COMPARISON BETWEEN WHOLLY OWNED SUBSIDIARY AND LIMITED LIABILITY PARTNERSHIP
| Particulars | Wholly Owned Subsidiary | Limited Liability Partnership |
| General Meaning | A Private Limited Company is a separate legal business entity held by small group of people. The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. | Limited Liability Partnership is a separate legal entity and an alternative form of business that gives the benefits of Limited Liability and flexibility of partnership. |
| Governing Act | Companies Act, 2013 | Limited Liability Partnership Act, 2008 |
| Governing Authority | Ministry of Corporate Affairs | Ministry of Corporate Affairs |
| Definition as per Act | Section 2(68) of the Companies Act, 2013 defines a Private Company as under: A Company having a minimum paid-up share capital as may be prescribed, and which by its articles- (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its members to two hundred; Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member: Provided further that— (A) persons who are in the employment of the company; and (B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and (iii) prohibits any invitation to the public to subscribe for any securities of the company. |
Section 2(1)(n) of the Limited Liability Partnership Act, 2008 defines a Limited Liability Partnership as under:
LLP means a partnership formed and registered under the Limited Liability Partnership Act, 2008. |
| Legal Status | Separate Legal Entity | Separate Legal Entity |
| Prohibited Sectors | An NRI or an OCI including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, cannot invest in capital instruments or units of a Nidhi company or a company engaged in agricultural/ plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights. | An NRI or an OCI including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, cannot invest in capital instruments or units of a Nidhi company or a company engaged in agricultural/ plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights. |
| Permitted Activities | As per its ‘main objects’stipulated in theMemorandum & Articles ofAssociation. | As per the LLP Agreement. |
| Eligibility Criteria | Norequirement of track record of parent company as Shareholder. |
Norequirement of track record of parent company as partner. |
| Prior Approval | Not required. Only intimation to RBI is required post incorporation. | Not required. Only intimation to RBI is required post incorporation. |
| Charter document | Memorandum of Association and Articles of Association | LLP Agreement |
| Permitted Incomes | All income arising out of its business activities. |
All income arising out of its business activities. |
| Remittance of Profit to Parent Company | Remittance of profit required only in case of closure of LO. | Profits can be repatriated/transferred to parent company subject to applicable taxes in India. |
| Taxability | Taxed as Indian Private Company | Taxed as Limited Liability Partnership |
| Statutory Audit | Audit is mandatory for Private Company irrespective of its turnover or capital. | Audit is mandatory if contribution exceeds Rs. 25 Lakhs or turnover exceeds Rs. 40 Lakhs |
| Borrowing | 1. There is no restriction on local borrowing. 2. External Commercial Borrowings are subject to guidelines issued by the RBI. |
1. There is no restriction on local borrowing. 2. External Commercial Borrowings are subject toguidelines issued by the RBI. |
| Management | Minimum 2 Directors, 1 Director shall be an Indian resident. | Minimum 2 Designated Partners, 1 Partnershall be an Indian resident. |
| Existence or Survivability | Existence of a Private Limited Company is not dependent on the Directors or Shareholders. Could be dissolved only voluntarily or by Regulatory Authorities. | Existence of a LLP is not dependent on the Partners. Could be dissolved only voluntarily or by Regulatory Authority. |
| Dissolution | Process is lengthy and time consuming | Dissolution is less procedural than Company |
