Pvt Ltd vs LLP vs Partnership vs Proprietorship

Side-by-side comparison

How each is taxed

• Proprietorship: profit is added to the owner’s income and taxed at slab rates.
• Partnership and LLP: taxed at a flat rate on profit; partner salary and interest are deductible within limits.
• Private Limited: taxed at corporate rates, with a lower rate option available; dividends are taxed again in shareholders’ hands.

Which suits whom

Proprietorship

Single-owner shops, freelancers and home businesses that want to start quickly with minimal paperwork.

Partnership

Family and local businesses where partners trust each other and liability risk is low.

LLP

Professional firms, consultants and growing partnerships that want limited liability without company-level compliance.

Private Limited Company

Startups planning to raise angel or venture funding, issue employee stock options, or bid for large contracts.

Questions to ask yourself

1. How much personal risk can I take if the business has debts or claims?
2. Will I raise outside equity in the next two to three years?
3. How much ongoing compliance can I handle or pay for?
4. Do customers or tenders require a registered entity?

You can start simple and move up. Proprietorships and partnerships can transfer their business to an LLP or company later, though it takes planning.

Frequently asked questions