar of the Company. Approval is given to only those name which are non-objectionable.
Sole Proprietorshipnames can be chosen by promoters .No approval is needed regarding usage of the name. But it is preferred to avoid trademark names.
Registration
LLPhas to be registered with Registrar of Company and Certificate of Incorporate has to be issued.
Sole Proprietorship, there is no need of Registration. A sole proprietorship does not require any formality which is there in the LLP. Business can be opened whenever owner wants.Sole proprietorship requires less paperwork.
Participation
InLLPforeign nationals can take part in a partnership which follows RBI guidelines. In these, at least 1 member has to be Indian Resident.
InSole Proprietorshipthere are no such made regarding participation .
Applicable Acts
LLPwas passed under partnership act 2008 which contains all the rules and regulations.
InSole Proprietorshipneeds no act has been passed.
Taxability
LLPstax rates are charged 30 % in addition to the service charge.
InSole Proprietorshiptax slabs are applicable according to the personal income.
Control and liability
LLPis organized in according to the state laws. LLPs have control over business management in partnership.Task and obligations are divided based on the partnership agreement. The agreement includes the division of costs and profits. this type of business entity helps shield the owners' personal assets from attachment to satisfy debts of the business.
InSole proprietorperson has complete management control over business.
Audit
InLLPfirm is audited if there is a contribution of 25,00,000 and turnover crosses 40,00,000
InSole Proprietorship, an audit is not applicable.
InLLPbusiness partners frame their business idea and then apply all the formalities required for DSC-Digital Signature Certificate, DIN-Director Identification Number, Consent letter and subscription letter.
These formalities are not requiredSole ProprietorshipBusiness.
Author: Dushyant Sharma
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
