All three give you limited liability. The differences show up in compliance, tax and how easily you can bring in investors.
| LLP | Private limited | OPC | |
|---|---|---|---|
| Owners | At least 2 partners | 2 to 200 shareholders | 1 member |
| Liability | Limited to contribution | Limited to shares | Limited to shares |
| Compliance | Lighter: two annual forms | Highest: board meetings, registers, several annual forms | Lighter than a private company |
| Statutory audit | Only above turnover or contribution limits | Always | Always |
| Raising equity | Difficult | Easiest: shares, ESOPs, foreign investment | Must convert first |
| Profit to owners | Share of profit is tax free for partners | Dividends taxed in shareholders' hands | Dividends taxed in member's hands |
Tax at the entity level
An LLP pays tax at 30% plus surcharge and cess. A company can choose the concessional regime at 22% plus surcharge and cess, giving an effective rate of about 25.17%, but then distributions as dividends are taxed again for shareholders. LLPs can pay partners remuneration and interest within limits, which is deductible for the LLP.
Choose an LLP if
You run a professional or family business, do not plan to raise equity and want lower compliance costs.
Choose a private limited company if
You plan to raise investment, issue ESOPs, bring in foreign shareholders or build a business to sell.
Choose an OPC if
You are a single founder who wants the credibility of a company without a second shareholder. An OPC can be converted to a private company as you grow.
This article is general information, not advice for your situation. Tax rules change, so speak to us before acting on it.