Private Limited Company Vs. Limited Liability Partnerships (LLP): Key Differences

Mar 17, 2024
Private Limited Company vs. Limited Liability Partnerships

Choosing the right business structure is one of the most critical decisions for entrepreneurs. It lays the foundation for how the business will operate, manage liabilities and raise funds, as well as how stakeholders will perceive it.

Among the many options available, Private Limited Companies (Pvt Ltd) and Limited Liability Partnerships (LLP) are two of India's most popular and widely adopted structures.

Both these structures offer the advantage of limited liability while being distinct in their governance, ownership, compliance requirements and suitability for different business types.

This blog provides an in-depth comparison of Pvt Ltd companies and LLPs, delving into their features, compliance requirements, taxation and funding options. By the end, you will have a clear understanding of which structure aligns best with your business goals and aspirations.

Table of Contents

Difference Between Limited Liability Partnership and Private Limited Company

The fundamental difference between a Pvt Ltd and an LLP lies in ownership and management. While a Pvt Ltd company is governed by shareholders (owners) and directors (managers), an LLP is managed by partners who own and operate the business. Additionally, compliance requirements, taxation and funding options differ significantly between the two.

Here is a table outlining the difference between LLP and a private limited Company:

Private Limited Company Limited Liability Partnership
Governing Act Governed by the Companies Act Governed by the Limited Liability Partnerships Act
Suitable For Financial Services, Tech Startups, Medium Enterprises Consultancy firms, Professional Services
Shareholders/ Partners Minimum– 2
Maximum– 200
Minimum– 2
Maximum– Unlimited
Minimum Capital Requirement No minimum capital requirement, but it is often advised to set the authorized capital at ₹1,00,000 (One Lakh) No minimum capital requirement, but it is often advisable to consider an initial capital of ₹10,000
Tax Rates The basic tax rate, excluding Surcharge and Cess – 25% The standard fixed rate – 30% on their generated earnings.
Fundraising Easier to raise funds from Investors Raising funds can be challenging
Transfer of Shares Shares can be easily transferred by amending AOA Transfer of partnership rights may require the consent of other partners and is generally more complex
ESOPs Can issue ESOPs to the Employees Unable to issue ESOPs to the Employees
Agreements Duties, Responsibilities, and other basic clauses outlined in MOA and AOA Duties, Responsibilities and other basic clauses outlined in the LLP Agreement
Compliances • More compliance costs
• Mandatory 4 Board Meetings
• Mandatory Statutory Audits
• Mandatory filings include Annual financial statements in form AOC–4 and annual returns in Form MGT–7, etc.
• Less Compliance Costs
• No mandatory Board Meetings
• Statutory Audits are not required if turnover is less than 40 Lakhs or capital contribution is less than 25 Lakhs.
• Mandatory filings include Annual financial statements in Form 8 and annual returns in Form 11.
Registration Company registration is done by SPICe+ form LLP registration is done by FiLLiP form
Name Reservation Company name reservation is made by SPICe+ Part A LLP name reservation is done by LLP–RUN
Dissolution More complex
Can be initiated by filing STK–2 form
Less Complex
Can be initiated by filing the Form 24

While the differences between LLPs and Private Limited Companies are numerous, they share similarities in key aspects:

  • Limited Liability
  • Separate Legal Identity
  • Registration Process with the MCA
  • Perpetual Succession

Let’s understand the key features and registration process in detail for both Private limited companies and LLPs.

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) is a privately held business entity that operates under the legal framework of the Companies Act of 2013 in India (or similar laws in other countries). It combines the benefits of limited liability protection for its shareholders with certain restrictions to maintain its private nature.

This structure is popular among startups and small to medium-sized enterprises due to its ability to attract investments while offering limited liability protection and operational flexibility.

Features of Pvt Ltd Company

Listing down some key advantages of a Private Limited Company below:

1. Limited Liability

The liability of Shareholders is limited. Personal assets are generally protected from business debts.

2. Separate Legal Entity

A Private Limited Company is considered a distinct legal entity from its owners (shareholders). It can enter into contracts, own property, and sue or be sued in its own name.

3. Ownership

Owned by shareholders who hold shares in the company. Transfer of ownership is facilitated through the buying and selling of shares.

4. Management

Managed by directors who are appointed by the shareholders. The day-to-day operations are overseen by the management team, while major decisions are often subject to shareholder approval.

5. Number of Shareholders

Requires a minimum of two shareholders and can have a maximum of 200 shareholders.

6. Regulation and Compliance

Governed by the Companies Act and regulated by the Ministry of Corporate Affairs in India. Compliance includes filing annual financial statements, conducting annual general meetings and maintaining statutory records.

7. Investment and Funding

Easier to attract investment and funding compared to other business structures due to the well-defined ownership structure and limited liability.

