Private limited company Vs Limited liability partnership Vs Partnership firm

May 13, 2009 at 4:14 pm | Posted in Company incorporation, Legal, Startup | 17 Comments

Sharda Balaji from Novojuris, wrote a very informative post on on the least understood and most young type of a commercial organization, called Limited liability partnership (LLP).  She also tells the various diff between a Private limited company, a  Limited liability partnership and a Partnership firm in a tabular form. Check out the article here:



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  1. Hey Himanshu…

    Great post.. I am on the verge of opening a pvt. limited in bangalore with an authorized capital of 1 lac. I intend to pull in one of my friends as the 2nd director. do we need to think of distributing the stock options for now ?

    cheers – Dhruv

  2. @Dhruv
    Yes you need to be very clear on the equity front. Later on these things cause a lot of trouble.

  3. Thats correct. But how do i do the breakup. Since I want to keep the majority of the share and also keep some for Angels, VCs later and employee stock options.

  4. Whichever way!! Even 99:1 is ok.

    When you add VCs etc later, usually the capital will be increased and more shares are added. So the equity for both of you will be diluted in equal proportion. So dont worry about that as of now. Think of what your share should be as of today.

  5. hey Himanshu .. thank you 🙂 you got some good stuff on marketing as well .. amazing !!!

  6. Thanks! 🙂

  7. We are at the verge of opening a susidiary in Hong Kong, so should it be a LLC or Pvt. Ltd. or any other form of a business entity. Also, how should we divide the shares between the parent company and the subsidiary? What the parameters to decide all this.

    Kindly guide.

  8. LLC vs Pvt Limited company decision depends on various factors. See my post

  10. for some points. Dividing the share entirely depends on the capital investment and the scale of business the subsidiary would have.

  • Dear Himashu,

    My wife and me are planning to start a media company. We were thinking of it being a PVT Ltd Company. Then someone mentioned about LLP… We may want to invite Angel/VC investors at a later stage. Would it be better to go for LLP or Pvt Ltd.

    Arun D’souza

  • @Arun

    LLP should be fine to start with!

  • Hey Himanshu,
    We have a chain of 3 retail stores currently running as different proprietorships. We wish to merge the 3 to have better control over purchases, inventory, payments etc. Should we go for LLP or Pvt Ltd company?

    We are only 2 of us in the family. Me n my mother.

  • @Dhawal
    LLP should be fine!

  • Dear Mr.Himanshu,

    I am running a chitfund firm since last two years.. I am having 400 members as a investors.. Now, i want to extent my business as setting up few branches in the nearest cities and covert my firm into Pvt.Ltd… we are 4 partners now.. should i do it in pvt ltd or LLP ?? which is the best ??

  • I would like to start a Fertilizing Manufacturing business with 7 Partners. Which is better option to start with Partnership Firm or Private Limited Company.

  • Hi Himanshu,
    Three of us want to float a company in Hyderabad. Our project to develop a portal is in the formative stage and at a later stage we will try for outside funding. Which will be a better format to protect our interests- LLP or private limited company ? Whch will take less time to incorporate and will cost less ?
    Uma Shankar

  • sir,

    Problem —– i want to what exactly means a share.

    I Have opened a pvt ltd company with my partner.. later when i have seen papers majority shares 75% alloted to my partner and for me its 25% shares.. but he commited for 50% equal distribution. now also what ever bussiness happening we are sharing equally. but in papers it differs.he never informed regarding shares.

  • Hi,
    I am opening a travel agency.I am not sure about the business type I must go for.I wanted something where I have the maximum tax benefits and less tax liability.I might plan to add my father in my business( not yet decided )Something that I can pass on to my kids once I am not there.
    Please guide me properly so that i can move further in a safe a secure manner.
    The funds are limited and I dont want to enter into a something where I am just spending for my incorporation and the main domain for which I am starting this business gets neglected.
    I have read about Sole Proprietorship that is tax as an individual however Profit Sharing gets taxed at the same time LLP the Profit Sharing is not get taxes however the income tax is flat 30.90%… so all this confusing me a lot.In a travel business the maximum transactions are on cash basis e.g. the Agencies that are not IATA certified get the tickets issued though a IATA certified Travel agency and the those agencies charge everything in cash.The reason for that is very simple as they issue the tickets for a non IATA travel agency thus once the tickets get issued the charge becomes non refundable from airlines end thus to be on safer side and avoid any post issuance cancellation done by the non IATA travel agency, they make it sure that there money remain safe.

    Please help and guide me to decide that should I opt for.I would appreciate of someone can call me. I got to know about you people from one of my friend and on the basis of that and keeping faith on your genuineness I want a help from you.

    Thanks & Regards

    Sandeep Mamgain

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