The limited liability partnership (LLP) and the private limited company (Pvt Ltd) are the two structures most Indian founders end up choosing between. Both give limited liability and a separate legal identity. They pull in opposite directions on compliance, tax and the ability to raise money.
This guide compares the two in detail: the audit threshold, the tax rates, the filings each one makes, FDI, and what a late filing really costs. If you are also considering a one person company, start with our three-way Pvt Ltd vs LLP vs OPC guide.
Quick answers
| Question | Answer |
|---|---|
| Cheaper to run? | An LLP: two annual forms, no board meetings, audit only above thresholds. |
| Better for raising funds? | A Pvt Ltd, because investors buy shares and an LLP has none. |
| Minimum people? | Two for both: directors and shareholders for a Pvt Ltd, designated partners for an LLP. |
| Lower tax rate? | A Pvt Ltd can opt for 22% under section 115BAA for FY 2025-26; an LLP pays 30%. |
| Limited liability? | Both cap the owners' liability at what they have put in. |
What is an LLP?
A limited liability partnership combines the flexibility of a partnership with the limited liability of a company. It is a body corporate under the Limited Liability Partnership Act, 2008, registered with the Ministry of Corporate Affairs (MCA). Our LLP registration page covers the process and fees.
- Separate legal entity from its partners
- Partners' liability limited to their contribution, and one partner is protected from another's misconduct
- At least two designated partners, one resident in India
- No minimum capital contribution
- Run under an LLP agreement that sets out roles, profit sharing and rules
What is a private limited company?
A private limited company is a privately held company registered under the Companies Act, 2013. It is the usual structure for startups that plan to raise external funding, issue equity or scale quickly. See private limited company registration.
- Separate legal entity with perpetual succession
- Shareholders' liability limited to the amount unpaid on their shares
- At least two directors and two shareholders, up to 200 shareholders
- Can issue shares and ESOPs and raise equity from investors
- Strong credibility with banks, investors and large clients
The difference in one sentence
A Pvt Ltd raises capital by issuing shares; an LLP runs on its partners' capital contributions. That single difference drives how each is taxed, funded and regulated. Rule of thumb: if an investor will ever buy a stake, you need a private limited company, because an LLP has no shares to sell.
Side by side
| Factor | LLP | Private limited company |
|---|---|---|
| Governing law | LLP Act, 2008 | Companies Act, 2013 |
| Registration form | FiLLiP | SPICe+ |
| Ownership | Partners | Shareholders |
| Management | Designated partners | Board of directors |
| Minimum members | 2 designated partners | 2 directors and 2 shareholders |
| Maximum members | No limit | 200 shareholders |
| Liability | Limited to contribution | Limited to shareholding |
| Equity funding and ESOPs | Not possible | Yes |
| FDI | Allowed, conditionally | Allowed, subject to sector rules |
| Income-tax rate (FY 2025-26) | 30% | 22% (s.115BAA), or 25% / 30% |
| Statutory audit | Only above ₹40 lakh turnover or ₹25 lakh contribution | Every year, whatever the turnover |
| Annual MCA filings | Form 11 and Form 8 | AOC-4 and MGT-7 (MGT-7A for a small company) |
| Meetings | Not mandated by statute | At least 4 board meetings a year, plus an AGM |
| Cost of maintenance | Lower | Higher |
Tax rates are before surcharge and the 4% health and education cess.
Liability and legal identity
Both structures give limited liability, so personal assets are protected against business debts. In an LLP, a partner is also shielded from the wrongful acts or negligence of another partner. In a Pvt Ltd, a shareholder's liability is capped at the amount unpaid on their shares. On this core protection the two are broadly equal, and both have a legal identity separate from their owners.
Compliance: what each one actually files every year
The company cycle: AOC-4, MGT-7, statutory audit, four board meetings
A Pvt Ltd appoints an auditor and has its accounts audited every year regardless of turnover, holds at least four board meetings a year and an AGM, keeps statutory registers, and files AOC-4 (financial statements) and MGT-7 (annual return) through annual ROC filing. A small company, one with paid-up capital up to ₹10 crore and turnover up to ₹100 crore (G.S.R. 880(E), 1 December 2025), files the shorter MGT-7A, needs only one board meeting in each half of the calendar year, and gets lower penalties. Most new companies qualify, and that relaxed regime is the fair comparison with an LLP.