8. Perpetual Succession

The company continues to exist even if its shareholders or directors in private limited company change, retire, or pass away. Ownership can be transferred seamlessly through the sale of shares.

Private Limited Company Registration

The Ministry of Corporate Affairs (MCA) has introduced a streamlined process for incorporating companies called the Simplified Proforma for Incorporating Company Electronically Plus (SPICe+). It consists of two parts: Part A and Part B.

1. Step 1: Acquire a Digital Signature Certificate (DSC)

• A Digital Signature Certificate (DSC) is a digital method of verifying or attesting documents.
• It is typically issued with one or two-year validity and is mandatory for all witnesses in the Memorandum of Association (MOA) and Articles of Association (AOA).
• Class 2 or 3 DSCs can be obtained through listed Government Certifying Agencies (CAs).

2. Step 2: Apply for Name Approval using SPICe+ Part A

• Part A facilitates 'Name Reservation' with two proposed names and one re-submission (RSUB).
• In case of name rejection due to various reasons, a re-filing with the specified fee is required.

Note: Simultaneous application for name approval (Part A) and Incorporation (Part B) through SPICe+ is possible, but only one name can be reserved.

3. Step 3: Apply for Company Registration using SPICe+ Part B

After name approval, Part B completes the registration process, including:

  • • Application for allotment of Director Identification Number (DIN)
    • Incorporation of the new company
    • Submission of e-MoA (INC-33) and e-AoA (INC-34)
    • Application for PAN and TAN (mandatory)
    • Application for EPFO registration (mandatory)
    • Application for ESIC registration (mandatory)
    • Application for Professional tax registration (only for Maharashtra)

The entered information in SPICe+ Parts A and B is automatically transferred to associated forms like AGILE-PRO, eAoA, eMoA, URC1, and INC-9, as applicable.

4. Step 4: Open a Bank Account

Open a current account for your company to facilitate seamless financial transactions and business operations, handling various aspects such as receiving payments, making supplier payments and managing payroll.

5. Step 5: File for the Commencement of Business Certificate

The Commencement of Business Certificate, filed through Form INC-20A within 180 days of incorporation, is a declaration by the Director of the Company submitted to the Registrar of Companies.

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After the SPICe+ Form receives approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation, confirming the successful registration of your company.

This certificate includes vital information such as the Company's name, registration number (CIN), date of incorporation, registered office address, and so on.

Example of CIN: U72200KA2013PTC097389

Read more about what each letter in a CIN signifies here.

What is a Limited Liability Partnership?

A Limited Liability Partnership (LLP) is a business structure combining features of a traditional partnership and a limited company.

Limited Liability Partnerships are often chosen by professional services firms, small businesses and ventures where the partners want the flexibility of a partnership along with the protection of limited liability.

Features of LLP

A Limited Liability Partnership (LLP) is a business structure that combines features of both a traditional partnership and a limited company. Limited Liability Partnerships are often chosen by professional services firms, small businesses, and ventures where the partners want the flexibility of a partnership along with the protection of limited liability.

Some key characteristics of a Limited Liability Partnership are:

1. Limited Liability

Similar to a private limited company, partners in an LLP have limited liability.

2. Separate Legal Entity

An LLP is a distinct legal entity from its partners. It can own property, enter into contracts, and sue or be sued in its own name.

3. Ownership

Owned by partners, and the ownership structure is defined by the LLP agreement. Transfer of ownership usually requires the consent of other partners.

4. Management

Managed by partners or a designated management team, as specified in the LLP agreement. Each partner typically has an equal say in the management decisions, making it a more collaborative structure.

5. Number of Partners

Requires a minimum of two partners, and there is no maximum limit on the number of partners in an LLP.

6. Regulation and Compliance

Governed by the Limited Liability Partnership Act in India, with less stringent regulatory requirements compared to a private limited company. Compliance involves filing annual returns and maintaining statutory records.

7. Flexibility

Offers greater flexibility in terms of internal management and decision-making processes compared to a private limited company.

Limited Liability Partnerships Registration

Here's a simplified guide on the steps for Limited Liability Partnership (LLP) registration:

1. Step 1: Apply for DSC

  • Obtain a Digital Signature Certificate (DSC) from Government Certifying Agencies with one or two-year validity.

2. Step 2: Name Reservation

  • Reserve the LLP's name using the LLP-RUN form.

3. Step 3: Apply for Registration through FiLLiP

  • Complete the FiLLiP (Form for Incorporation of Limited Liability Partnership) and submit it to the Registrar. Alongside FiLLiP, submit the Subscriber sheet and Partner's consent (Form 9) as additional documentation.

4. Step 4: File LLP Agreement

  • File the LLP Agreement using Form 3 on the MCA portal within 30 days of LLP registration.

After the FiLLiP Form receives approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation, a crucial legal document confirming the successful registration of your company.

