Proprietorship, Partnership, LLP or Private Limited: Choosing the Right Structure
The structure you choose affects your personal liability, tax, paperwork and ability to raise money. Here is a simple comparison of the four most common options in India.
Sole proprietorship
- Easiest and cheapest to start
- The owner and the business are the same in law, so liability is unlimited
- Suitable for small, single-owner businesses with low risk
Partnership firm
- Two or more partners under a partnership deed
- Simple to set up and run
- Partners usually have unlimited liability
Limited liability partnership (LLP)
- A separate legal entity with limited liability for partners
- Lighter compliance than a company
- Popular with professional firms and small businesses with several owners
- Less suited to raising equity investment
Private limited company
- Separate legal entity with limited liability for shareholders
- Higher compliance: audit, board meetings, annual filings
- Most credible with banks, large customers and investors
- The usual choice for startups planning to raise funds or issue employee stock options
Questions to ask yourself
- How much personal risk does the business carry?
- Will you bring in partners or investors?
- How much administration can you handle each year?
- Do customers or tenders require a particular structure?
Changing later
It is possible to convert from one structure to another later, but it takes time and effort. Choosing well at the start saves work.
A note on accuracy
Tax treatment and compliance rules differ by structure and change over time. Discuss your situation with a qualified advisor.
How Vega Legal helps
Vega Legal helps founders compare options and then registers the chosen structure through verified experts, with transparent pricing and live status tracking.