The LLP cycle: Form 11 by 30 May, Form 8 by 30 October
An LLP files Form 11, its annual return, by 30 May and Form 8, the statement of accounts and solvency, by 30 October. Both are due even if the LLP did no business in the year. There are no statutory board meetings or AGM.
DIR-3 KYC applies to both
Every director of a company and every designated partner of an LLP holds a DIN and files director KYC. DIR-3 KYC is not annual: it is due once every three financial years by 30 June (G.S.R. 943(E), 31 December 2025, effective 31 March 2026), and the next date is 30 June 2028 for those already compliant. Changes in contact details are reported within 30 days through DIR-3 KYC Web. The fee is nil on time, ₹5,000 if late, and ₹500 for a change filing (G.S.R. 300(E), 21 April 2026). A missed KYC deactivates the DIN until it is filed.
Audit: the ₹40 lakh and ₹25 lakh lines
An LLP needs a statutory audit only if its turnover exceeds ₹40 lakh or its partners' contribution exceeds ₹25 lakh in the year. Below both, the designated partners certify the accounts themselves. A Pvt Ltd is audited every year, however small.
This is the most searched fact on the comparison and the most common mistake: an LLP that crosses either line in a year needs an audit for that year. A tax audit under the Income-tax Act is a separate test with its own threshold, and it can apply to either structure.
Tax: 30% flat against the concessional company rate
For FY 2025-26 (AY 2026-27) both are taxed under the Income-tax Act, 1961.
- LLP: 30% on total income, a 12% surcharge where income exceeds ₹1 crore, and 4% cess.
- Pvt Ltd: 25% where turnover in FY 2023-24 did not exceed ₹400 crore, otherwise 30%; or 22% under section 115BAA, with a 10% surcharge and 4% cess, if the company gives up certain deductions and incentives.
From Tax Year 2026-27 the Income-tax Act, 2025 applies (in force since 1 April 2026). The 22% company option continues under section 200 of the new Act. For the company rates in detail, see private limited company tax rate for AY 2026-27.
What happens when you take the money out
The headline rate is only half the answer. A company's profit is taxed once in the company and again when it is paid out, because dividends are taxed in the shareholder's hands at their slab rate. A partner's share of LLP profit is exempt in the partner's hands, so it is taxed only once. Salary to directors and remuneration and interest to partners are deductible within limits. A business that reinvests most of its profit usually does better as a company; one that distributes most of it may do better as an LLP. Model your own numbers before you decide.
Fundraising, ESOPs and DPIIT recognition
If raising external capital is central to your plan, the private limited company wins clearly. Angel investors, venture funds and institutional investors take equity or preference shares, and employees are rewarded with ESOPs. An LLP cannot issue shares or grant equity to employees. Our ESOP scheme drafting service sets up a pool once you are incorporated.
Both a private limited company and an LLP can apply for DPIIT recognition under Startup India recognition, so recognition alone does not decide the structure. What recognition cannot fix is that an LLP has no shares to offer investors or employees, which is why funded startups are almost always companies. If you are a professional firm or family business funding itself from profits, the LLP's flexibility and lower running cost are attractive instead.
FDI: can a foreign investor come in?
Yes, in both, on different terms. FDI in an LLP is allowed under the automatic route only where the sector permits 100% FDI on the automatic route and carries no FDI-linked performance conditions (paragraph 3.2.4 of the Consolidated FDI Policy). The widely repeated claim that an LLP cannot take FDI is wrong.
A Pvt Ltd can take foreign investment within the sectoral cap and route that applies to its business. Each allotment of shares to a foreign investor is reported to the RBI in Form FC-GPR through our FC-GPR filing service. For the wider picture, see FDI reporting.
Late filing: what it really costs
Company: a late AOC-4 or MGT-7 carries an additional fee of ₹100 per day per form, with no upper limit, until it is filed. Separately, a company that fails to file its annual return faces a penalty under section 92 of ₹10,000 plus ₹100 per day of continuing default. The additional fee and the penalty are two different things, and both can apply.
LLP: since 1 April 2022, a late Form 11 or Form 8 carries an additional fee that is a multiple of the form's normal fee, rising with the delay: from 1 time up to 15 times for a small LLP and up to 30 times for any other LLP, plus ₹10 or ₹20 a day once the delay passes 360 days. It is not ₹100 a day. The ₹100 a day figure is a separate penalty that can be adjudicated under sections 34(5) and 35(2) of the LLP Act, capped at ₹1,00,000 for the LLP and ₹50,000 for each designated partner.
