Both structures offer limited liability. The choice depends on whether you will raise external equity, issue ESOPs and how heavy a compliance load you can carry. LLPs suit professional services and bootstrapped businesses; Pvt Ltds suit startups planning institutional rounds.
| Attribute | LLP | Private Limited |
|---|---|---|
| Registration cost (approx) | ₹6,000–10,000 | ₹8,000–15,000 |
| Minimum members | 2 designated partners | 2 directors + 2 shareholders |
| Annual ROC compliance | Form 8 + Form 11 | AOC-4 + MGT-7 + DIR-3 KYC + board meetings |
| Audit threshold | Turnover > ₹40L or capital > ₹25L | All Pvt Ltds (statutory audit always) |
| Tax rate | 30% + surcharge + cess | 22% (115BAA) or 25% (small co.) |
| Profit distribution | Tax-free in partners' hands | Dividend taxed in shareholders' slab |
| ESOPs | Not possible | Standard practice |
| External equity / VC funding | Difficult — no share capital | Standard route |
| FDI | Allowed in 100% auto-route sectors only | Allowed across most sectors |
| Conversion to Pvt Ltd | Possible via Sec 366 + tax implications | N/A |
Our recommendation
Pick LLP if you are a 2-5 partner professional services firm, family business, or bootstrapped operating company with no equity-raise plans for 3+ years. Pick Pvt Ltd if you will raise even a small angel round, plan ESOPs, take FDI, or want a credible structure to win enterprise customers.
FAQs
What about One Person Company (OPC)?
OPC suits solo founders who want corporate status without partners. It auto-converts to Pvt Ltd once paid-up capital > ₹50L or turnover > ₹2 crore for 3 years.
Is dividend distribution tax (DDT) still a thing?
No, DDT was abolished from FY 2020-21. Dividends are now taxed in the shareholder's hands at slab rates, with 10% TDS above ₹5,000 per year per company.
Last updated: 20 Apr 2026