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In the business field, the two most important terms are VCs and LLP. While LLP stands for Limited Liability partnership, VC stands for a venture capitalist. As the market for business gets boosted, the demand for PLC and LLP also rises alongside with it. And in the era globalization, the world is in the middle of global business methods, which eventually help the native investors and foreign investors to invest in the various startups for generating and earning colossal revenue. The biggest question that remains is what VC is and what is LLP.

Well, VC can be defined as an institutional or private investment which is made in the early stages of new ventures or startup companies. Ventures have risks as there is no certainty in the outcomes. But, the major reason behind this investment is for gaining a minimum amount of profit. Venture capital can also be invested as the amount that is being invested the small scale businesses where the amount of profit can be low, but the potential for growth is high. A venture capital investment can be made when the venture capitalists buy a company’s share and eventually become the financial partner of the business.

VC is one of the best options that can be utilized for funding the costly capitals of any company and for any other business which have no other cost-saving alternative. Intellectual property or software is one of the most uncertain assets of a company. Venture capital is rapidly spreading in the biotechnology and rapidly growing technology fields.

Features of VC

  • Lack of liquidity
  • High risk
  • Capital gains and equity participation
  • Innovative projects are the most common investment area for the venture capitalists
  • Venture capital suppliers often participate in company management.

Advantages of venture capital

  • A huge amount of wealth and expertise is drawn towards the company
  • A lump sum amount of equity finance can be delivered
  • There is no obligation for the company to pay back the money

Disadvantages of VC

  • It’s a complex and lengthy process
  • The form of finance is not certain
  • The autonomy of the founders no longer remains valid as soon as the investors become the owners

What is PLC?

PLC is also known as Private Limited Company is one of the most common legal structures which are being used for company registration. Read along to know more about PLC. This structure helps the companies to keep the member’s liability from keeping their share limitedly. PLC is one of the best choices for companies who are looking forward to raising their capitals. When someone registers as a private limited, they become regulatory-compliant, which helps the companies for attracting private equity funds and for also venture capitalists. When a company registers themselves as a private limited company, it gets easier for them to get loans.

Why don’t VCs want to invest in LLP?

Despite having so many advantages, why do the VCs refrain from investing in LLP? And the main reason behind this is the shareholders as in LLP, and you have to be a partner in their business if you want to invest LLP, which eventually comes with a list of responsibilities too. And no wants to get indulged in any responsibility, and that is the main reason why the VPs choose to invest in the PLC rather than LLP. Moreover, there are certain limitations, too when it comes to LLP, such as an LLP needs at least two members for starting a venture. Moreover, if you are an NRI or foreigner, then you will need at least one national along with you to invest in LLP.

So, despite LLP being one of the most preferred business setups in India, people yet prefer to invest in PLC because of the limitations and restrictions in LLP.