Company Incorporation in 2025: Private Limited vs LLP vs OPC – Tax and Compliance Comparison
When to choose which structure, tax implications, compliance burden, conversion options, funding considerations, and exit strategies
Written by
CA Ashama Rajawat
Choosing the right business structure affects taxes, compliance burden, funding ability, and exit options for years. This guide helps you make the right choice.
Quick Comparison Table
| Feature | Proprietorship | LLP | OPC | Private Ltd |
|---|---|---|---|---|
| Min Members | 1 | 2 | 1 | 2 |
| Liability | Unlimited | Limited | Limited | Limited |
| Tax Rate | 30%+ | 30%+ | 25-30% | 25-30% |
| Audit Required | If > ₹1Cr | Always | Always | Always |
| Compliance Cost | Low | Medium | Medium-High | High |
| Funding | Very difficult | Limited | Moderate | Easy |
| Exit/Sale | Difficult | Moderate | Moderate | Easy |
1. Sole Proprietorship
- Easiest to setup (no registration required)
- Lowest compliance burden
- Complete control
- No separate tax return (file personal ITR)
- Unlimited personal liability (business debts = your debts)
- Cannot raise VC funding
- Difficult to sell business
- Taxed at individual slab rate (30%+ for high earners)
Best For: Freelancers, consultants, small traders with low risk
2. LLP (Limited Liability Partnership)
- Limited liability (partners not personally liable)
- Pass-through taxation (taxed at partner level, not LLP level)
- Lower compliance vs Private Limited
- Professional credibility
- Cannot raise VC funding (no equity shares)
- Audit mandatory (even if small turnover)
- Annual ROC filings required
- Partner taxation: 30%+ (individual slab rates)
Tax Treatment: LLP profit distributed to partners, taxed at their individual slab rates. High earners pay 30%+ tax.
Best For: Professional services (CAs, lawyers, architects), small businesses not seeking VC funding
3. OPC (One Person Company)
- Limited liability
- Separate legal entity
- Better credibility than proprietorship
- Corporate tax rate (25-30%)
- High compliance burden (similar to Private Limited)
- Cannot raise VC funding easily
- Mandatory audit + ROC filings
- Turnover limit: ₹2 crore (convert to Pvt Ltd if exceeded)
Best For: Solo entrepreneurs planning moderate growth (₹50L - ₹2Cr turnover)
4. Private Limited Company
- Can raise VC/PE funding (equity shares)
- Easy to bring co-founders, issue ESOPs
- Easy to sell (M&A, strategic exit)
- Corporate tax: 25-30% (flat, no slabs)
- Limited liability for directors
- High compliance: Board meetings, AGM, ROC filings
- Mandatory audit (regardless of turnover)
- Dividend Distribution Tax implications
- Cost: ₹50,000 - ₹2,00,000 annual compliance
Best For: Startups, businesses planning VC funding, scalable ventures, 2+ co-founders
Tax Comparison Example
- Profit:₹25L
- Tax @ 30% (individual slab):₹7.5L
- Cess 4%:₹30K
- Total tax:₹7.8L (31.2%)
- Profit:₹25L
- Corporate tax @ 25%:₹6.25L
- Cess 4%:₹25K
- Total tax:₹6.5L (26%)
- Tax Savings:₹1.3L!
Conversion Options
Proprietorship → Private Limited
Common conversion. Assets transferred, business closed.
LLP → Private Limited
Possible under Companies Act 2013. Required for VC funding.
OPC → Private Limited
Automatic conversion required if turnover > ₹2 crore
Decision Framework
- Solo, service-based business
- Revenue < ₹50L
- No funding plans
- 2+ partners
- Professional services
- No VC funding needed
- Solo entrepreneur
- Revenue ₹50L - ₹2Cr
- Want limited liability
- Planning VC funding
- 2+ co-founders
- Scalable business model
Conclusion
There's no one-size-fits-all. Proprietorship for simplicity, LLP for partnerships, OPC for solo entrepreneurs with growth plans, Private Limited for VC-fundable startups. Tax difference is marginal (25% vs 30%), but compliance and funding implications are massive. Start with simplicity, upgrade when growth demands it.