Loan for Business

What is the Difference Between Pvt Ltd and LLP?

By Tata Capital
05 January 2026
9 mins read
1504

Give me six hours to chop down a tree, and I will spend the first four sharpening the axe.

– Abraham Lincoln

If you are an aspiring business owner, you realise the importance of a business plan. A clear, well-defined business plan creates a sustainable and profitable business. To make such an effective business plan, you must rely on your business instinct as well as on your knowledge of business fundamentals.

One such business fundamental that can prepare and equip many aspiring business owners is the concept of a private limited company versus a limited liability partnership (LLP). You can register your business in India using either of these business structures. Are you wondering which will be more beneficial for your business? Read further to find out.

What is a Private Limited Company?

A private limited company is a business in which private investors hold shares that cannot be traded publicly.

To register your business as a private limited company, you must have at least one more member. The maximum number of shareholders in your company can be 200. A private limited company registration is suitable if your business has a high turnover and requires external funding.

What is an LLP (Limited Liability Partnership)?

A limited liability partnership provides the benefits of a company and a partnership. To set up an LLP, you must have one more partner (with at least one of you being an Indian resident). Additionally, there is no upper limit on the number of partners.

The Limited Liability Partnership Act, established in 2008, governs all LLPs in India. If you are a startup or a small—to medium-sized business owner, an LLP registration is more suitable for your business.

Also, read – MCLR vs RLLR: Which Is Better? Meaning & Key Facts

Similarities between LLP and Pvt Ltd company

An LLP and a Private Limited Company share several core similarities. Both provide limited liability, protecting owners’ personal assets from business risks. They are separate legal entities, capable of owning property, entering contracts, and suing or being sued in their own name. Registration with the Ministry of Corporate Affairs (MCA) is mandatory for both structures.

Each requires defined ownership. Partners in LLPs and shareholders/directors in Pvt Ltd companies must comply with statutory filings and tax regulations. These similarities make both LLPs and Private Limited Companies reliable, legally recognised structures for startups and SMEs in India.

Also, read – Difference Between Bond and Loan: Key Insights & Comparison

Differences between LLP and Private Limited Company

Name and identity

The first distinction in LLP vs Pvt Ltd is the business name. If you register your company as an LLP, you need to incorporate LLP in the company name. Conversely, in case of a private limited registration, your company name should end with ‘Pvt. Ltd’.

Company registration process

The second private limited company vs LLP difference pertains to the registration process.

A private limited company is governed by the Companies Act of 2003 and is registered under the Ministry of Corporate Affairs (MCA). Conversely, an LLP is registered with the MCA under the Limited Liability Partnership Act 2008. The registration of both is filed with the Registrar of Companies on the MCA portal.

Further, to register your company as a private limited company, you must obtain the Director Identification Number (DIN) along with your partners. For an LLP, you must obtain the Designated Partner Identification Number (DPIN) for you and your partners.

Governing documents

The governing document for an LLP is the LLP partnership agreement. This partnership agreement between you and your partners in an LLP is not publicly available.

However, when you register your company as a private limited company, the two governing documents, the Memorandum of Association (MOA) and the Article of Association (AOA) are publicly available after a fee payment to the MCA.

Management & ownership structure

Ownership is different in Pvt Limited vs LLP. If you register your business as an LLP, you and your partners will be the company’s owners and managers.

On the other hand, if you register your business as a private limited company, the management will be different from the owners. The company will be managed by a board of directors and owned by the shareholders. Shareholders will not participate directly in the company’s day-to-day operations.

Membership, partners & directors

The difference based on membership and director requirements is next on the list of differences between limited liability partnership and private limited company.

In an LLP, you must have a minimum of two partners without an upper limit. Directors are not required in an LLP.

A private limited company has a minimum number of members or shareholders of two and a maximum of 200. Additionally, it requires at least two and at most 15 directors for company management.

Compliance requirements

The next difference between a limited liability partnership and a private limited company is based on compliance requirements.

If you register your company as an LLP, you are not required to conduct board meetings. In contrast, you must conduct at least four board meetings per year and an annual general meeting every six months in a private limited company.

Further, your business is not liable for a mandatory audit in an LLP until the turnover exceeds INR 40 Lakhs. A statutory audit is compulsory for a private limited company regardless of turnover.

Fundraising & investment options

Funding constraints are next on the list of Pvt Ltd vs LLP.

You cannot get funds from venture capitalists and angel investors for an LLP. This is because any entity that invests in your LLP must be a partner. However, you can raise funds through financial institutions.

Registration as a private limited company allows you to raise funds from VCs and angel investors who become shareholders after investing.

Taxation & profits distribution

The next difference between Pvt Ltd and LLP is based on taxation.

An LLP is required to pay a 30% fixed tax on its income. When the income exceeds INR 12 Crore, an additional 12% tax is levied on an LLP.

