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20/10/2026 6:57 pm
Topic starter
This is the first question most founders ask us, so the TAXAJ team is answering it here.
Someone is starting a small services business with one co-founder. They want limited liability but low compliance cost, and may raise funding later. Which structure fits?
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20/10/2026 6:57 pm
Topic starter
A simple way to decide:
- Sole proprietorship: cheapest and quickest, with no separate registration beyond GST or a shop licence where needed. But it has unlimited personal liability and cannot take on a co-founder or investor. Fine for testing an idea alone.
- LLP: limited liability with lighter compliance. There is no audit unless turnover exceeds ₹40 lakh or partner contribution exceeds ₹25 lakh, and only two annual forms (Form 11 and Form 8). Good for two or more professionals or a services business that does not plan to raise equity.
- Private limited company: limited liability, shares that investors and ESOPs need, and the structure most investors expect. It has the most compliance: a statutory audit every year, board meetings and annual ROC filings.
For the case in the question, an LLP keeps costs low today. If funding is a realistic plan in the next year or two, start as a private limited company, because converting later costs time and fees.
Compare them in detail in LLP vs private limited and sole proprietorship vs company, or see launching a business with TAXAJ.