Private Limited vs LLP: Which Should You Register?

This is the most common decision founders face. Both structures give limited liability and a separate legal identity. The right answer depends mainly on your plans for funding and growth.

Comparison at a glance

Tax

An LLP pays tax at a flat 30% plus applicable surcharge and cess. A domestic company can opt for the 22% concessional regime plus surcharge and cess, but dividends are taxed again in the hands of shareholders. The better outcome depends on how you take money out, so model your own numbers before you decide.

Choose a private limited company if

• You plan to bring in angel or venture investors.
• You want to give employees stock options.
• Customers or tenders in your sector expect a company.

Start with our private limited company registration page.

Choose an LLP if

• You are consultants, professionals or a family business.
• Owners will take out most of the profit each year.
• You want fewer meetings and filings.

See LLP registration and our guide to the LLP agreement.

Can you change later?

Yes. An LLP can convert into a company and a company can convert into an LLP if it meets the conditions, but conversion takes time and cost. It is worth getting this right at the start.

Frequently Asked Questions

Q1. Is an LLP cheaper than a private limited company?

Yearly compliance is usually lower for an LLP, mainly because a statutory audit is not required below the prescribed limits.

Q2. When does an LLP need an audit?

When turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh in a financial year.

Q3. Can foreign investors invest in an LLP?

FDI in LLPs is allowed only in sectors with 100% automatic route and no performance conditions, so a company is usually simpler.

Q4. Which is better for a small consulting firm?

Often an LLP, as it has lower compliance and no need for outside equity, but check your tax position and clients’ expectations first.