A private limited company must pay a 25% tax on income less than INR 400 Crores. Above this, the tax rate increases to 30%.

Also, read – Difference between pledge, hypothecation, and mortgage

LLP vs Pvt Ltd: Pros and cons for startups and SMEs

The difference between Pvt Ltd and LLP depends on your startup’s growth plans, compliance comfort, and funding needs.

An LLP is ideal for small businesses and professional services. It offers limited liability, lower compliance costs, and flexible management. There’s no requirement for minimum capital, and profits can be withdrawn easily. However, LLPs face limitations in raising external funding, as they cannot issue shares, and are often less preferred by venture capitalists.

A Pvt Ltd Company suits startups aiming for scalability and investment. It allows equity funding, easier ownership transfer, and stronger brand credibility. Investors, lenders, and large clients usually prefer Pvt Ltd structures. On the downside, it involves higher compliance, stricter regulatory requirements, mandatory audits, and more formal governance.

In short, LLPs work well for steady, service-based SMEs, while Pvt Ltd companies are better for high-growth startups seeking funding, expansion, and long-term scalability.

Also, read – Loan vs. Advances: 8 Key Differences Explained

ESOPs, scalability & FDI: Which structure allows for more growth?

For startups targeting rapid growth, Private Limited Companies offer greater advantages. They can issue ESOPs, attract FDI, and raise equity from investors—key drivers of scalability. Their share-based structure supports ownership dilution and expansion. In contrast, LLPs cannot issue ESOPs, face restrictions on foreign investment, and have limited fundraising options. While LLPs suit stable, service-led businesses, Private Limited structures enable faster scaling, global investment, and long-term growth.

Also, read – Experian vs CIBIL: Key Differences Explained

How to choose between LLP and Private Limited Company?

Choosing between an LLP and a Private Limited Company depends on your business goals, scale, and future plans. If you’re starting a small or professional services business with limited capital and minimal compliance preference, an LLP is often suitable. It offers operational flexibility, lower compliance costs, and easier profit distribution among partners.

However, if your business aims for rapid growth, external funding, or investor participation, a Private Limited Company is a better choice. It allows equity issuance, attracts venture capital, and provides higher credibility with financial institutions, clients, and partners. Ownership transfer is also simpler through shareholding.

Consider compliance readiness as well. LLPs have fewer regulatory requirements, while Private Limited companies must follow stricter corporate governance and reporting norms.

In essence, choose an LLP for simplicity and cost-efficiency, and opt for a Private Limited Company for scalability, funding access, and long-term expansion.

Also, read – Loan Write Off vs Loan Waive Off: Differences & Meaning Explained

How to convert LLP to Private Limited and vice versa

Conversion between an LLP and a Private Limited Company is legally permitted under Indian law. To convert an LLP into a Private Limited Company, partners must meet shareholder criteria, obtain name approval, file incorporation forms, and transfer assets and liabilities. To convert a Private Limited Company into an LLP, shareholders’ consent, creditor approval, and ROC filings are required. In both cases, compliance with MCA rules, tax implications, and continuity of business must be carefully managed.

Concluding thoughts

This brings us to the end of our discussion on private limited company vs LLP. By now, you would have gotten a pretty good idea of which suits your business better. Once decided, you must tackle the overwhelming question of funding for your business. If you’re considering a business loan, look no further than Tata Capital’s MSME loan.

Tata Capital provides MSME loans with zero collateral and attractive interest rates. Apply for Tata Capital’s online business loan now and take advantage of its flexible repayment feature to establish your business without worry.

FAQs

What is the main difference between an LLP and a Private Limited?

An LLP offers flexible partner management with limited funding options, while a Private Limited Company supports equity investment, scalability, and structured governance.

Which is better for startups: LLP or Pvt Ltd?

A Private Limited Company is better due to easier funding, ESOPs, scalability, and investor preference, while LLPs suit small, service-based ventures.

Can LLPs raise funding from VCs and angel investors?

No, LLPs cannot raise funding from VCs or angel investors easily, as they cannot issue shares, limiting equity-based investment options.

What are the compliance differences between LLP and Pvt Ltd?

LLPs have lower compliance, requiring annual filings and audits only above turnover limits, while Pvt Ltd companies follow stricter audits, board meetings, and reporting.

How easy is it to convert LLP to Private Limited Company?

Converting an LLP to a Private Limited Company involves legal approvals, MCA filings, asset transfer, and compliance with shareholder and creditor requirements.

How is the ownership structure different in LLP and Pvt Ltd Company?

In an LLP, ownership lies with partners sharing profits and responsibilities, while a Private Limited Company has shareholders holding equity and voting rights.

Is statutory audit mandatory for both LLP and Private Limited Company?

Statutory audit is mandatory for Private Limited Companies annually, while LLPs require audits only if turnover exceeds ₹40 lakh or capital exceeds ₹25 lakh.

Previous Post Disclaimer Next Post

Menu