Cost of setup and maintenance
Setup costs are similar. Regikart's professional fee for either starts from ₹1,499, with government fees and stamp duty at actuals. The difference is in running costs: an LLP is cheaper to maintain because it has fewer filings, no board meetings and a conditional audit, while a Pvt Ltd carries a yearly audit and more filings. For the company setup line by line, see private limited company incorporation cost.
Converting an LLP to a private limited company
An LLP can convert to a private limited company under section 366 of the Companies Act, 2013, which lets an existing body corporate register as a company. It is common when a growing LLP wants to raise equity, but it takes time and fees and tends to land mid-fundraise. If funding is likely, incorporating as a company from the start is cleaner. Our company and LLP conversion guide covers the process.
Which one should you choose?
Choose an LLP if you:
- Run a professional services firm, consultancy or family business
- Want limited liability with minimal compliance
- Do not plan to raise equity or issue ESOPs
- Expect to distribute most of the profit to the owners
Choose a private limited company if you:
- Plan to raise funding from angels or venture funds
- Want to issue shares or ESOPs to employees
- Want DPIIT startup recognition and plan to raise equity on the back of it
- Aim to scale quickly and reinvest profit
Once you have decided on a company, our step-by-step private limited registration guide covers the SPICe+ process.
Common mistakes
- Picking an LLP, then needing investment. Conversion takes time and fees at the worst moment.
- Ignoring the LLP audit threshold. Crossing ₹40 lakh turnover or ₹25 lakh contribution in a year makes the audit compulsory for that year.
- Underestimating company compliance. INC-20A, board meetings, the yearly audit and DIR-3 KYC all carry penalties if missed.
- Skipping ESOP planning. An LLP cannot grant equity to employees, which matters once you start hiring senior people.
Talk to Regikart
The choice between an LLP and a private limited company shapes your tax, compliance and ability to raise capital for years. Regikart's Chartered Accountants and Company Secretaries look at your goals, funding plans and numbers, recommend a structure, and handle the registration. We work with 250+ clients from offices in Kolkata (head office), Delhi and Bengaluru. Call or WhatsApp +91 70444 94804, or contact us.
Frequently asked questions
What is the main difference between an LLP and a private limited company?
A private limited company raises capital by issuing shares and carries heavier compliance, including a yearly audit. An LLP runs on partner contributions, has lighter compliance and cannot issue shares, so it is not suited to equity funding.
Pvt ltd ya LLP, dono mein liability kahan kam hoti hai?
Dono mein liability limited hoti hai. Pvt Ltd mein shareholder ki liability unke shares ki unpaid amount tak hai, aur LLP mein partner ki liability unke agreed contribution tak.
Does an LLP need a statutory audit?
Only if its turnover exceeds ₹40 lakh or its partners' contribution exceeds ₹25 lakh. A private limited company is audited every year regardless of turnover.
How are an LLP and a private limited company taxed differently?
For FY 2025-26, an LLP pays 30% plus surcharge and cess, and the partners' profit share is exempt in their hands. A company pays 22% under section 115BAA or 25% or 30% otherwise, and dividends are taxed again in the shareholders' hands.
Can an LLP raise venture capital?
Not in practice. Venture funds invest in equity shares, which an LLP cannot issue. Most LLPs convert to a private limited company before an institutional round.
Is FDI allowed in an LLP?
Yes, under the automatic route, where the sector permits 100% FDI on the automatic route and there are no FDI-linked performance conditions.
When are LLP Form 11 and Form 8 due?
Form 11 by 30 May and Form 8 by 30 October each year, even if the LLP had no business.
What is the penalty for filing LLP forms late?
An additional fee that is a multiple of the form's normal fee, up to 15 times for a small LLP and 30 times for others, rising with the delay, plus a small per-day amount beyond 360 days. It is not ₹100 a day.
Is DIR-3 KYC annual for directors and designated partners?
No. It is due once every three financial years by 30 June. The next date is 30 June 2028 for those already compliant, and a late filing costs ₹5,000.
Can I convert an LLP into a private limited company later?
Yes, under section 366 of the Companies Act, 2013. Many businesses start as an LLP and convert when they are ready to raise external funding, but it costs time and fees.
About the author
CS Gaurav Singh
Company Secretary at Regikart. Want to discuss this in the context of your business?
