Pvt Ltd vs LLP vs OPC vs Proprietorship: Which to Choose

The short answer

The number that actually decides it

Most founders compare setup costs. Setup happens once. What you live with is the annual compliance burden, and the gap between structures is large.

Structural limits

Choose by circumstance

You have no customers and no revenue yet

Do not register a company. A sole proprietorship, or simply trading in your own name with the registrations your activity actually requires, costs nothing to maintain and can be converted later. Register the structure when the business needs it, not before.

You are two or more professionals sharing fees

An LLP. Limited liability, partners taxed individually, and the lightest annual compliance of any limited-liability structure at ₹10,000 – ₹20,000. Unless you plan to raise equity, a private limited company gives you nothing an LLP does not, at three times the annual cost.

You are alone but want your personal assets protected

An OPC. It gives you company status and limited liability without a second person. Note that bringing in a co-founder or investor later means converting to a private limited company.

You are raising, or will raise, outside investment

A private limited company. It is the only Indian structure investors will fund, equity can be issued, shares transferred, and ESOPs granted. Here the ₹30,000 – ₹50,000 annual cost buys you something real.

Your object is charitable, educational or social

A Section 8 company. It is designed for non-profit objects and carries specific benefits and restrictions that no other structure offers.

When you should not register a company at all

This is the section most firms will not write, because it argues against their largest sale.

• You have no vendors and no customers, nothing is being bought or sold yet
• You have no co-founder and no funding plan, and are being offered a private limited company anyway
• Your only reason is that a company 'looks more professional' to a client who has not asked for it
• You were told registration was mandatory when your turnover and activity do not require it

Registering the wrong structure is not a neutral mistake. It commits you to years of filings, audit fees and professional charges for a shape your business does not fit. Converting later is possible but costs time and money you did not need to spend.

What each one costs to set up

SPICe+ incorporation filing is free for authorised capital up to ₹15 lakh. DIN is included, and PAN and TAN are allotted automatically at no charge. Any quote showing a 'government filing fee' for a standard incorporation deserves a question.

What decides how long each takes

No number of days is quoted here deliberately. Every one of these is decided by a document or an officer rather than by a queue, and the cases that run long are the ones nobody could have predicted at the start.

Mistakes founders make at this decision

• Choosing private limited for credibility, then paying ₹30,000 – ₹50,000 a year for credibility they could have had another way
• Choosing OPC without realising a co-founder later forces a conversion
• Choosing a partnership without a written deed, then discovering liability is unlimited and joint
• Setting authorised capital far higher than needed and paying stamp duty on it
• Registering before there is a business, on the advice of someone paid to register things

Questions founders ask at this stage

Can I change structure later?

Yes, proprietorship to LLP or company, OPC to private limited, and so on. Conversion is a real process with cost and time attached, so it is worth choosing well now. But it is not a life sentence.

Does a private limited company save tax?

Not automatically. Companies pay corporate tax and dividends are taxed in the shareholder's hands. Whether a company is tax-efficient depends entirely on your income level and how you draw money from it.

Is an LLP taken less seriously than a company?

By investors, yes, an LLP cannot issue equity. By clients and vendors, rarely. Most B2B customers care that you can invoice properly and are GST-registered where required.

Do I need to register at all to start selling?

Not always. Many small businesses trade lawfully as a proprietorship with only the registrations their activity requires. Registration becomes necessary when liability, funding or a specific obligation makes it necessary.

Which is cheapest to maintain?

A sole proprietorship, there is no separate entity to file for. Among limited-liability structures, an LLP at ₹10,000 – ₹20,000 a year.

Read next, by structure

This page compares the options. Each structure has a full guide of its own covering registration, cost, compliance and the traps specific to it.

• Private limited company: registration, documents, fees and the annual compliance calendar
• LLP: registration, the LLP Agreement and its stamp duty, and Form 11 and Form 8
• One Person Company: registration, the nominee and Form INC-3, and the conversion triggers
• Sole proprietorship: what registration actually means, proof of business, and ongoing obligations
• Partnership firm: the deed, its stamp duty, and why Section 69 makes registration matter
• Section 8 company: registration, the licence, and 12A, 80G, CSR-1 and FCRA

The Decision, In One Table

Cost Over Five Years

Registration is the small number. This is what the two structures actually cost to keep alive, assuming a small operating business with no audit trigger in the early years.

The Tax Point People Get Wrong

An LLP pays tax at 30% plus surcharge and cess, with no concessional regime available. A company can elect 115BAA at an effective 25.17%. On the face of it the company wins. But company profits distributed to shareholders are taxed again in their hands as dividend, while LLP profits distributed to partners are not. Whether the company or the LLP costs less depends entirely on whether you intend to take the money out.

Statutory figures on this page verified 4 August 2026.