An LLP cannot issue equity, so venture capital and private equity investors will not put money into one. Converting opens equity funding, ESOPs, and foreign investment without prior approval.
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Why an LLP hits a ceiling when it goes looking for investment, what the company structure adds, and why founders choose LegalWiz.in.
Private companies are one of the most common business structures in India, and they are the best vehicle for raising equity capital, which is not possible in an LLP at all. An LLP is not a suitable structure if the owners want venture capital or private equity money, because those investors will put it into a private limited company and not into a partnership or an LLP.
Foreign investment is the second reason. FDI into a private limited company does not require approval and can be made directly, where an LLP’s route is narrower. Where the promoters are NRIs or foreign nationals, a private limited company is generally the preferable structure from the outset.
None of that makes the conversion compulsory. It is what has to happen if you want funding on those terms, and if you do not, the LLP’s lighter compliance is a genuine advantage worth keeping.
Your relationship manager and the filing team handle everything below. You supply the documents once and approve the drafts.
Government fees and stamp duty are charged at actuals. Where the LLP has more than seven partners at the date of conversion, the MoA and AoA are prepared physically and filed as scanned copies rather than as e-forms.
The principal deed and all subsequent ones, including the latest, have to be filed with the Registrar in URC-1.
A maximum of three DINs can be applied for in the incorporation form. Any further directors are appointed after the company exists.
A unique first part, a second part suggesting the activity, and "Private Limited" as the suffix.
Open the current account, appoint the statutory auditor, deposit the paid-up capital and issue the shares.
The more stringent registration process makes this the more credible structure, which makes raising money or borrowing from outside easier. The company itself offers several ways to raise funds, private equity and ESOPs among them.
Separating the two lets the company and the management each focus on their own work. Shareholders assign the responsibility of running the company without losing control, which they keep through their votes.
Only private limited companies can offer stock ownership and ESOP plans. That attracts employees, because it gives them an incentive to stay and a share in the company’s growth.
The obligations or debts of the company create no charge over the owners’ personal assets. Their liability is limited to the capital they have subscribed and not yet paid.
The two columns that matter to you are the first and the third. The rest are here for completeness.
| Attribute | Private Limited Company | One Person Company | Limited Liability Partnership | Partnership Firm | Proprietorship Firm |
|---|---|---|---|---|---|
| Setting it up | |||||
| Applicable law | Companies Act, 2013 | Companies Act, 2013 | LLP Act, 2008 | Indian Partnership Act, 1932 | No specified Act |
| MandatoryMust be registered with the MCA under the Companies Act | MandatoryMust be registered with the MCA under the Companies Act | MandatoryMust be registered with the MCA under the LLP Act | OptionalCan be registered or unregistered, though there are clear benefits to registering with the State ROF | Not requiredMSME or GST registration is treated as valid proof for a proprietor firm | |
| 2 to 200Excluding present or former employees who are members | Only 1A single shareholder | 2 to unlimitedMinimum 2 designated partners, no cap on the total | 2 to 50Minimum 2 partners, maximum 50 | Only 1The proprietor is the sole owner | |
| AllowedUnder RBI and FEMA rules, usually via the automatic route | Not allowedMember, nominee and director must be Indian residents | AllowedUnder RBI and FEMA rules, usually via the automatic route | AllowedAn NRI can be a partner, subject to RBI regulations | Not allowedA foreign national cannot own a proprietorship business in India | |
| What you are liable for | |||||
| YesCan enter contracts and own assets in its own name | YesCan enter contracts and own assets in its own name | YesCan enter contracts and own assets in its own name | NoThe firm has no identity separate from its partners | NoProprietor and business are the same, and share one PAN | |
| LimitedLimited to the share capital subscribed, unless the MOA defines it otherwise | LimitedLimited to the share capital subscribed | LimitedLimited to the contribution agreed in the LLP agreement | UnlimitedPartners are jointly and severally liable for the debts | UnlimitedClearing the firm’s liabilities is the proprietor’s job | |
| YesSurvives a change of ownership or management | YesBut it can only ever have one owner | YesA change of partners does not affect the LLP | NoA change of partner dissolves or reforms the firm | NoDeath or insolvency of the proprietor ends the business | |
| YesShares transfer easily, which is why external investors prefer it | Restricted100% of shares must move to change the single owner | YesBy consent of the other partners, via a supplementary deed | RestrictedThe partnership deed sets out the restrictions | NoA proprietorship cannot be transferred | |
| What it costs you every year | |||||
| MandatoryAn auditor must be appointed within 30 days | MandatoryAn auditor must be appointed within 30 days | As applicableRequired once turnover crosses ₹40 lakh or contribution crosses ₹25 lakh | Not mandatoryTax audit applies based on turnover | Not mandatoryTax audit applies based on turnover | |
| Moderate25% for companies with turnover up to ₹400 crore | Moderate25% for companies with turnover up to ₹400 crore | High30% on business profits, with tax-efficient distribution to partners | High30% on business profits | LowTaxed at the proprietor’s individual income tax slab | |
| HighThe heaviest of the five, both annual and event based | HighSimilar to a company, without an AGM | ModerateAnnual filing plus a few event based filings, lighter than a company | LowAn annual ITR, and little else | LowNo separate ITR, and very little else | |
| Next step | Get started | Know more | Know more | Know more | Know more |
Swipe the table sideways, Private Limited Company stays in view. Open any attribute to read the detail behind all 5 answers.
