Demystifying the difference between One Person Company, Limited Liability Partnership and Private Limited Company 
                        Authored by Priyanka Bharti, Partner and Anubhav Chakravorty, Associate 
                         
                        India is an emerging market with expansive scope and opportunities for Indian and foreign investors alike. As a result, many companies continue to 
                        target expansion by establishing their businesses in India. Investors can decide the legal structure within which their businesses will operate, based 
                        on the purpose, objective, initial investment, risk appetite and duration (short term/long term) of the business. The commercial law in India lays 
                        down several mechanisms for the establishment and functioning of different types of commercial entities; each having distinguishable attributes, 
                        prerequisites for incorporation, and conversion mechanisms. Through this article, we aim to demystify three types of companies in India (One Person 
                        Company, Limited Liability Partnership and Private Limited Company) and share a comprehensive understanding of their differences.  
                         
                                                              One Person Company                                      Limited Liability Partnership                                     Private Limited Company 
                          Salient                    Low compliance burden, owing to the                             No  minimum  capital  requirement.                             Most prevalent and popular type of 
                          Features                      numerous  exceptions  culled  out,                             The  contribution  of  a  partner  can                          corporate legal entity in India. 
                                                        despite being within the scope of what                         consist  of  tangible,  movable  or                            A  Private  Limited  Company  has 
                                                        is  defined  as  a  “Private  Limited                          immovable or intangible property or                             ‘perpetual             succession’,             i.e. 
                                                        Company”  under  S.  2(68)  of  the                            other benefit to the Limited Liability                          continued             or         uninterrupted 
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                                                        Companies Act, 2013.                                           Partnership (LLP).                                              existence         until      it     is    legally 
                                                     One Person Company (OPC) tends to                               An LLP requires a minimum of two                                dissolved.  Being  a  separate  legal 
                                                        bring  the  unorganized  sector  of                            partners while there is no limit on the                         person, it is unaffected by the death 
                                                        proprietorship  into  the  organized                           maximum number of partners (S. 6,                               or  other  departure  of  any  member 
                                                        version of a private limited company.                          Limited  Liability  Partnership  Act,                           but  continues  to  be  in  existence 
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                                                        Proprietors,          by       default,         have           2008 ).                                                         irrespective  of  the  changes  in 
                                                        unlimited liability. However, if such a                       Lower cost for registration.                                    membership.  
                                                        proprietor  does  business  through  an                       The  LLP,  being  a  separate  legal                           The  liability  of  the  members  is 
                                                        OPC, then the liability of the members                         entity, has the right to own, enjoy and                         limited only to the extent of the face 
                                                        is limited.                                                    transfer property in its own name.                              value of shares taken up by them (S. 
                                                     OPC           gives        entrepreneurs            the         The       accounts         are      audited        in           2(22), CA, 2013). 
                                                        advantage of limited liability whereby                         accordance with the LLP Rules, 2009                            Shares        are     transferable         by     a 
                                                        their liability as members is limited to                       unless the turnover does not exceed                             shareholder  to  any  other  person. 
                                                        their unpaid subscription money.                               Rs. 40,00,000, in any financial year;                           The transfer is easier in comparison 
                                                     On  the  demise/disability  of  the                              or the contribution does not exceed                             to the transfer of interest in business 
                                                        original director, a nominee director is                       Rs. 25,00,000 (Rule 24, LLP Rules,                              run  as  a  proprietary  concern  or  a 
                                                        appointed who is required to manage                            2009).                                                          partnership.  
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                                                        the affairs of the company till the date                      LLP is liable for payment of income                            A company being a juristic person, 
                                                        of transmission of shares to legal heirs                       tax  but  the  share  of  its  partners  in                     can acquire, own, enjoy and alienate 
                                                        of  the  demised  member  (S.  4(1)(f),                        LLP is  not  liable  to  tax.  Thus,  no                        property in its own name.  
                                                        CA, 2013).                                                     dividend distribution tax is payable.                          Being an independent legal entity, it 
                                                     OPC’s  can  appoint  as  many  as  15                            Provision  of  ‘deemed  dividend’                               can sue and also be sued in its own 
                                                        directors for administrative functions,                        under  income  tax  law  is  not                                name. 
                                                        without giving any share to them.                              applicable  to  LLP  (S.  40(b),  CA,                          It  can  make  a  valid  and  effective 
                                                     There  is  no  requirement  to  hold                             2013).                                                          contract with any of its members. It 
                                                        Annual  or  Extra  Ordinary  General                                                                                           is also possible for a person to be in 
                                                        Meetings.  Only  a  resolution  is                                                                                             control of the company and at the 
                                                        required to be communicated by the                                                                                             same  time  be  in  its  employment. 
                                                        member of the company, and entered                                                                                             Thus, a person can at the same time 
                                                        into the minutes’ book with the date                                                                                           be a shareholder, creditor, director 
                                                        and signature. Such date is deemed to                                                                                          and also an employee of the Private 
                                                        be the date of meeting (S. 96 (1), CA,                                                                                         Limited Company. 
                                                        2013).                                                                                                                        It can issue debentures (secured as 
                                                     Provisions  of  S.  174  (Quorum  for                                                                                            well  as  unsecured)  and  can  also 
                                                        meetings of Board) don’t apply to a                                                                                            accept deposits from the public, etc. 
                                                        One Person Company in which there 
                                                        is  only  one  director  on  its  Board  of 
                                                        Directors. 
                                                     Where the OPC has only one director, 
                                                        all  the  businesses  to  be  at  the 
                                                        transacted  meeting  of  the  Board  is 
                                                        required  to  be  entered  into  the 
                                                        minutes’  book  maintained  under  S. 