This certificate includes vital information such as the LLP's name, registration number (LLPIN), date of incorporation, registered office address, and more.

Example of LLPIN: AAA-1234

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LLP vs Pvt Ltd Ownership

  • Shareholders vs. Partners
    • Pvt Ltd Ownership: Shareholders own the company but may not be involved in day-to-day management. Primarily managed by Directors.
    • LLP Ownership: Partners typically manage the business and have a direct role in decision-making.
  • Transfer of Ownership
    • Pvt Ltd: Shares can be easily transferred from private limited company members, making it simpler to onboard or exit shareholders.
    • LLP: Ownership transfer requires the consent of other partners, which can be complex.

LLP vs Pvt Ltd Compliance

  • Compliance for Private Limited Companies
    • Hold the First Meeting of the Board of Directors within 30 days of the Incorporation of the Company. It is compulsory to host four meetings in a year with a gap not more than 120 days.
    • Hold an Annual General Meeting every year, on or before September 30th, during business hours and in the registered office.
    • Appoint the company's first auditor within 30 days of incorporation, who will serve until the end of the first AGM.
    • File Form ADT 1 within 15 days of the appointment of the subsequent auditor.
    • File Annual Returns (AOC 4 and MGT 7) within 30 and 60 days of holding the AGM, respectively.
    • File Form ITR-6 for Income Tax Return annually.
    • File Form DIR-3 KYC to disclose details of the Directors.
  • Compliance for Limited Liability Partnerships
    • File an LLP agreement within 30 days of incorporation. The penalty of ₹100/day will be levied if an LLP fails to comply with this condition.
    • File the form DIR3 for the DIN allotment in case of an existing company.
    • File two annual statements for Annual Return and Statement of Accounts and Solvency using Forms 11 and 8, respectively.
    • Sign, verify and file the Income Tax Return (ITR) annually.
    • Depending on their shareholding capacity, you and your partner must deposit their contribution into the relevant bank account within the specified time frame.
    • Get a GST registration since it is a legal compulsion per the GST Act.
    • Audit your accounts through CAs if the company's annual turnover exceeds Rs 40 lakhs or the contribution surpasses ₹25 lakhs of the threshold limit.
    For businesses that prefer a simpler and cost-effective compliance framework, LLPs are the better option. With fewer regulatory requirements, LLPs reduce the administrative burden, making them ideal for small businesses, professional firms and startups not seeking external funding. However, for companies planning rapid growth, attracting investors or requiring a formal structure for credibility, Pvt Ltd companies are worth the added compliance effort.

LLP vs Pvt Ltd Funding

  • Equity Financing
    • Pvt Ltd Company funding: Easily attracts investors by issuing shares, making it suitable for startups seeking venture capital or private equity.
    • LLP funding: Equity financing is not possible since partners cannot issue shares.
  • Debt Financing
    • Both structures can access loans, but Pvt Ltd companies have additional options like issuing debentures or convertible notes.

LLP vs Pvt Ltd Foreign Direct Investment (FDI)

  • Pvt Ltd Company funding: Easily attracts investors by issuing shares, making it suitable for startups seeking venture capital or private equity.
  • LLP: FDI in LLP is allowed only in sectors where 100% FDI is permitted and is subject to approval in other cases, making it less flexible.

LLP vs Pvt Ltd Taxation

  • Taxation for Pvt Ltd CompaniesIncome tax for Pvt Ltd companies:
    • 25% if the turnover is up to ₹400 crore (as per recent provisions).
    • 30% for larger companies.
    A cess of 4% applies to the tax amount, along with surcharges for higher income levels.
  • Taxation for LLPsLLP taxation rate is 30% on their total income plus a surcharge (if applicable) and cess.Both LLPs and Pvt Ltd companies are treated equally under the GST regime:
    • GST registration is mandatory for businesses with annual turnover exceeding ₹20 lakhs (₹40 lakhs for goods in some states).
    • Compliance includes filing monthly or quarterly GST returns, depending on turnover.

Company Registration with Razorpay Rize

You can experience a hassle-free, 100% online business registration process with Razorpay Rize, featuring the lowest professional fees and absolutely no hidden charges.

Explore the diverse range of services tailored to suit the needs of both startups and established businesses.

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Our package includes:

  • Company Name Registration
  • 2 Digital Signature Certificates (DSCs)
  • 2 Directors’ Identification Numbers (DINs)
  • Certificate of Incorporation(COI)
  • MoA & AoA [Applicable for Private Limited Companies and OPCs]
  • LLP Agreement [Applicable for LLPs]
  • Company PAN & TAN

*Prices and documents can differ based on the company type.

Which Company Type Should You Register Your Business With?

Before proceeding with the registration of either an LLP or a company, it is crucial to evaluate the following factors carefully.

