Article | Foundr MAGAZINE


Starting a company is an exciting venture, but it comes with a multitude of decisions, including the choice of business structure. Two common options for startups are Private Limited (Pvt. Ltd.) and Limited Liability Partnership (LLP). So, founders should be well-informed about the differences between them before registering their company. Here are the top 10 differences between Pvt ltd and LLP to consider:

Difference between PVT.LTD and LLP

1. Legal Entity:
– Pvt. Ltd.: It is a separate legal entity distinct from its owners. Shareholders have limited liability.
– LLP: Like a partnership, but with limited liability for partners. It’s also a separate legal entity.

2. Ownership:
– Pvt. Ltd.: Owned by shareholders who hold shares in the company.
– LLP: Owned by partners who have a direct involvement in the business.

3. Number of Owners:
– Pvt. Ltd.: Requires a minimum of two shareholders and two directors.
– LLP: Can be formed with a minimum of two partners, and there is no maximum limit.

4. Management:
– Pvt. Ltd.: Managed by directors who may or may not be shareholders.
– LLP: Partners actively manage the business.

5. Liability:
– Pvt. Ltd.: Shareholders have limited liability, meaning their personal assets are generally protected.
– LLP: Partners have limited liability, protecting their personal assets from business liabilities.

6. Compliance and Formalities:
– Pvt. Ltd.: Involves more regulatory compliance and formalities, such as annual audits.
– LLP: Relatively simpler compliance requirements.

7. Transfer of Ownership:
– Pvt. Ltd.: Shares can be sold to transfer ownership.
– LLP: Transfer of ownership may require the consent of other partners.

8. Taxation:
– Pvt. Ltd.: Subject to corporate tax rates, dividends are taxed in the hands of shareholders.
– LLP: Taxed at the individual partner’s income tax rate, no dividend distribution tax.

9. Business Expansion:
– Pvt. Ltd.: Easier access to funding and attracting investors.
– LLP: More suitable for small and medium-sized businesses with a limited scale of operations.

10. Name and Branding:
– Pvt. Ltd. : Allows for a more formal and prestigious image.
– LLP: Often perceived as a more flexible and collaborative structure.

Choosing between a Pvt. Ltd. and an LLP depends on various factors. Like, the nature of your business, your long-term goals, and the level of control you want to maintain. Pvt. Ltd. is often preferred for businesses with growth ambitions, while LLP is suitable for professionals and service-based businesses. Consulting with a legal or financial advisor is crucial for an informed decision that aligns with your specific needs and objectives.

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