The right structure depends on liability, compliance burden, funding plans and how profits will be taken out. A proprietorship is simple, but the owner has unlimited personal liability. An LLP gives limited liability with lighter compliance. A private limited company suits businesses planning to raise equity.
Tax treatment differs too. Companies can opt for concessional rates under Section 115BAA, while LLP profits are taxed in the LLP and partners’ share is exempt in their hands.
Key points
- Proprietorship: quickest to start, no separate legal entity
- Partnership: registered under the Partnership Act, unlimited liability
- LLP: limited liability, Form 8 and 11 compliance
- Private limited: suited to investors and ESOPs, highest compliance
General information only, not professional advice. Section references are to the Income-tax Act, 1961; corresponding provisions of the Income-tax Act, 2025 apply from 1 April 2026. Thresholds and dates may change by notification.
CA Rahul Rajendra MohiteACA, M.Com · ICAI Membership No. 622387 · Founder, Rahul R. Mohite & Co., PuneFirm profile and key facts