The main business structures in India are Private Limited company, LLP, One Person Company, partnership, sole proprietorship and Section 8 company. Private Limited suits funded startups, LLP suits professional and closely held businesses, and proprietorship suits the smallest, simplest ventures.
Key takeaways
- Limited liability protects personal assets in companies and LLPs; proprietors and partners are personally liable.
- Only a company can issue shares to investors in the usual way, so funded startups prefer Private Limited.
- Compliance and cost rise as you move from proprietorship to company.
- You can change structure later, but it has tax and paperwork cost.
01The structures at a glance
| Structure | Liability | Best for | Compliance |
|---|---|---|---|
| Proprietorship | Unlimited | Freelancers, small traders | Lowest |
| Partnership firm | Unlimited, shared | Small family or trade firms | Low |
| LLP | Limited | Professionals, closely held businesses | Medium |
| One Person Company | Limited | Solo founders | Medium |
| Private Limited | Limited | Startups, growth businesses | Higher |
| Section 8 company | Limited | Non-profit work | Higher |
02How to choose
- Raising equity funding? Choose Private Limited.
- Providing professional services with a partner? An LLP is often simpler.
- Testing an idea alone? Start as a proprietor, then move to a company.
- Running a charity or social cause? Consider a Section 8 company or a trust.
If you are unsure, pick the structure you would be comfortable defending to an investor and a bank in three years.
03Tax in one paragraph
Companies pay corporate tax, and many domestic companies can opt for the concessional 22 percent regime subject to conditions. LLPs and partnerships are taxed at 30 percent plus surcharge and cess. Proprietors are taxed at individual slab rates. The best structure depends on profit level and how you take money out, so model it before you decide.
04What changed recently
Since 1 December 2025 a company with paid-up capital up to ₹10 crore and turnover up to ₹100 crore can qualify as a small company, which brings lighter compliance. See our Private Limited and LLP pages for current requirements.
Frequently asked questions
Which is cheaper to register, LLP or Private Limited?
Both have modest government fees. Total cost depends on capital, stamp duty and professional fees, and annual compliance is usually lighter for an LLP.
Can a proprietorship become a company later?
Yes. It involves incorporating a new company and transferring the business, with tax and licence implications.
Do I need GST registration for every structure?
GST depends on turnover and the nature of supplies, not on the structure.
Can foreigners own a company in India?
Yes, subject to FDI rules for the sector. See our foreign company setup page.
This guide is general information based on Indian law as understood in October 2026. Rules, fees and due dates change, so confirm current requirements with a qualified Chartered Accountant before you act. It is not professional advice.