Which business structure is best in India depends on three answers: will you raise equity, how many owners will there be, and do you need limited liability. This guide compares Pvt Ltd vs LLP vs OPC, partnership and proprietorship on tax, compliance and cost, so you can test the finder's result before you register. Of these five structures, only a private limited company can sell shares to investors and grant ESOPs without converting first.
Which business structure is best in India for a new business?
The best structure is the one your plans will not force you to change. Decide in this order, because each answer rules options out. In the finder, a yes to raising money leads to a private limited company in almost every case, and two partners in a services firm who want limited liability and little paperwork get an LLP.
- Purpose. A non-profit for education, charity or social welfare points to a Section 8 company, which cannot pay dividends.
- Owners. One owner rules out an LLP and a partnership. Two or more rules out an OPC and a proprietorship.
- Fundraising. Plans for angel or VC money, or for ESOPs, move the finder's score more than any answer except purpose, because investors buy shares.
- Liability. If personal assets must be protected, a proprietorship and a partnership drop down the list, since their owners are personally liable for business debts.
- Foreign owners. A foreign national, OCI or foreign company rules out an OPC and limits what an LLP can take.
Pvt Ltd vs LLP vs OPC: how do tax and compliance compare?
A private limited company or OPC that opts for the 22% regime pays an effective 25.168% on its profit, against 31.2% for an LLP (34.944% once income passes ₹1 crore). Every company must be audited each year whatever its size, while an LLP, in usual practice, needs an audit only if turnover exceeds ₹40 lakh or partners' contribution exceeds ₹25 lakh.
| Point | Private limited company | OPC | LLP |
|---|---|---|---|
| Tax on profit | 22% regime under section 200 (section 115BAA of the 1961 Act): 25.168% with surcharge and cess | Same as a private company | 30% plus 4% cess, and a 12% surcharge above ₹1 crore |
| Audit | Every year | Every year | Only above ₹40 lakh turnover or ₹25 lakh contribution |
| Accounts filing | AOC-4 within 30 days of the AGM | AOC-4 within 180 days of the year end (no AGM) | Form 8 by 30 October |
| Annual return | MGT-7 (MGT-7A for small companies) within 60 days of the AGM | MGT-7A | Form 11 by 30 May |
| Paying the owners | Salary is deductible; dividends are taxed again at the owner's slab rate | Same as a private company | Remuneration deductible within limits, interest on capital up to 12% a year, profit share tax-free |
An LLP's working partners can draw remuneration that the LLP deducts, and their share of the remaining profit is not taxed again. A company's dividends are taxed twice: once in the company and again in the shareholder's hands. Put your own profit into the business tax comparison calculator before you decide on tax alone.
Proprietorship vs partnership vs company: what changes when you add owners?
A proprietorship and a partnership firm are not legally separate from their owners, so liability is unlimited and personal. A company or LLP is a separate legal entity, and its owners risk only the unpaid amount on their shares or their agreed contribution. Once you borrow or hire, that matters more than tax.
- Proprietorship. One owner, no registration as an entity. The business is identified through GST, Udyam or shop registration, and its profit is taxed in the owner's return at slab rates.
- Partnership firm. 2 to 50 partners under a deed, with no ROC filings. Registration with the Registrar of Firms is optional, but only a registered firm can sue to enforce its contracts, so register it.
- Company or LLP. Registered with the Registrar of Companies. The SPICe+ and FiLLiP incorporation forms also issue its PAN and TAN.
NRIs can put money into a proprietorship or a partnership firm only on a non-repatriation basis, and not into a firm in agriculture or plantation, print media or real estate business, under the RBI Master Direction on foreign investment.
When does a One Person Company make sense?
An OPC suits a single founder who is an Indian citizen, wants limited liability and expects to stay the only owner for a while. It has one member and a nominee, holds no AGM, and since 1 April 2021 can convert into a private limited company at any time, so it works as a first step rather than a dead end.
