Choosing the right business structure—Private Limited Company (Pvt Ltd), Limited Liability Partnership (LLP), or One Person Company (OPC)—depends on factors such as ownership, liability, scalability, compliance, and taxation. Here’s a comparison to help you decide:
1. Private Limited Company (Pvt Ltd)
A Pvt Ltd company is a popular structure for businesses with plans to grow and attract funding.
Key Features:
- Ownership: Requires a minimum of 2 directors and 2 shareholders. Can have up to 200 shareholders.
- Liability: Limited to the capital invested.
- Compliance: High; includes annual filings, audits, and regular reporting.
- Scalability: High; can raise equity funds easily from investors and venture capitalists.
- Taxation: Subject to corporate tax rates.
- Perpetual Existence: Continues even if the owners change.
Best For:
- Businesses seeking external funding.
- Growth-oriented ventures aiming for scalability.
2. Limited Liability Partnership (LLP)
An LLP combines the flexibility of a partnership with limited liability protection.
Key Features:
- Ownership: Requires a minimum of 2 partners. No upper limit on the number of partners.
- Liability: Limited to the agreed contribution of each partner.
- Compliance: Moderate; annual filings are mandatory, but no mandatory audit unless turnover or contribution crosses a threshold.
- Scalability: Limited compared to Pvt Ltd.
- Taxation: LLPs are taxed at 30% without dividend distribution tax (DDT).
- Perpetual Existence: Yes, but changes in partners affect operation slightly.
Best For:
- Professional services firms (e.g., CA, legal, consultancy).
- Small and medium businesses prioritize lower compliance costs.
3. One Person Company (OPC)
An OPC is a structure designed for solo entrepreneurs who want limited liability.
Key Features:
- Ownership: Single shareholder; can appoint one nominee.
- Liability: Limited to the shareholder’s capital investment.
- Compliance: Moderate; annual filings required.
- Scalability: Limited; cannot raise funds from investors or convert to a multi-member company without restructuring.
- Taxation: Same as Pvt. Ltd. companies.
- Perpetual Existence: Dependent on the nominee taking over in case of the shareholder’s demise.
Best For:
- Solo entrepreneurs looking for limited liability.
- Small businesses not seeking external funding.
Decision Factors:
| Factor | Pvt Ltd | LLP | OPC |
|---|---|---|---|
| Number of Owners | 2–200 | 2+ | 1 |
| Compliance Cost | High | Moderate | Moderate |
| Liability Protection | Yes | Yes | Yes |
| Funding Options | High | Low | None |
| Taxation | Corporate Tax | Flat Tax (30%) | Corporate Tax |
| Ease of Formation | Moderate | Easy | Moderate |
Recommendations:
- Choose Pvt Ltd if you’re planning to scale, attract investors, or establish a strong corporate identity.
- Opt for LLP if you want a flexible structure with moderate compliance for a professional or service-based business.
- Select OPC if you’re a solo entrepreneur seeking limited liability with no plans for large-scale expansion or external funding.