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

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

March 17, 2024
Private Limited Companies and Limited Liability Partnerships (LLPs) emerge as the two most prevalent options. In this blog, we are highlighting the distinctions between these legal structures, providing insights that can empower you to make an informed decision.
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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.

{{pvt-llp-cards}}

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."

{{know-your-coompany}}

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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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.

Procedure for Converting a Private Limited Company to an OPC

Procedure for Converting a Private Limited Company to an OPC

As startups evolve and founders reassess business needs, many look for simpler structures that offer flexibility without compromising legal benefits. One such move gaining traction is the conversion of a Private Limited Company (Pvt Ltd) into a One Person Company (OPC) — especially when a company reduces to a single shareholder or no longer requires multiple directors.

In this blog, we break down the process, eligibility, benefits, and post-conversion obligations involved in converting a Private Limited Company to an OPC in India.

Table of Contents

Private Limited Company

A Private Limited Company is a widely preferred structure for startups and growing businesses in India. It requires:

  • A minimum of 2 directors and 2 shareholders
  • Limited liability protection
  • Separate legal identity
  • Mandatory compliance with the Companies Act, 2013

This structure is ideal for businesses seeking external funding and operational scale. However, it can become administratively heavy for a solo founder or small team.

Related Read: Characteristics of Private Limited Company

One Person Company (OPC)

An OPC is a simplified structure designed for solo entrepreneurs who want the benefits of a corporate entity without the complexities of a Private Limited Company. Key features include:

  • Only one shareholder and one nominee required
  • Limited liability protection
  • Separate legal identity
  • Lesser compliance burden

An OPC is ideal for solo founders, consultants, and professionals transitioning from informal to formal business setups.

Related Read: Advantages of One Person Company

Eligibility Criteria for Converting a Company into an OPC

As per Rule 7 of the Companies (Incorporation) Rules, 2014, a Private Limited Company can be converted into an OPC if:

  • The company has no more than one shareholder (at the time of conversion)
  • The shareholder is an Indian citizen and resident in India (staying in India for at least 120 days during the financial year)
  • The company has no outstanding liabilities or ongoing litigation
  • The company’s paid-up capital is less than ₹50 lakh, and its annual turnover is under ₹2 crore (as per past financials)

Note: These limits may be relaxed depending on MCA updates, so always check the latest provisions.

Benefits of Converting a Company to an OPC

  • Lower compliance requirements – Less paperwork, fewer meetings
  • Sole ownership with control – Ideal for solo founders
  • Limited liability – Personal assets remain protected
  • Separate legal entity – Recognised as a company under law
  • Brand credibility – Enjoys more trust than sole proprietorships

Process for Converting a Private Limited Company to an OPC

Here's a step-by-step breakdown:

1. Board Meeting

  • Pass a resolution to convert the Pvt Ltd company into an OPC
  • Approve a draft of the special resolution for shareholder approval

2. Shareholder Approval

  • Convene an Extraordinary General Meeting (EGM)
  • Pass a special resolution authorising conversion into an OPC

3. Filing with ROC (Registrar of Companies)

  • File Form MGT-14 within 30 days of passing the special resolution
  • File Form INC-6 with the following attachments:
    • Board & shareholder resolutions
    • Updated MOA & AOA (altered for OPC structure)
    • Declaration by directors and shareholders
    • Latest audited financial statements
    • Affidavit stating the company is free of debts and litigation

4. Scrutiny by ROC

  • The Registrar reviews all filings and may request clarifications

Issue of Certificate

Upon successful verification, the ROC issues a Certificate of Incorporation reflecting the conversion from Private Limited to OPC. This certificate carries the same company registration number (CIN), but the company name is updated to include “(OPC) Private Limited.”

Post-Conversion Requirements by the OPC

After conversion, the newly formed OPC must:

  • Update PAN, TAN, GST registrations, bank accounts, contracts, etc.
  • Use the new name with “(OPC) Private Limited” on all communications
  • Maintain books of accounts and comply with annual filing requirements (though fewer compared to a Pvt Ltd)
  • Inform all stakeholders, vendors, and customers about the structural change

Final Thoughts

If you're a solo founder managing a Private Limited Company and want to streamline operations while retaining limited liability, converting to an OPC could be a strategic move. With reduced compliance and full control, you get the best of both worlds- formal recognition with solo flexibility.

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

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

What are the turnover and capital limits for conversion?

To convert a Private Limited Company into an OPC, the following financial thresholds must be met:

  • Paid-up capital must be less than ₹50 lakhs
  • Annual turnover must be less than ₹2 crores (as per the latest profit and loss statement)

These limits are prescribed under Rule 7 of the Companies (Incorporation) Rules, 2014. If your company exceeds these limits, conversion may not be permitted.

How long does it take to convert a private limited company into an OPC?

The conversion process typically takes 3 to 4 weeks, depending on:

  • Accuracy of documentation
  • Timely approval from shareholders
  • Workload at the concerned Registrar of Companies (ROC)
  • Any queries or objections raised by the authorities

Filing forms like MGT-14 and INC-6 correctly the first time helps avoid delays.

