Most startups and companies working in their initial stages are worried about the kind of business structure they should choose. Mostly, the choice is whether they should choose a private limited company structure or a Limited Liability Partnerships (LLP) structure. The benefits as well as the features of both these structures collide for them. There is always a crossroads that most startups find themselves in. But if we look at the foundational meaning of the private limited or LLP company structure, the contrast is sharper than expected.
Let’s delve deeper into an extensive analysis of the Private limited and the LLP company structure individually. And more importantly, which company structure should you adopt as a startup?
Private limited company structure
A private limited company can be described as a company setup that allows limited liability protection to the shareholders. This means that even if the liability is limited, the people have private ownership of shares. There is a minimum paid up share capital as per the highest amounts set up by the law and the government. There is a restriction on the rights of the shareholders to transfer their shares. This means that the shareholders cannot freely sell or transfer any company shares without the consent of all the shareholders or the company. Apart from that, the company under the private limited company needs to limit the total number of its members within 200. Henceore than 200 members within a private limited company structure at any given time. at any Atven time
Features of the private limited Company structure-
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Limited liability
As mentioned in the definition of a private limited company, the shareholders' liability will be limited due to their amount invested in the company.
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Number of shareholders
A private limited company can have a minimum of two shareholders and a maximum of two hundred shareholders.
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Directors
A private limited company also needs to have a minimum of two directors who are appointed and chosen by the shareholders.
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Clear distinction between shareholders and managers
A private limited company also starkly demarcates between its shareholders and managers. It is the shareholders who engage in the process of electing the managers/ directors of a private limited company.
Limited Liability partnership company structure
An LLP company structure can be defined as a company that combines the benefits of a company with limited liability. Organisational flexibility also exists within partnerships. It allows the members or the partners to structure their internal operations more liberally.
Features of the LLP company structure-
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Separate legal entity
An LLP company is considered a separate legal entity from the partners. Hence, as a company under this structure, you can enter into contracts, break contracts or sue them.
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Perpetual succession
An LLP also enjoys perpetual succession, which means that the company continues to exist despite the changes in its partners. The death or the retirement of any partners does not affect the LLP company’s continuity or the company's future.
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Minimum number of partners
An LLP company requires a minimum number of two partners with no upper limit on the maximum number of partners.
Hence, an LLP company structure provides startups with a commercially efficient and a very flexible business structure which offers limited liability protection while allowing customisation based on mutual agreements among the partners.
Private limited V/S LLP- Which one is better?
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Eligibility criteria
The eligibility criteria for the total number of partners in Private limited companies are upto 200, while for LLP companies there is no limit on the maximum number of partners.
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Liability
Liability is limited for both Private limited companies and LLP companies. In private limited companies, the shareholders are liable for their investment in the company, while for LLP companies, the shareholders are liable for the capital contributions.
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Perpetual succession
Both private limited and LLP companies enjoy the benefit of perpetual succession, which means the companies continue to exist even when the partners retire or die.
Both the Private limited and the LLP company structures offer their own set of benefits and cater to different business needs. At the same time, LLP provides flexibility, reduced compliance burdens and partnership-oriented managements, while the Private limited company structure offers limited liability, easier access to capital and more credibility. So, as per the startup and the field, you can choose the company structure.
FAQs
1. I’m starting a business—should I go for an LLP or a Private Limited Company?
It depends on your goals. If you're looking for flexible management and lower compliance, LLP might suit you. But if you're planning to raise funding and want stronger brand credibility, a Private Limited Company is often the better pick. Lawgical India helps you evaluate both and register the right structure seamlessly.
2. What’s the main difference between LLP and Private Limited Company?
LLPs are more partnership-driven with flexible management, while Private Limited Companies have stricter governance but more credibility with investors. Lawgical India can help you understand which fits your business operations better.
3. Is liability protection the same in both LLP and Private Limited Company?
Yes, both offer limited liability—but the way it's structured differs. In LLP, it's based on capital contribution; in a Private Limited Company, it’s based on shareholding. Lawgical India ensures your liability protection is clearly documented during registration.
4. Which structure is better for raising funds—LLP or Private Limited?
Private Limited Companies are preferred by VCs and angel investors due to their shareholding model. LLPs aren't allowed to issue equity shares. If you’re aiming to raise capital, Lawgical India recommends and facilitates Private Limited Company registration.
5. Can I convert from LLP to Private Limited later if needed?
Yes, but the process involves legal formalities and approvals. It's easier to start right. Lawgical India can handle both initial registration and future conversions, guiding you through each step.
6. Are compliance requirements lower for LLPs?
Generally, yes. LLPs have fewer annual filings and simpler audits compared to Private Limited Companies. If you're a lean team, this might be a deciding factor. Lawgical India helps you stay compliant, no matter the structure.
7. What’s the minimum number of partners or shareholders needed?
Both require at least two people to start. LLPs need two partners, while Private Limited Companies need two directors and shareholders. Lawgical India ensures all partner/director DINs and documents are in place before filing.
8. Is there a cap on the number of people involved?
Yes, Private Limited Companies can have up to 200 shareholders. LLPs, however, have no such upper limit on partners. We’ll help you pick what’s best based on your growth plans.
9. Which structure is better for long-term scalability?
Private Limited Companies offer better scalability, especially if you plan to grow, onboard investors, or go global. Lawgical India helps startups set up with growth and funding in mind.
10. How can Lawgical India help with choosing and registering the right company type?
We offer end-to-end services—from explaining the pros and cons based on your goals to registering your LLP or Private Limited Company. We also handle tax registrations, licensing (like GST, FSSAI, MSME), and post-registration compliance so you can focus on building your business.
