Understanding the Difference Between Private Limited Company and LLP

May 12, 2025

Choosing the right business structure is one of the first big decisions you make as an entrepreneur. Whether you're launching a consultancy, a startup, or a growing SME, this choice can affect your taxation, compliance, investment potential, and how your business is perceived. Two popular options in India are the LLP vs private limited company models. So, which one should you choose?

At BC Shetty & Co., one of the trusted CA firms in Bangalore, we help new businesses make the right decisions. This guide simplifies the difference between LLP and a private limited company, making it easy for you to decide based on your goals.

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) is a registered entity under the Companies Act, 2013. It offers limited liability to its shareholders and has a separate legal identity. Its structure makes it attractive to investors and banks, which is why startups and mid-sized companies often choose it. With proper private limited company registration, the business enjoys more credibility and scalability.

What is a Limited Liability Partnership?

A Limited Liability Partnership (LLP) combines the flexibility of a traditional partnership with the benefits of limited liability. Governed by the LLP Act, 2008, it’s a great choice for consulting firms, agencies, and family-run businesses.

The partners aren’t liable for each other’s actions, and the compliance requirements are much simpler. Choosing LLP makes sense if your business doesn't need external funding and you're looking for ease and flexibility.

Features Comparison: LLP vs Private Limited Company

Let’s break down the difference between LLP and Pvt Ltd in a detailed table:

LLP Vs. Private Limited: Advantages

Let’s dig deeper into the pros of both structures. These are the core points many of our clients consider before registering:

Advantages of LLP:

• Lower Costs & Simpler Compliance: LLPs are easy to set up and manage. You won’t need to conduct board meetings or do statutory audits unless your business crosses a threshold. That’s why many small businesses prefer them.
• No Dividend Tax in Owners' Hands: Unlike companies, LLPs don’t pay Dividend Distribution Tax. The profits are taxed only once and directly in the hands of the partners, making it tax-efficient.
• Limited Liability for Partners: Each partner’s liability is limited to their contribution. No one partner is responsible for the acts or debts of another.
• No Minimum Capital Required: You don’t need a fixed amount of money to start an LLP. This rule applies to both LLPs and Private Limited companies. But many startups choose LLPs because they’re cheaper to set up and manage, which is a big advantage for new businesses.

Advantages of Pvt Ltd:

• Easy Fundraising and Investor Trust: Private Limited Companies attract more investors because of their structured nature and share-based ownership. Perfect for startups seeking funding.
• Better Brand Image and Credibility: A Pvt Ltd tag often helps build a more professional image. Banks, vendors, and clients see it as a sign of long-term vision.
• Clear Ownership & Transferability: Shareholders can easily transfer their shares, which makes ownership transitions smoother compared to an LLP.
• Eligibility for ESOPs: Private Limited companies can offer Employee Stock Option Plans (ESOPs) to attract and retain top talent—something LLPs can’t do.

Final Thoughts: Which One Should You Choose?

Still confused about the difference between Limited Liability Partnership vs Private Limited Company? Let’s keep it simple.

• Choose an LLP if you want flexibility, less compliance, and don’t plan to raise funds or issue shares.
• Choose a Pvt Ltd if your business plans include growth, investment, and long-term scalability.

Whether you're a first-time founder or a seasoned entrepreneur, your choice between LLP vs Pvt Ltd should align with your goals, not trends.

At BC Shetty & Co., we offer professional guidance and hassle-free services for private limited company registration, LLP setup, tax advisory, and more.

Contact us today to schedule a free consultation!