• Consider the nature and size of your business

  • If you operate a small business with a limited workforce, opting for LLP registration might be more favourable, given the relatively lighter compliance requirements compared to a company. On the other hand, for larger businesses with substantial employee numbers and capital needs, registering as a company provides greater flexibility in raising capital.

• Fundraising requirements

  • If your goal is to raise funds through equity, choosing a company structure is imperative. However, if your fundraising needs are more straightforward, the LLP structure may be a more suitable option.

• Tax rates

  • It's essential to compare the tax rates applicable to both company and LLP structures, as there can be significant differences. Opt for the structure that aligns with your financial goals based on total income or turnover.

Personal liability protection

  • While an LLP offers limited liability protection, a company structure treats the company as a distinct legal entity, safeguarding shareholders' personal assets.

Ultimately, the choice between a company structure and an LLP structure hinges on the unique characteristics of your business, including its nature, size, and capital requirements.

Find Your Ideal Company Type

If you still need more help deciding which company type to register with, don't worry! We’ve got you covered with our latest tool - "Know Your Company Type."

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For the first time in India, simply answer a quick set of questions about your startup, and this tool will leverage your responses to identify the ideal company registration type. Find your perfect fit with just one click!

Explore side-by-side comparisons of popular company types for added clarity and make informed choices effortlessly!

Frequently Asked Questions

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Register your Private Limited Company in just 1,499 + Govt. Fee

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Register your One Person Company in just 1,499 + Govt. Fee

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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Which is better, LLP or Pvt Ltd?

The choice between an LLP and a Pvt Ltd company depends on the nature and goals of the business:

  • LLP: Best for small businesses, professional services and firms looking for flexibility and cost-effective compliance. LLPs are ideal for businesses that do not need external investors or plan to scale aggressively.
  • Pvt Ltd: Suitable for businesses planning to raise funds, scale operations or build a more structured and credible entity. Pvt Ltd companies are preferred by startups seeking venture capital or private equity investments.

Refer to the detailed difference between LLP and Pvt ltd company for more context.

Does LLP need to file a tax return?

Yes, all LLPs must file an Income Tax Return annually, irrespective of whether they have generated income or incurred losses. Key requirements include:

  • ITR-5 Form: Used for filing LLP income tax returns.
  • Tax Audit: Mandatory if the annual turnover exceeds ₹1 crore.
  • LLPs must file tax returns by the end of the financial year.

How is the salary from LLP taxed?

  • Partners' Salary: Salaries or remuneration paid to partners of an LLP are treated as business expenses for the LLP and are deductible from its taxable income.
    • The salary received by partners is taxed as personal income under the Income Tax Act, based on their applicable income slab rates.
  • Employee Salary: Salaries paid to employees of an LLP are subject to TDS (Tax Deducted at Source) and standard income tax rules.

Can an LLP have employees?

Yes, an LLP can hire employees just like any other business entity.

  • Employees of an LLP are entitled to all statutory benefits, such as Provident Fund (PF), Employee State Insurance (ESI) and gratuity, if applicable.
  • Salaries paid to employees are subject to payroll taxes, such as TDS and GST compliance (for specific payments like consulting fees).

Why do people prefer LLP?

Many small businesses and professional firms prefer LLPs due to their unique advantages:

  1. Low Compliance
  2. Cost-Effective
  3. Limited Liability
  4. Tax Efficiency
  5. Flexibility in Management
  6. Separate Legal Entity

LLPs are especially favoured by professionals (like consultants, lawyers, or accountants) and small businesses that prioritise simplicity and operational control.

Related Posts

How to Convert a One Person Company (OPC) to LLP in India

How to Convert a One Person Company (OPC) to LLP in India

As India's entrepreneurial ecosystem evolves, founders now have access to a range of legal business structures tailored to different growth stages and ownership goals. From sole proprietorships and partnerships to private limited companies and, more recently, One Person Companies (OPCs) and Limited Liability Partnerships (LLPs) are among the most popular. 

While a One-Person Company (OPC) is ideal for solo entrepreneurs starting small, many founders later seek more flexibility, lower compliance, and shared ownership, making a Limited Liability Partnership (LLP) an attractive alternative.

If you’re planning to scale or bring in partners, converting your OPC to an LLP could be the right move. This blog walks you through the concept, legal framework, and procedure for converting an OPC to an LLP in India.

Table of Contents

Limited Liability Partnership (LLP)

An LLP is a hybrid business structure that combines the benefits of a company (limited liability) with the flexibility of a partnership. Some key features include:

  • Minimum two partners required
  • Liability of partners is limited to their contribution
  • No minimum capital requirement
  • Fewer compliance requirements than a company
  • Separate legal identity from its partners

One Person Company (OPC)

Introduced under the Companies Act, 2013, an OPC allows a single individual to operate a corporate entity. It offers:

  • Limited liability
  • Separate legal identity
  • Easier fundraising compared to a sole proprietorship
  • Greater credibility in business dealings

However, OPCs face limitations like:

  • Restrictions on fundraising
  • Mandatory conversion if turnover exceeds ₹2 crore or capital exceeds ₹50 lakh
  • Cannot have more than one member

Conversion of OPC to LLP

OPC conversion to LLP is governed by the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. While direct provisions for OPC-to-LLP conversion are not explicitly provided, companies (including OPCs) can be converted into LLPs under Section 366 of the Companies Act and the Second Schedule of the LLP Act.

