Side by side
| Private limited company | LLP | |
|---|---|---|
| Tax on profits | 22% option (about 25.17% effective) or 25% / 30% | 30% (+12% surcharge above ₹1 crore, 4% cess); partners’ profit share exempt |
| Raising equity / VC | Yes — shares, CCPS, SAFEs-style instruments | No shares; investors become partners — VCs rarely invest |
| ESOPs | Yes, under the Companies Act | No statutory ESOPs — only contractual profit-sharing |
| Foreign investment | Automatic route in most sectors | Only in sectors open to 100% automatic FDI without performance conditions |
| DPIIT recognition | Yes | Yes |
| Audit | Always | Only above ₹40 lakh turnover or ₹25 lakh contribution |
| Annual filings | AOC-4, MGT-7, board and AGM records | Form 11 (by 30 May), Form 8 (by 30 October) |
How to choose
- Raising from angels or VCs, or hiring with equity: private limited company. See the startup funding guide.
- Professional or services firm owned by its partners: LLP — lighter compliance, profits taxed once.
- Planning a US parent later? A company is easier to flip — see Delaware flip.
Changing later
- LLP to company: possible under section 366 of the Companies Act — common before a funding round.
- Company to LLP: under the LLP Act; tax-neutral only for small companies meeting turnover, asset and shareholding-continuity conditions.
Frequently asked questions
Is LLP or private limited better for a startup?
A private limited company is usually better if you plan to raise equity or issue ESOPs, because LLPs have no shares and VCs rarely invest in them. An LLP suits partner-funded services businesses wanting lighter compliance.
What is the tax rate for an LLP in 2026-27?
30% plus 12% surcharge where income exceeds ₹1 crore and 4% cess; partners' share of profit is exempt in their hands.
Can an LLP get DPIIT startup recognition?
Yes. Private limited companies, LLPs, registered partnership firms and, since 2026, cooperative societies are eligible.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.