- Indian citizens living abroad can form an OPC since 1 April 2021. Foreign nationals and OCIs cannot.
- A person can form only one OPC.
- Compliance is close to a private company: a yearly audit, accounts within 180 days of the year end and the shorter MGT-7A.
- It cannot take investors or grant ESOPs while it has a single member, so convert it before a funding round.
Worked example: four founders, four results
Here is what the finder recommends for four common profiles, using its own scoring; all owners are Indian residents. The deciding answer is different each time: fundraising for the startup, services work and liability for the consultants, paperwork for the shopkeeper, and single ownership for the freelancer.
| Profile | Key answers | Best fit | Second choice |
|---|---|---|---|
| Two founders building a software product, raising an angel round next year | 2 owners, funding yes, limited liability, paperwork: whatever it takes, product | Private limited company | LLP |
| Two marketing consultants starting a practice | 2 owners, no funding, limited liability, least paperwork, services | LLP | Private limited company |
| One person opening a hardware shop | 1 owner, no funding, liability not important, least paperwork, trade | Proprietorship | OPC |
| A solo designer who may raise money later | 1 owner, funding maybe, limited liability, some paperwork, services | OPC | Private limited company |
Example. The software founders choose ₹10 lakh authorised capital and register in Maharashtra. There is no MCA registration fee or SPICe+ fee up to ₹15 lakh, so the government cost is ₹1,000 for the name, ₹1,000 stamp duty on the MoA and ₹3,000 (0.3%) on the AoA: ₹5,000 in all. The consultants' LLP, with a ₹1,00,000 cash contribution, pays ₹200 for the name, a ₹500 FiLLiP fee, a ₹50 Form 3 fee and ₹1,000 stamp duty on the agreement: ₹1,750.
If the shopkeeper had asked for limited liability instead, the OPC and the proprietorship would score level and the finder would show the OPC first. Treat that tie as a prompt to weigh the OPC's yearly audit and filings against the protection it gives.
What does each structure cost to start and run?
Starting is cheap for small entities. A company with authorised capital up to ₹15 lakh pays no MCA registration fee or SPICe+ fee, only name reservation and state stamp duty. Running costs differ far more: a company pays for a statutory audit and ROC filings every year, while a proprietorship pays for its owner's tax return and any GST returns.
- Above ₹15 lakh, OPCs and small companies pay a lower registration fee. A small company has paid-up capital up to ₹10 crore and turnover up to ₹100 crore, from 1 December 2025.
- Use the incorporation fee and stamp duty calculator for the government cost in your state, and the registration cost calculator to add Ofin's fee and first-year add-ons.
- Budget for yearly compliance from day one: Ofin's company annual compliance starts at ₹19,999 and LLP annual compliance at ₹7,999.
Common mistakes when choosing a business structure
The costliest mistake is starting as an LLP or proprietorship and then raising equity, which means moving the business into a company with fresh filings and fees. The next is setting authorised capital far above need: in Maharashtra, going from ₹15 lakh to ₹20 lakh raises a private company's government cost at incorporation from ₹6,500 to ₹74,500, or ₹30,500 if it stays a small company for its first year.
- Capital set too high. Start with what you need and raise authorised capital later on Form SH-7. The authorised capital increase calculator shows the fee.
- No resident director. A private company needs at least one director resident in India, and an LLP at least one resident designated partner.
- Foreign money in the wrong vehicle. An LLP can take foreign contribution only in sectors open to 100% foreign investment under the automatic route with no FDI-linked performance conditions. In a company, investors from a country sharing a land border with India need the government route. Check with the FDI route checker.
How Ofin can help
Ofin registers every structure the finder suggests, with a written price before you pay. A private limited company starts at ₹8,999, an OPC at ₹8,999 and an LLP at ₹9,999, with the government fee and stamp duty listed in each package. Send us your finder result and we will check the structure, starting capital and first-year filings.
