Both the Limited Liability Partnership (LLP) and the Private Limited (Pvt Ltd) are forms of business ownership under the Companies Act 1994 that offer limited liability to their shareholders or partners. This means that shareholders or partners are considered a separate legal entity from the company, thus they are only held liable for the debt and liability incurred pertaining to the amount of shares they hold for Pvt Ltd companies or the amount of investments they have in the company for a partnership business.
Typically, a small business in Bangladesh will prefer to set up an LLP because an LLP enjoys most of the same advantages as a Pvt Ltd company but at a lower cost. For instance, the registration fee for an LLP is much lower than a Pvt Ltd company and an LLP is not required to audit its accounts if its annual turnover does not exceed US$54,500.
However, larger businesses which have an annual turnover of more than US$54,500 will be required to submit audited financial accounts. These accounts may contain information about the income of the partners because an LLP is taxed based on the personal income of the partners. Hence, larger businesses may prefer to set up a Ptd Ltd company for confidentiality reasons.
In addition, it is usually more advantageous to be taxed based on corporate tax instead of personal income tax if your company has a high amount of profits. Hence, it is more advisable for large businesses to set up a Ptd Ltd company instead of a LLP.