Understanding the Legal Provisions for Conversion of OPC to LLP

The legal path for converting an OPC to an LLP involves:

  • Section 366 of the Companies Act, 2013 (deals with companies being converted into LLPs)
  • Second Schedule of the LLP Act, 2008 (provides the procedure for such conversions)
  • Form FiLLiP and Form 18 under the LLP Rules, 2009

Note: Prior approval from the Registrar of Companies (ROC) is mandatory.

Related Read: ROC Compliance Calendar for 2025–2026

Eligibility Conditions and Compliance Steps for Conversion

To be eligible for conversion:

  • Before conversion, the OPC must have at least two shareholders (LLPs require a minimum of two partners).
  • No active defaults in filing annual returns, income tax, or other statutory dues.
  • All secured creditors (if any) must give their consent.
  • The company should not have applied for winding up or struck-off status.

Compliance steps include:

  1. Holding a Board Meeting and passing a resolution for conversion
  2. Increasing the number of members/directors to meet LLP requirements
  3. Obtaining name approval through RUN–LLP or FiLLiP form
  4. Filing Form FiLLiP and Form 18 with ROC
  5. Executing an LLP Agreement within 30 days of incorporation

Looking to switch from OPC to LLP? Get professional help for a smooth and compliant business conversion with Razorpay Rize's LLP Registration Service.

Documents Furnished along with Form 18

Form 18 is the declaration for conversion and must be supported with:

  • Board resolution for conversion
  • Consent of all shareholders
  • Statement of assets and liabilities certified by a CA
  • List of creditors and their consent
  • Latest income tax return acknowledgement
  • Copy of PAN card and Aadhaar of all proposed partners
  • Address proof of the registered office of the LLP
  • NOC from the property owner (if rented office)

Procedure for Conversion of OPC to LLP

Here’s a step-by-step breakdown:

  1. Board Resolution: Approve the conversion plan and authorise directors to file the necessary forms.

  2. Increase Number of Members: Since an LLP requires at least two partners, the OPC must first induct another shareholder.

  3. DIN & DSC: Ensure all partners have a Director Identification Number (DIN) and Digital Signature Certificate (DSC).

  4. Name Approval: Apply for name reservation using RUN–LLP or through FiLLiP.

  5. Form FiLLiP Filing: File FiLLiP with ROC for incorporating the LLP.

  6. Attach Form 18: While filing FiLLiP, attach Form 18 with the required documents.

  7. Certificate of Incorporation: On approval, the ROC will issue a Certificate of Incorporation for the LLP.

  8. Execute LLP Agreement: Draft and file the LLP Agreement within 30 days.

  9. Apply for PAN, TAN & GST: Update statutory registrations with new LLP details.

  10. Close OPC Bank Account & Update Records: Close existing bank accounts of OPC and update stakeholders.

Frequently Asked Questions (FAQs)

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Register your business
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Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

Register your business
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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Why convert an OPC into an LLP?

Converting to an LLP offers greater flexibility, allows multiple partners, reduces compliance burden, and enables easier capital infusion, making it suitable for scaling beyond a single founder.

Is it mandatory to get creditor consent for conversion?

Yes. Obtaining written consent from creditors is required, as their rights could be affected during the conversion process.

Can an OPC with outstanding debts be converted into an LLP?

Yes, but all creditors must be informed, and their no-objection certificates (NOCs) must be secured. The LLP will assume all debts and liabilities of the OPC post-conversion.

Will the new LLP retain the OPC’s assets and liabilities?

Yes. Upon conversion, all assets, liabilities, obligations, and agreements of the OPC automatically vest in the LLP.

Do tax implications arise during conversion?

If the conversion meets certain conditions under the Income Tax Act (e.g., continuity of business and ownership), it can be tax-neutral. Otherwise, capital gains tax or other liabilities may apply. It’s advisable to consult a tax expert.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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A Guide to Nidhi Company Registration in India – Process & Requirements

A Guide to Nidhi Company Registration in India – Process & Requirements

Starting a business is exciting, but most entrepreneurs are immediately overwhelmed by the strict regulations and complex licensing processes involved in building a financial institution. But what if there was a simpler, community-driven model designed to encourage savings and provide easy credit within a trusted group of people?

That’s exactly what a Nidhi Company offers. Popular in India’s smaller towns and communities, Nidhi Companies allow individuals to pool money, support each other financially, and grow together without the burden of full-scale NBFC regulations.

