Company registration
LLP or private limited company: which one should you register
If you will raise money or give equity to employees, the answer is a company. Almost every other trade-off favours the LLP.
Updated 29 Jul 20267 min read
Both structures give the owners limited liability, and both are registered with the Ministry of Corporate Affairs. From there they diverge on almost everything that matters to how a business is run.
| Private limited company | LLP | |
|---|---|---|
| Owners | Shareholders, minimum 2 | Partners, minimum 2 designated |
| Equity and ESOPs | Yes | No |
| Annual MCA filings | AOC-4, MGT-7, ADT-1, DIR-3 KYC | Form 11 and Form 8 |
| Statutory audit | From the first year | Only above turnover or contribution limits |
| Board meetings | Required, with minutes | Not required |
| Typical setup cost | Higher | Lower |
The fundraising question decides most cases
An LLP cannot issue equity shares. It cannot run an ESOP pool. Venture investors and most angel investors will not put money into one, and if they like your business they will ask you to convert before the money moves. If there is any real chance of external investment in the next two years, register the company now and save yourself the conversion.
The compliance question decides the rest
A company has to appoint an auditor within thirty days of incorporation and have its accounts audited every year, regardless of turnover. It files four annual forms with the registrar. An LLP files two, and audit only bites once turnover crosses forty lakh rupees or contribution crosses twenty five lakh rupees.
For a two person consulting practice that will never raise money, the LLP saves a meaningful amount every year and gives the same protection against personal liability.
Conversion works, but it costs
An LLP can convert into a private limited company and a company can convert into an LLP. Both are filings with their own documents, fees and waiting period. Choosing correctly at the start is cheaper than either.