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September 27, 2025
LLP vs Pvt Ltd: Choosing the Right Business Structure
Introduction
When registering a business in India, entrepreneurs often find themselves comparing LLP vs Pvt Ltd. Both structures offer limited liability and separate legal status but differ in compliance requirements, taxation, and fundraising opportunities. This guide breaks down the differences so you can make an informed choice.
What is an LLP?
A Limited Liability Partnership (LLP) blends the flexibility of a partnership with limited liability of a company. Partners are directly involved in business management, and their liability is limited to their contribution. LLPs are especially popular among professionals and service-based businesses due to their lighter compliance burden.
What is a Private Limited Company?
A Private Limited Company (Pvt Ltd) is a separate legal entity owned by shareholders and managed by directors. It provides stronger credibility, makes it easier to raise external funds, and is ideal for startups and businesses with high growth potential. It, however, involves more compliance and statutory requirements.
Key Differences: LLP vs Pvt Ltd
|
Parameter |
LLP |
Private Limited Company |
|
Governing Law |
LLP Act, 2008 |
Companies Act, 2013 |
|
Members Required |
Minimum 2 partners, no upper limit |
Minimum 2 shareholders, maximum 200 |
|
Ownership & Management |
Partners own and manage directly |
Shareholders own, directors manage |
|
Compliance |
Fewer compliances, mainly Form 8 & Form 11 |
|
|
Audit Requirement |
Mandatory only if turnover > ₹40 lakhs or capital > ₹25 lakhs |
Mandatory for all companies, regardless of turnover |
|
Fundraising |
Limited; cannot issue shares |
Can issue shares, attract investors, offer ESOPs |
|
Taxation |
Taxed at 30% + cess; profit share exempt for partners |
Corporate tax rate (22% under Section 115BAA) + dividends taxed in shareholders’ hands |
|
Transfer of Ownership |
Requires partner consent, less flexible |
Shares transferable (restricted by AoA) |
|
Credibility |
Suitable for small businesses/professionals |
Preferred by investors, lenders, and VCs |
|
Dissolution |
Relatively simpler |
More complex, involves NCLT procedures |
Which One Should You Choose?
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Opt for LLP if you want lower compliance, flexibility, and your business is service or family-owned with no immediate need for external investors.
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Opt for Pvt Ltd if you plan to raise capital, scale aggressively, or seek investor confidence.
Conversion Between LLP and Pvt Ltd
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LLP to Pvt Ltd: Allowed if all partners consent and conditions under Companies Act are met.
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Pvt Ltd to LLP: Possible if there are no corporate shareholders and all members agree.
Both require MCA filings, approvals, and updated statutory documents.
Conclusion
Choosing between llp vs pvt ltd depends on your business model, growth plans, and compliance readiness. LLPs offer simplicity and cost savings, while Private Limited Companies provide better fundraising opportunities and credibility. Evaluate carefully before incorporating, as the right choice impacts your long-term business journey.
Suggested Read :
LLP vs Private Limited Company: A Comparative Analysis for Business Owners
LLP Registration vs. Pvt Ltd: Which is Right for Your Business?
Legal Structure for Startups: Choosing Between LLP and Private Limited Company
Key Difference Between Private Company & LLP
FAQs
1. Which is more cost-effective: LLP or Pvt Ltd?
LLPs are generally more cost-effective due to fewer filings and conditional audits. Pvt Ltd Companies involve higher compliance costs.
2. Can LLPs raise venture capital?
No. LLPs cannot issue shares, making them unsuitable for equity-based funding. Pvt Ltd Companies are preferred by venture capitalists and angel investors.
3. What is the minimum capital required for LLP and Pvt Ltd?
There is no minimum capital requirement for either structure. However, Pvt Ltd usually involves higher incidental costs for compliance.
4. Do both LLP and Pvt Ltd require registration with MCA?
Yes. Both must be registered on the Ministry of Corporate Affairs (MCA) portal with proper filings.
5. Is audit compulsory for LLP?
No, audit is required only if annual turnover exceeds ₹40 lakhs or capital contribution exceeds ₹25 lakhs. For Pvt Ltd, audit is always mandatory.
6. Which has higher compliance: LLP or Pvt Ltd?
Pvt Ltd has higher compliance, including statutory meetings, registers, and multiple MCA forms. LLPs need only two main filings annually.
7. Which is better for a startup in India: LLP or Pvt Ltd?
A Pvt Ltd Company is better for startups aiming for rapid growth, fundraising, or issuing ESOPs. LLPs suit professionals or small-scale businesses.
8. Can a foreign national become a partner in LLP or shareholder in Pvt Ltd?
Yes. Both allow foreign participation, but FDI rules differ. Pvt Ltd has broader FDI access compared to LLPs.
9. How is profit taxed in LLP vs Pvt Ltd?
In LLP, profits are taxed at 30% in the LLP, but distributed profits are tax-free in partners’ hands. In Pvt Ltd, corporate tax applies, and dividends are taxable for shareholders.
10. Can I convert an LLP into a Pvt Ltd later?
Yes. Conversion is possible under MCA rules by filing required forms and obtaining approvals, provided conditions are met.
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Rajesh Moza
16 Jul 2020For starting a new a company or applying to become a Director of a company, to procure Digital signature/Trademark & other IPRs etc Ebizfiling India Pvt Ltd is there to do all these jobs through single window service. Ebizfiling is a complete online service platform and people working here are young professionals. They have been very honest with me, whatever they promised initially, they did it. I feel rates quoted by this company were lowest in comparison to others and they cleared all my doubts, wherever needed.
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Hemanshu Mahajan
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Thank you Shrikant Gadhave, Team Ebizfiling.com
Hi Krishna,
Thank you for your query. Team will get in touch with you soon.
Excellent post. How difficult is it to transfer from LLC to LLP. What are the tax implications of each mode.
Hello Srikanth,
Thank you for your inquiry!
The team will get in touch with you soon. Meanwhile, you can get in touch with Ebizfiling on +919643203209 / info@ebizfiling.com
Hello, i have a query regarding conversion, if Pvt ltd has two shareholders who are companies, can they become partners in LLP after conversion.
Hello Heena Talesara,
Thank you for your Inquiry!
An individual or a corporate body may become a partner in an LLP. The LLP must have at least two Designated Partners. At least one of the Designated Partners must be an Indian citizen. A LLP’s body corporate partner may appoint an individual as a Designated Partner. For any further assistance get in touch with Ebizfiling at +919643203209 / info@ebizfiling.com