Which business structure should I choose: private limited company, OPC, LLP, partnership or proprietorship?

Question

I am starting a small tech business with one co-founder and want to know which entity structure suits us best under Indian law. I would rather settle this without going to court if the law allows it, but I need to know my rights before I sign anything. Please tell me what to do first and what document to keep.

MyVakeel Legal Desk · Accepted Answer

Under Indian law, Companies Act 2013, Section 2(68) is the starting point for this corporate law question. What follows is the position in substance, together with the steps that usually make the difference in practice.

A private limited company under Section 2(68) of the Companies Act 2013 offers limited liability, perpetual succession and easier access to equity funding, but carries higher compliance costs.

A One Person Company defined under Section 2(62) suits a sole promoter who wants limited liability without bringing in another shareholder, subject to conversion rules if turnover or capital thresholds are crossed.

An LLP registered under Section 3 of the Limited Liability Partnership Act 2008 combines limited liability with lower compliance than a company and is suited to professional and services firms.

A partnership firm under Section 4 of the Indian Partnership Act 1932 and a sole proprietorship involve unlimited personal liability of the partners or proprietor for business debts.

The choice should weigh funding plans, liability exposure, compliance capacity and exit or transfer requirements before registration is finalised.

What this means for you: 1) List expected funding sources and whether external investors will be brought in; 2) Assess your ability to handle ongoing ROC and tax compliance costs; 3) Compare liability protection needs against setup and running costs of each structure; 4) Consult a company secretary or lawyer before finalising the entity type.

Where the facts are disputed, what usually decides a private limited vs llp matter is the paper trail — dated complaints, acknowledgments and written replies under Companies Act 2013, Section 2(68). You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in corporate law.