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Jignesh was very helpful and amazing while filling the compliance form for my business. Will take your service again.
Good support team. No hindrance in executions. Go for it.
JIGNESH BHAI, I wanted to take some time to sincerely thank you for your incredible support with my MSME registration through LegalWiz. From start to finish, Jignesh Bhai, your guidance, patience, and professionalism made what could have been a stressful and confusing process feel completely smooth and manageable. You took the time to explain every step clearly, answered all my questions patiently, and ensured that nothing was left uncertain. Your attention to detail and dedication truly stood out, and it gave me a lot of confidence throughout the process. I really appreciate the effort, care, and commitment you put into helping me. Jignesh Bhai, your service has been exceptional, and I couldn’t have asked for a better experience. Heartfelt thanks once again!
Highly recommend services from Legalwiz. Got my LLP conversion process faster. Helpful staff.
Limited Liability PartnershipHad a great experience working with the team! They handled my LLP registration smoothly, guided me clearly through every step, and were always quick to respond. Really appreciate their professionalism and support. Highly recommended!
They are so quick and highly professional and experienced in the industry to carry out the requirement. Loved their services.
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File INC-20AI am very much satisfied with their service for INC 20 A. i will recommend them and definitely will keep in mind for any other service.
Close a Private Limited Companyexcellent, i appreciate accountability and transparency in the process
Private Limited CompanyLegalwiz is doing its best to give good service to clients.
Trademark RegistrationRecently got Trade Mark registered
Trademark RegistrationIt was an amazing experience from the support team. Thank you...
GST RegistrationHad a Seamless Experience in registering for GST. Been associated with them for 5 yrs now, and have done several LLP and GST registrations. Happy with their service, so i keep coming back.
The personal set is needed for every shareholder and director. The last two are about the LLP itself.
For every shareholder and director. A foreign national provides a passport instead.
The voter ID, passport or driving licence of every shareholder and director.
The telephone bill, electricity bill or latest bank statement of every shareholder and director.
A recent passport size photograph of every shareholder and director.
The electricity or telephone bill for the registered office address.
A no objection certificate from the owner of the registered office premises, and the rent agreement where they are rented.
A copy of the latest income tax return filed by the Limited Liability Partnership.
The documents of a director who is an NRI or a foreign national must be notarised or apostilled.
Step 01
Step 02
Step 03
Subject to government processing time.
Fifteen working days end to end. Everything we control is done by day 9; the rest is the registrar’s.
1 of 15 working days
3 of 15 working days
3 of 15 working days
2 of 15 working days
6 of 15 working days
Subject to government processing time.
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Four things, on priority:
A maximum of three through the SPICe form.
Where the applicant wants to incorporate the company with more than three directors and more than three of them have no DIN, the company is incorporated with three and the further directors are appointed afterwards.
A minimum authorised capital of ₹1 lakh at registration. The requirement of a minimum paid-up capital was removed as part of the government’s initiative to simplify business registration.
Each shareholder must subscribe to at least one share, and enough should be introduced to actually run the business.
Where the LLP has more than seven partners at the time of conversion, the MoA and AoA are prepared physically and a scanned copy is filed.
The company then files URC-1 and INC-32.
Yes. Copies of the principal deed and of all subsequent deeds, including the latest one, are filed with the Registrar in e-form URC-1.
Yes. Where one of the directors is outside India it can be filed in an electronic copy, and no physical copy needs to be submitted.
Among the members of the company, yes.
To transfer shares to a non-member, the shares have to be offered to an existing member first. If they refuse to buy them, the shares can then be transferred to a non-member.
Yes, a foreign national can be a director. To obtain a DIN, the details of a valid passport are filled in form DIR-3 and a certified copy is attached to the application.
All supporting documents, the photograph included, must be certified by the Indian embassy, by a notary in the applicant’s home country, or by the managing director, CEO or company secretary of an Indian company in which the applicant is a director. Where the foreign director holds a valid multiple-entry Indian visa, a Person of Indian Origin card or an Overseas Citizen of India card, attestation may instead be done by a public notary or gazetted officer in India, or by a practising CA, CS or CWA.
Yes. A private company can carry on multiple businesses after converting from an LLP; it has no restrictions of the kind an LLP does.
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