Business Structure Types in India (LLP, OPC, Pvt Ltd)

The decision related to the selection of the business structure is also a very important one when opening the business in India. It touches upon every aspect of your day-to-day operations, taxes payable, and compliance with it, and your liability. In India, some of the most popular forms of business are:

• Limited Liability Partnership (LLP)

• One Person Company (OPC)

• Private Limited Company (Pvt Ltd)

Now, in depth, we shall discuss each of these to enable you to make a qualified decision.

Limited Liability Partnership (LLP)

Overview:

Limited Liability Partnership was established in the year 2008 under the LLP Act, and it integrates the benefits of a partnership and a company. It ensures its partners flexibility of partners and liability.

Key Features:

• At least 2 partners (not limited to the number)

• Minimum capital is not required

• Distinguish a legal entity and its partners

• Limited liability insurance

• Statutory audit (Turnover < 40 lakhs) No statutory audit

Advantages:

• Cochepancy is low cost in comparison with a Pvt Ltd company

• Conveniently pronounced and easy to control

• Distribution of profits is not rigid

• Can match the real-life needs of a person who is a doctor, lawyer, or consultant or even act as a small business of its own

Disadvantages:

• Unable to attract equity funding by investors

• Some compliance and filing actions are also required annually

Best suited for: Small and medium-sized business and professional services, and family-owned firms.

One Person Company (OPC)

Overview:

One Person Company under the Companies Act, 2013 is a radical concept, and it is a kind of company in which the individual may run the company as an individual and has limited liability and single-handed control.

Key Features:

• The shareholders are just one, and there is a nominee

• The minimum requirement of conversion to Pvt Ltd beyond 2 crore turnover

• Independent legal personality

• Limited liability to a single member

Advantages:

• This is suitable for a lone entrepreneur

• Separation of legal identity safeguards personal property

• It is less difficult to obtain loans and banking credibility than a sole proprietorship.

Disadvantages:

• Limits the possibility of conversion voluntarily within 2 years after incorporation

• There should also not be over one shareholder

• Placed compliance over a sole proprietorship

Best suited for: Individual owners, one-man entrepreneurs and startups.

Private Limited Company (Pvt Ltd)

Overview:

The Patent Limited Company is the most frequent and secure form of business establishment in India for newborn ventures and thriving businesses. The Companies Act, 2013 controls it.

Key Features:

• 2-200 shareholders, maximum and minimum

• Independent legal personality

• Protection against limited liability

• Compulsory audits without regard to turnover

Advantages:

• It is very suitable for startups that need funds

• VCs and investors like this type of structure

• Facilitation of change of ownership

• Perpetual succession

Disadvantages:

• Increased maintenance and compliance cost

• The directors and shareholders have stricter requirements on their part

Best suited for: Start companies, technology companies, business development with potential to grow and seek capital.

Key Comparison Table

Conclusion

When making the choice of a business structure in India, one has to consider the current/ future business goal, appetite and scale of compliance.

• Choose LLP in case you require the flexibility but do not want so many limited liabilities and plenty of compliance requirements.

• OPC is an option when you are a one-time entrepreneur taking out a small.

• Choose a Private Limited Company in case you intend to grow and attract investments or develop a corporate base.

The consideration of legal structure provides a firm platform for success. Ask the advice from a professional or a legal expert on your case.