LLP vs. Private Limited Company: Key Difference & Registration Processes Explained (2025 Guide)

When you're setting up a business in India, one of the most critical early decisions you'll face is choosing the right legal structure. This choice will influence everything from how much you pay in taxes to how you raise funding, manage compliance, and even how easily you can scale or exit the business later.

Two of the most common structures for startups and small businesses in India are the Limited Liability Partnership (LLP) and the Private Limited Company (Pvt Ltd). While both offer limited liability protection and are registered under the Ministry of Corporate Affairs (MCA), they serve different types of entrepreneurs and growth ambitions. 

In this guide, we break down: 

• The key features of LLPs and Pvt Ltd companies

• The registration process for each

• The differences in compliance, taxation, and fundraising

What is an LLP?

A Limited Liability Partnership (LLP) is a hybrid business structure that combines the operational flexibility of a partnership with the limited liability protection of a company. Partners in an LLP are shielded from personal liability beyond their capital contribution, and the entity enjoys fewer compliance requirements than a Pvt Ltd company.

What is a Private Limited Company?

A Private Limited Company is a separate legal entity registered under the Companies Act, 2013. It requires at least two directors and shareholders (maximum 200 shareholders), and offers limited liability protection. This structure is preferred by startups and businesses seeking scalability and external funding. 

LLP Registration Steps 

• Obtain Digital Signature Certificates (DSC) for all partners.

• Reserve the LLP name using the RUN-LLP service.

• File the incorporation form (FiLLiP) with the Ministry of Corporate Affairs (MCA).

• Draft and file the LLP Agreement within 30 days of incorporation.

• Obtain the Certificate of Incorporation and apply for PAN/TAN.

For entrepreneurs seeking a streamlined company registration experience, platforms like Razorpay Rize can help simplify and manage the entire LLP registration process, ensuring compliance at every step.

Private Limited Company Registration Steps 

• Obtain DSCs for proposed directors.

• Reserve the company name using the SPICe+ form.

• Draft the Memorandum and Articles of Association (MoA/AoA).

• File the incorporation application (SPICe+) with MCA.

• Receive Certificate of Incorporation, then apply for PAN/TAN.

Suitability and Use Cases

• LLP: Best for small businesses, consulting firms, and professional partnerships seeking operational flexibility and minimal compliance.

• Private Limited Company: Ideal for startups, growth-oriented businesses, and ventures planning to raise external funding or attract investors.

Case Example:

A group of software developers started a consultancy as an LLP to benefit from management flexibility and tax advantages. In contrast, another tech startup registered as a Private Limited Company to issue shares and attract venture capital for expansion. 

Compliance and Ongoing Requirements

• LLP: Annual filing of Forms 8 and 11; audit only if turnover exceeds ₹40 lakh or capital exceeds ₹25 lakh; no mandatory board meetings.

• Private Limited Company: Annual filing of AOC-4 and MGT-7; mandatory statutory audit; at least four board meetings per year; annual general meeting required.

LLP vs. Private Limited Company: Key Differences Explained

Legal Status and Ownership

• Both LLPs and Private Limited Companies are recognized as separate legal entities.

• LLPs are owned by partners, with no maximum limit on the number of partners.

• Private Limited Companies are owned by shareholders, with a maximum of 200 shareholders.

Minimum Members

• LLPs require at least two partners.

• Private Limited Companies require at least two directors and two shareholders.

Compliance and Regulatory Requirements

• LLPs have a lower compliance burden, with fewer mandatory filings and no requirement for regular board meetings.

• Private Limited Companies face higher compliance, including annual filings, statutory audits, and at least four board meetings per year.

Audit Requirements

• LLPs are only required to conduct an audit if their turnover exceeds ₹40 lakh or their capital contribution exceeds ₹25 lakh.

• Private Limited Companies must conduct a statutory audit every year, regardless of turnover.

Fundraising and Investment 

• LLPs have limited options for raising funds, as they cannot issue shares and are less attractive to investors.

• Private Limited Companies can issue shares, making it easier to attract equity investment and raise capital.

Foreign Direct Investment (FDI)

• FDI in LLPs is permitted only in specific sectors and under certain conditions.

• Private Limited Companies can receive 100% FDI in most sectors, making them more suitable for businesses seeking foreign investment.

 Taxation

• LLPs are taxed at a flat rate of 30% on profits, but do not pay Dividend Distribution Tax (DDT).

• Private Limited Companies are taxed at 22–25% (subject to conditions), but DDT applies when distributing profits as dividends.

Flexibility and Management

• LLPs offer greater flexibility in management, similar to traditional partnerships.

• Private Limited Companies have a more structured management system, with clear roles for directors and shareholders.

Perpetual Succession

• Both LLPs and Private Limited Companies enjoy perpetual succession, meaning the entity continues to exist regardless of changes in ownership.

Conclusion

Deciding between an LLP and a Private Limited Company depends on your business’s unique needs, future plans, and compliance comfort level. Both structures offer distinct advantages, so it’s important to align your choice with your growth strategy.

To simplify the LLP Registration & Private Limited Company registration and compliance process, many entrepreneurs turn to online platforms like Razorpay Rize, which provide guided support and resources for company formation. Other options include going with local CAs, or working directly with a local chartered accountant. Whichever route you choose, having the right support can make your business setup smoother and set you up for long-term success.