Definition |
A simple, unregistered business structure owned and managed by a single individual. Ideal for small-scale operations and freelancers. |
A corporate business structure combining the benefits of a partnership and a company with limited liability protection for its partners. |
A separate legal entity with limited liability protection, owned by shareholders, suitable for businesses seeking growth, investment, and scalability. |
Ownership Structure |
Sole ownership. Complete control and decision-making power rest with the proprietor. |
Minimum 2 designated partners, with no upper limit. Partners can be individuals or corporate entities. |
Minimum 2 shareholders and 2 directors, maximum of 200 shareholders. For an One Person Company (OPC): 1 director and 1 nominee. |
Registration Time |
No specific registration required. Business can be started with basic licenses like GST and MSME registrations. |
Typically takes 7-9 working days for incorporation, subject to document submission and verification. |
Generally takes 10-15 working days for registration. OPCs can be registered faster under simplified procedures. |
Liability |
Unlimited personal liability. The proprietor’s personal assets are at risk in case of business liabilities. |
Limited liability to the extent of the partners’ capital contribution. Personal assets are protected from business debts. |
Limited liability to the value of shares held. Shareholders’ personal assets are not at risk, making it a preferred choice for risk mitigation. |
Compliance Requirements |
Minimal compliance: Income tax filing only if turnover exceeds ₹2.5 lakhs. No mandatory annual filings. |
Moderate compliance: Annual filing of Form 11, Form 8, and ITR 5 with the Registrar of Companies (ROC). |
High compliance: Annual ROC filings, board meetings, AGMs, audit requirements, and ITR 6. Directors must comply with statutory obligations. |
Taxation |
Business income is taxed as personal income under the proprietor’s name. Simple tax structure with no separate business tax filings. |
LLPs are taxed at a flat rate of 30%, plus surcharge and cess. No dividend distribution tax, making it tax-efficient. |
Taxed at 22% for domestic companies without exemptions. Additional surcharge and cess may apply. Dividend distribution tax applicable on shareholder dividends. |
Perpetual Existence |
No, the business is dependent on the proprietor’s life. It ceases to exist upon the proprietor’s death or incapacitation. |
Yes, the LLP exists independent of partners. It can continue despite changes in partnership or ownership. |
Yes, the company has perpetual succession. Ownership transfer does not affect business continuity. Suitable for long-term business stability. |
Cost of Formation |
Low cost, involves only basic registrations like PAN, GST, and MSME. No formal incorporation fees. |
Moderate cost due to LLP agreement, incorporation fees, and compliance filings. |
High cost due to incorporation fees, professional charges, and ongoing compliance costs. Suitable for businesses looking for long-term scalability. |
Transferability of Ownership |
Non-transferable. The business cannot be sold or transferred easily due to lack of separate legal identity. |
Transferable. Partners can be added or removed, and partnership interest can be transferred with consent. |
Easily transferable. Shares can be sold or transferred to new shareholders, making it suitable for raising capital and expanding ownership. |
Documentation Needed |
- PAN Card - Aadhaar Card - GST Registration (if applicable) - Bank Account |
- LLP Agreement - Partners’ Consent - PAN & Aadhaar of Partners - LLP Incorporation Certificate |
- Memorandum of Association (MOA) - Articles of Association (AOA) - Incorporation Certificate - Shareholders’ and Directors’ KYC Documents |