Guide
LLP vs private limited company
Choose a private limited company if you plan to raise investment or issue ESOPs; choose an LLP if you are a few partners who want lower compliance and will fund the business yourselves.
| Item | Private limited company | LLP |
|---|---|---|
| Law | Companies Act, 2013 | Limited Liability Partnership Act, 2008 |
| Minimum people | 2 directors and 2 shareholders (can be the same people) | 2 designated partners |
| Resident requirement | At least one director resident in India | At least one designated partner resident in India |
| Raising investment | Easy: equity shares to investors, ESOPs for staff | Limited: no shares, so venture investors rarely invest |
| Statutory audit | Always required | Required only above the turnover or contribution thresholds |
| Main annual filings | AOC-4 (financial statements), MGT-7/7A (annual return), DIR-3 KYC; board meetings and an AGM | Form 11 (annual return), Form 8 (accounts and solvency), DIR-3 KYC |
| Income tax on profits | Company rates; a concessional rate can be opted for | Flat partnership rate |
| Profit to owners | Dividends, taxed in the shareholders’ hands | Share of profit is not taxed again in the partners’ hands |
Quick way to decide
- Raising money from angels or VCs, or hiring with ESOPs: private limited company.
- Consultancy, agency or family business run by 2–5 partners: LLP.
- Solo founder who wants limited liability: one person company (OPC), which can later convert to a private limited company.
Can you switch later?
Yes. An LLP can convert into a company, and a company can convert into an LLP, subject to conditions. Converting later costs more time and fees than choosing right at the start, so decide based on your funding plans for the next two to three years.
Tax rates and audit thresholds change with each Finance Act. Check the current figures for your case before deciding.
See our company and LLP registration service and prices →
Need help with this?
General information only, as of October 2026. It is not professional advice; requirements change and depend on your facts.