This guide covers everything you need to know about Nidhi Company registration, process, requirements, compliances, and restrictions.

Table of Contents

What is Nidhi Company?

A Nidhi Company is a type of Non-Banking Financial Company (NBFC) that operates exclusively for its members. It is registered under Section 406 of the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs (MCA), rather than directly by the Reserve Bank of India (RBI).

The primary function of a Nidhi Company is to accept deposits from members and lend money back to its members. This “for members only” model distinguishes it from other NBFCs and ensures that operations remain community-centric.

Since Nidhi Companies deal only with their members and do not interact with the general public, they enjoy exemptions from core RBI regulations that typically apply to other NBFCs. However, they must still adhere to rules laid down by MCA and maintain transparency in their financial dealings.

The Purpose and Nature of Nidhi Companies

The central purpose of Nidhi Companies is to promote savings and thrift among their members and to facilitate easy, low-interest loans for those same members. They act as mutual benefit societies, pooling deposits and using those funds to lend back within the group.

Key characteristics include:

  • Community-Focused Model: Members both contribute and borrow, keeping financial circulation within the group.

  • Limited RBI Oversight: While they fall under the broad category of NBFCs, Nidhi Companies are largely governed by MCA rules.

  • Exemption from Core NBFC Rules: They are not required to obtain RBI approval for incorporation or daily operations.

This makes them a niche but highly effective option for people looking to run community-driven financial institutions.

Benefits of Nidhi Company

  • Encourages Savings: Members are motivated to build disciplined saving habits.
  • Access to Affordable Credit: Members can borrow at lower interest rates compared to market lenders.
  • Limited Regulatory Burden: Exemptions from most RBI regulations make operations simpler.
  • Low Risk of Default: Since lending and borrowing are limited to members, risks are lower.
  • Simple Incorporation: Registration under MCA is more straightforward than NBFC licensing.
  • Legal Status: Recognised as a public company, lending credibility and trust.

Nidhi Company Registration Process

Registering a Nidhi Company in India involves several steps:

  1. Obtain DSC & DIN – Digital Signature Certificate for proposed directors.
  2. Name Approval – File an application with MCA to get the company name approved (must include “Nidhi Limited”).
  3. Draft MOA & AOA – Prepare Memorandum of Association and Articles of Association with clear objectives.
  4. Filing for Incorporation – Submit the incorporation application along with required documents through MCA’s SPICe+ form.
  5. ROC Scrutiny – Registrar of Companies reviews and verifies the application.
  6. Certificate of Incorporation – Once approved, the company is legally formed.
  7. GSTIN & Bank Account – Apply for GST (if applicable), and open a current account for operations.

Related Read: How to apply for a Digital Signature Certificate in India

Compliances of the Nidhi Companies

After incorporation, a Nidhi Company must comply with specific filings and statutory requirements:

  • NDH-1: Filing of return of statutory compliances within 90 days of the first financial year.
  • NDH-2: Application to extend time for compliance (if required).
  • NDH-3: Half-yearly return to ROC.
  • MGT-7: Annual return filing with MCA.
  • AOC-4: Filing of financial statements with MCA.
  • Income Tax Compliances: Annual income tax return filing, tax audit (if applicable), TDS deductions, and advance tax payments.

Related Read: ROC Compliance Calendar 2025–2026: Important Filing Due Dates

Nidhi Company Incorporation Requirements

To incorporate a Nidhi Company, certain prerequisites must be met:

Before Registration:

  • Minimum 7 members required.
  • Minimum 3 directors.
  • Minimum ₹5 lakh paid-up equity capital.
  • The name must end with “Nidhi Limited”.

Post Registration (within 1 year):

  • Minimum 200 members.
  • Net Owned Funds (NOF) of at least ₹10 lakh.
  • Deposits not to exceed 20 times NOF.
  • Maintain at least 10% of deposits as unencumbered deposits (liquid assets).

Documents Required for Nidhi Company Registration

To register a Nidhi Company, you need the following documents:

  • Identity Proof: PAN card of directors and members.
  • Address Proof: Aadhaar card, passport, voter ID, or driving license.
  • Photographs: Passport-sized photos of all directors and members.
  • Office Proof: Rent agreement/ownership papers and utility bill of the registered office.
  • Digital Signature Certificate (DSC) of directors.
  • Charters: Draft MOA and AOA.
  • Foreign Directors: Passport and notarised documents if applicable.

The entire process can be completed online via the MCA portal.

Restrictions on Nidhi Companies

To ensure that Nidhi Companies remain true to their purpose, certain restrictions apply:

  • Cannot accept deposits from or lend to non-members.
  • Cannot carry out chit funds, hire purchase, leasing finance, or insurance businesses.
  • Cannot issue debentures, preference shares, or other securities.
  • Cannot advertise for deposits to the general public.
  • Cannot open current accounts in the name of members.
  • Cannot conduct corporate transactions such as partnerships with other financial institutions.
  • Must operate strictly within the framework of member-only deposit and lending.