                                                        118 (S. 122(3), 122(4), CA, 2013). In 
                                                        this  case,  there  is  no  additional 
                                                        requirement to hold Board Meetings 
                                                        (S. 96(1)), CA, 2013). 
                                                     The cost for registration of an OPC is 
                                                        lower and there are fewer filings with 
                                                        the Registrar of Companies (ROC). 
                                                     The  mandatory  rotation  of  auditor 
                                                        after expiry of the maximum term is 
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                                                        not applicable. 
                                                     Provisions of S. 98 and S. 100-111, 
                                                        relating       to     holding        of     general 
                                                        meetings do not apply to a One Person 
                                                        Company (S. 122 (1), CA, 2013). 
                                                     OPC  is  an  artificial  entity  distinct 
                                                        from its owner. Thus, the claims made 
                                                        against the business cannot be pressed 
                                                        against  the  owner  and  there  is 
                                                        perpetual succession. 
                          Requirements    At least one shareholder;                                                  At least two partners (not cooperative                         A minimum of two directors, and 
                                                     At least one director;                                           societies,  minors)  with  at  least  one                       maximum of 15 (One needs to be 
                                                     The director and shareholder can be                              partner being an Indian resident (S. 6,                         Indian         Resident          and       Indian 
                                                        the same person;                                               LLP Act, 2008).                                                 national) (S. 3(1)(b), 149(1)(b), CA, 
                                                     At least one nominee director (cannot                           The  fee  for  registration  of  LLP                            2013). 
                                                        be a minor);                                                   including conversion of a firm or a                            Two persons are also required to act 
                                                     Only a natural person who is an Indian                           private  company  or  an  unlisted                              as shareholders of a company. The 
                                                        Citizen and resident in India may form                         public company into LLP:                                        shareholders can be natural persons 
                                                        an OPC;                                                         LLP whose contribution is limited                             or      an      artificial      legal       entity 
                                                     Share Capital of at least Rs. 1,00,000;                               to Rs 1,00,000: fee of Rs. 500.                            (Maximum 200) (S. 2(68)(ii), CA, 
                                                     ‘OPC’ to be suffixed with the name of                             LLP whose contribution exceeds                                2013). 
                                                        OPCs to distinguish it from the other                               Rs 1,00,000 but is limited to Rs                          Minimum             capital       contribution 
                                                        companies (S. 12(3), CA, 2013);                                     5,00,000: fee of Rs. 2,000.                                required  for  a  private  limited 
                                                     At least one meeting of the Board of                              LLP whose contribution exceeds                                company is Rs. 1,00,000. 
                                                        Directors in  each  half  of  a  calendar                           Rs 5,00,000 but is limited to Rs                          An  address  in  India  where  the 
                                                        year where the gap between the two                                  10,00,000: fee of Rs. 4,000.                               registered  office  of  the  Company 
                                                        meetings shall not be less than 90 days                         LLP whose contribution exceeds                                will  be  situated  is  required.  The 
                                                        (unless there’s only one director)  (S.                             Rs 10,00,000: fee of Rs. 5,000. (5,                        premises               can            be           a 
                                                        173(5), CA, 2013); and                                              Annexure A, LLP Rules, 2009)                               commercial/industrial/residential 
                                                     Filing of the financial statements duly                         Name should not include something                               where  communication  from  the 
                                                        adopted by its member, along with all                          prohibited  under  the  Emblems  and                            MCA will be received.  
                                                        the documents which are required to                            Names  Act,  1950  (Rule  18,  LLP 
                                                        be     attached         to     such       financial            Rules, 2009). 
                                                        statements, within 180 days from the                          Should not belong to the excluded list 
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                                                        closure of the financial year (S. 137,                         of  names  (Rule  18,  LLP  Rules, 
                                                        CA, 2013).                                                     2009).  
                                                                                                                      Minute  book  to  be  maintained  to 
                                                                                                                       record  minutes  of  meetings  of 
                                                                                                                       partners. However, the LLP Act does 
                                                                                                                       not  prescribe  compulsory  meetings 
                                                                                                                       of  partners.  Partners  may  be  called 
                                                                                                                       for  events  prescribed  in  the  LLP 
                                                                                                                       Agreement.   
                                                                                                                      Statement of account and solvency is 
                                                                                                                       required to be filed annually. 
                                                                                                                      If the LLP has a turnover of less than 
                                                                                                                       Rs.       40,00,000         and       a     capital  
                                                                                                                       contribution          of     less      than      Rs. 
                                                                                                                       25,00,000;          there      are     no      audit 
                                                                                                                       requirements.  
                                                                                                                      FDI  in  LLP  requires  prior  RBI 
                                                                                                                       approval.  (Annex  I  to  A.  P.  (DIR 
                                                                                                                       Series) Circular No. 123 dated April 
                                                                                                                       16, 2014) 
                          Conversions              To LLP:                                                        To  OPC:  Cannot  be  done  as  LLP  To OPC:  
                                                   Cannot be done as at least two members  requires at least two members.                                                             A      Board         Meeting         must        be 
                                                   are  required  to  be  partners  in  LLP                                                                                            conducted          to      get     in-principal 
                                                   (Section 6, LLP Act, 2008).                                                                                                         approval  of  the  Directors  and  fix 
                                                                                                                                                                                       date, time and place for conducting 
                                                                                                                                                                                       EGM to obtain the approval of the 
                                                                                                                                                                                       shareholders of the private limited 
                                                                                                                                                                                       company  by  means  of  a  special 
                                                                                                                                                                                       resolution. 
                                                                                                                                                                                      Hence,  at  the  Board  Meeting,  a 
                                                                                                                                                                                       support notice of EGM along with 
                                                                                                                                                                                       Agenda and Explanatory Statement 
                                                                                                                                                                                       should be annexed to the notice of 
                                                                                                                                                                                       General  Meeting  according  to  the 
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