One of the most common questions startup founders and entrepreneurs ask us is:
“Should I register an LLP or a Private Limited Company?”
While both structures are recognized under Indian law and offer limited liability, they are designed for different types of businesses. Let’s break it down from a legal, tax, and compliance perspective — so you can make a confident decision.
1. Understanding the Basics
| Criteria | LLP (Limited Liability Partnership) | Private Limited Company |
|---|---|---|
| Legal Identity | Separate Legal Entity | Separate Legal Entity |
| Minimum Members | 2 Designated Partners | 2 Shareholders, 2 Directors |
| Foreign Ownership | Allowed with RBI/FEMA compliance | Allowed with FDI norms |
| Perpetual Succession | Yes | Yes |
2. Taxation Differences
- LLP is taxed at a flat 30% + surcharge & cess.
- Private Ltd. enjoys a lower tax slab (as low as 15% for new manufacturing co. under Section 115BAB).
- Dividend distribution tax is not applicable on LLP withdrawals, but it is on Pvt Ltd profits (via DDT or personal tax).
3. Compliance Requirements
- LLP has easier annual compliance — Form 8 and 11 filing only.
- Private Ltd. must maintain statutory registers, conduct AGMs, and file ROC forms like AOC-4, MGT-7 etc.
4. Funding & Investor Preference
- Pvt Ltd is the preferred structure for venture capital, seed funding, and equity-based growth.
- LLP is better suited for service professionals, bootstrapped startups, and family-owned businesses.
5. Our Advice as Chartered Accountants
- Go for LLP if: You’re in consulting, services, or bootstrapping.
- Choose Private Ltd. if: You’re planning to raise capital, scale fast, or require investor interest.
Conclusion
Both entities offer protection, structure, and credibility — but your growth goals, capital strategy, and compliance bandwidth should decide the format.