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Frequently Asked Questions

Can a Nidhi Company establish branch offices?

Yes, a Nidhi Company can open branch offices, but with conditions:

  • It can open up to 3 branches within the same district after fulfilling compliance requirements.
  • Prior approval from the Regional Director (MCA) is required to open branches outside the district.
  • A Nidhi Company must have a profit after tax for 3 consecutive years before opening a branch.

Can a salaried individual serve as a Nidhi Company director?

Yes, a salaried individual can be appointed as a director in a Nidhi Company, provided:

  • Their employment contract does not prohibit directorships.
  • They comply with all MCA eligibility criteria (such as being a resident of India, holding a valid DIN, etc.).

What types of financial transactions are not permitted for Nidhi Companies?

Nidhi Companies are restricted from engaging in the following activities:

  • Accepting deposits or lending to non-members.
  • Running chit funds, hire purchase finance, leasing, or insurance businesses.
  • Issuing preference shares, debentures, or other debt instruments.
  • Opening current accounts in the name of members.
  • Advertising for deposits from the general public.

Entering into partnerships in lending or borrowing.

Can a Nidhi Company do business in microfinance?

No, Nidhi Companies cannot operate as microfinance institutions (MFIs). Microfinance involves lending small amounts to non-members, often at higher interest rates, which violates Nidhi Company rules.

Is a Nidhi Company required to obtain an NBFC license from RBI?

No, a Nidhi Company does not need an NBFC license from RBI. They are exempt because their operations are limited to members and do not affect the wider public.

Swagatika Mohapatra

Swagatika Mohapatra is a storyteller & content strategist. She currently leads content and community at Razorpay Rize, a founder-first initiative that supports early-stage & growth-stage startups in India across tech, D2C, and global export categories.

Over the last 4+ years, she’s built a stronghold in content strategy, UX writing, and startup storytelling. At Rize, she’s the mind behind everything from founder playbooks and company registration explainers to deep-dive blogs on brand-building, metrics, and product-market fit.

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A Guide to Charitable Trust Registration

A Guide to Charitable Trust Registration

Charitable trusts are powerful vehicles for driving social impact. Whether it's providing education to underprivileged children, supporting healthcare initiatives, or promoting cultural and religious values, charitable trusts operate with the sole aim of public welfare. They function as nonprofit entities, helping individuals and organisations contribute meaningfully to society.

Proper legal registration is required to set up a charitable trust. This not only establishes credibility but also enables access to tax benefits and ensures compliance with laws.

In this guide, we’ll explain everything you need to know about charitable trust registration: what it is, how to create one, the benefits, required documents, legal structure options, and a step-by-step registration process.

Table of Contents

What is a Trust?

A trust is a legal arrangement where one party (the trustor or settlor) transfers assets to another (the trustee), who manages them for the benefit of a third party (the beneficiary). Trusts can be:

  • Private trusts – Created for specific individuals or groups (like family members).
  • Charitable/public trusts – Established to serve the public good through activities in education, healthcare, relief, or religion.

Creation of Trust

Setting up a trust involves a few essential steps:

  1. Define the purpose – Clearly outline the mission or goal of the trust.
  2. Draft a Trust Deed – This is the legal document that outlines the trust’s objectives, details of trustees, mode of operations, and more.
  3. Appoint Trustees – These are individuals who will manage the trust's affairs.
  4. Identify Beneficiaries – Define who will benefit from the trust.
  5. Register the Trust – For a charitable trust to be recognized legally and receive tax exemptions, registration with the local authority is crucial.

What is a Charitable Trust?

A charitable trust is a type of public trust established to carry out philanthropic, religious, educational, or social activities. Unlike private trusts, these operate for the benefit of society at large and not for any specific individual or family.

Charitable trusts must be registered under applicable laws, such as the Indian Trusts Act, 1882, or state-specific legislation, to be legally recognised and to enjoy tax benefits.

Benefits of Setting Up a Charitable Trust

Here’s why setting up a charitable trust can be highly beneficial:

  • Tax Exemptions: Registered charitable trusts can avail of tax benefits under Sections 12A and 80G of the Income Tax Act.
  • Legal Recognition: Gives legitimacy and builds trust among donors and beneficiaries.
  • Structured Fund Management: Enables systematic handling of funds and activities.
  • Credibility and Transparency: Boosts donor confidence and supports fundraising.
  • Long-Term Impact: A legal trust ensures that social efforts continue beyond the lifespan of its founders.

Legal Structure Options for Charitable Trust

When setting up a charitable organisation, you can choose from a few legal structures:

  • Public Charitable Trusts – Governed by the Indian Trusts Act or state laws. Ideal for small to mid-sized social initiatives.
  • Societies – Registered under the Societies Registration Act, 1860. Suitable for large-scale, membership-based organisations.
  • Section 8 Companies – Formed under the Companies Act, 2013, for nonprofit purposes. Best for organisations looking for high compliance standards and credibility.

Depending on your goals, each structure has different compliance requirements, operational flexibility, and advantages.

Documents Required for Registering a Charitable Trust

To register a charitable trust, you’ll typically need the following documents:

  • Trust Deed (on non-judicial stamp paper)
  • PAN card of the trust and the trustees
  • ID and address proof of all trustees (Aadhaar, passport, voter ID)
  • Passport-size photographs of trustees
  • Proof of registered office address (rent agreement, utility bill)
  • No Objection Certificate (NOC) from the property owner (if applicable)
  • Trust objectives clearly stated in the deed

Charitable Trust Registration Process

Follow these steps to register your charitable trust:

  1. Draft the Trust Deed – Clearly define your objectives, trustees, operations, and rules.
  2. Get it Notarised – Ensure it’s on proper stamp paper and signed by the settlor and trustees.
  3. Submit to the Registrar – File the trust deed with the local Sub-Registrar office along with identity proofs and passport-size photos of trustees.
  4. Pay Registration Fees – Fees vary depending on the state and property involved.
  5. Apply for PAN – After registration, get a PAN card for the trust.
  6. Apply for 12A and 80G Certification – These allow income tax exemption for the trust and its donors.

Conclusion

Setting up a charitable trust is a meaningful way to contribute to society, but it requires careful planning, legal clarity, and compliance. Registering your trust legitimises your efforts and opens up access to tax benefits and funding opportunities.

Whether you're working toward education, healthcare, or social welfare, a properly structured and registered charitable trust ensures that your good work has a lasting impact.

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1,499 + Govt. Fee
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1,499 + Govt. Fee
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Private Limited Company
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Limited Liability Partnership
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1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
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  • Firms sharing resources with limited liability 

Frequently Asked Questions

How Do I Register for a Charitable Trust?

To register a Charitable Trust in India, follow these steps:

Step-by-Step Process:

  1. Choose Trustees: Decide the number of trustees (minimum 2). There’s no upper limit.
  2. Draft a Trust Deed: This legal document defines the trust's objectives, operations, trustee roles, and management rules.
  3. Prepare Supporting Documents: Prepare documents like ID and address proof of all trustees, Photographs, Proof of registered office (rent agreement or ownership document + NOC), etc.
  4. Visit Sub-Registrar Office: Submit the trust deed on stamp paper (value depends on the state), signed by trustees and two witnesses.
  5. Get Trust Deed Registered: Once verified, the registrar will return a certified copy of the trust deed with an official stamp and registration number.

What is the Difference Between an NGO and a Charitable Trust?

"NGO" is a broad term referring to any non-governmental organisation working for social welfare. A Charitable Trust is a specific legal structure for an NGO.

Aspect Charitable Trust NGO
Legal form Specific type of NGO Can be a Trust, Society, or Sector 8 Company
Registration Act Indian Trusts Act, 1882 Depends on structure: Trust Act, Societies Act or Companies Act
Governing Body Trustees Governing council, Board of Directors, etc.
Best suited for Smaller, family-run or religious initiatives Formal NGOs working with the Government or donors

What are the Eligibility Criteria for a Charitable Trust?

To register a charitable trust:

  • Minimum of 2 trustees (individuals)
  • At least one trustee should be an Indian citizen
  • Must have a defined charitable objective (education, healthcare, poverty relief, etc.)
  • Should have a registered address (can be residential or rented space with NOC)
  • Trustees should not be involved in any criminal or financial misconduct

What is the Fee for Charitable Trust Registration?

The registration fee varies by state and typically includes:

  • Stamp Duty for Trust Deed
  • Notarisation Fee
  • Professional Fee

Does a Charitable Trust Have to Pay Tax?

Yes, but they can get exemptions if they register under:

  • Section 12A: Grants income tax exemption for charitable activities.
  • Section 80G: Allows donors to claim tax deductions on donations.

Key conditions to claim exemptions:

  • Funds must only be used for charitable purposes.
  • No profit distribution among trustees.
  • Accounts must be audited if income exceeds limits.

Sarthak Goyal

Sarthak Goyal is a Chartered Accountant with 10+ years of experience in business process consulting, internal audits, risk management, and Virtual CFO services. He cleared his CA at 21, began his career in a PSU, and went on to establish a successful ₹8 Cr+ e-commerce venture.

He has since advised ₹200–1000 Cr+ companies on streamlining operations, setting up audit frameworks, and financial monitoring. A community builder for finance professionals and an amateur writer, Sarthak blends deep finance expertise with an entrepreneurial spirit and a passion for continuous learning.

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