Is shareholder approval required for conversion?

Yes, shareholder approval is mandatory. A special resolution must be passed in a duly held Extraordinary General Meeting (EGM). The resolution, along with supporting documents, is then filed with the ROC via Form MGT-14.

Can a foreign national form or be part of an OPC?

No, a foreign national cannot incorporate or be a member/nominee of an OPC in India. Only a natural person who is a citizen of India and a Resident in India (i.e., stayed in India for at least 120 days during the previous financial year) is eligible to form an OPC or be appointed as its nominee.

Company Registration for AI Startups in India: A Complete Guide

Company Registration for AI Startups in India: A Complete Guide

In India, the AI ecosystem is evolving at a remarkable pace. The government’s proactive initiatives are creating a supportive environment for emerging tech ventures. Startups are using AI to solve real-world problems in healthcare, fintech, agriculture, logistics, and education, and the demand for intelligent solutions is only accelerating. Global investors are also increasingly considering India a hub for deep-tech innovation, with AI playing a central role.

If you're planning to launch an AI startup in this dynamic landscape, one of the first and most important steps is establishing your legal foundation by registering your company. From choosing the right legal structure to understanding data privacy norms and protecting your intellectual property, the decisions you make early on can significantly impact your startup's journey.

Table of Contents

Why You Should Start an Artificial Intelligence Solutions Business in India?

India is becoming a global AI hub. Several factors make it fertile ground for launching AI startups:

  • Huge Market Demand: Industries like fintech, healthcare, education, and logistics are actively adopting AI.
  • Government Support: Initiatives like the National Strategy for Artificial Intelligence, startup schemes, and sandbox environments encourage AI innovation.
  • Talent Availability: India boasts one of the largest pools of tech and data science talent.
  • Cost Advantage: Operating costs and engineering salaries are still lower than in the West.
  • Global Export Potential: Indian AI products can serve both domestic and international markets.

Market Research and Niche Identification

Before writing a single line of code or registering your business, research is key.

  • Market Research: Analyse trends in AI adoption from predictive analytics and NLP to computer vision and GenAI. Identify real pain points across industries, understand competitor offerings, and spot emerging gaps.
  • Niche Selection: Don’t try to be everything to everyone. Narrow your focus. Are you solving a problem in healthcare diagnostics, automating retail inventory, or creating AI copilots for content teams?
  • Data-Driven Decision Making: Use public datasets, surveys, Google Trends, and customer interviews to validate demand.

Tip: Start small, prove your model in one segment, and then scale.

Kickstart your AI venture—register your startup with expert help tailored for tech founders.

Legal Structure Selection

Your legal structure affects liability, taxation, compliance, funding, and perception.

Popular options for AI startups:

Note: Most AI startups aiming for scale and funding choose to register as Private Limited Companies under the Companies Act, 2013.

Registration and Compliance

Once you’ve selected your legal structure, follow these key steps to register your business:

Key Registration Steps:

  1. Obtain DSCs for directors (Digital Signature Certificate)
  2. Register your company with the MCA (Ministry of Corporate Affairs)
  3. Apply for PAN and TAN
  4. Register for GST if your turnover exceeds the threshold or you're providing services across states
  5. Open a bank account in the company’s name

Tip: Use the SPICe+ form on the MCA portal- it combines name approval, incorporation, PAN, TAN, EPFO, and ESIC into one form.

Intellectual Property (IP) Protection

For an AI startup, IP is your core asset. Whether it's your brand, your algorithm, or your dataset, protect it.

What You Should Consider Protecting:

  • Trademark your brand name and logo
  • Copyright original code, training data, or written content
  • Patent any novel AI technique, model architecture, or unique solution

Data Privacy and Compliance

AI businesses often deal with large volumes of personal and sensitive data. Protecting it is surely mandatory.

Ensure:

  • Clear privacy policies
  • User consent mechanisms
  • Proper data anonymisation
  • Secure storage practices

Funding Your AI Venture

AI businesses often require upfront investment for model training, infrastructure, and talent. Here's how you can fund it:

Funding Options:

  • Bootstrapping: Start lean, especially if you're solving a niche problem
  • Angel Investors: Look for early-stage investors with tech or SaaS experience
  • Venture Capital: Once you have traction or a working product
  • Startup India Scheme / MeitY Grants: Government initiatives for deep-tech and AI

Tip: Most investors in AI want to see real use cases, traction, and defensible technology.

Operational Setup

Once registered, set up your AI business for daily operations:

  • Choose your tech stack (e.g., Python, TensorFlow, AWS/GCP)
  • Hire key roles- data scientists, ML engineers, backend devs, and product owners
  • Set up internal processes for version control, documentation, and data pipelines
  • Create scalable workflows for automation over manual ops

Keeping Up with AI Regulations

AI is under increasing scrutiny globally. Your startup must stay ahead of legal and ethical expectations.

Stay informed on:

  • India’s upcoming AI regulation framework
  • Global movements like the EU AI Act or the OECD AI principles
  • Set up an internal AI ethics framework even if you’re early-stage.

Marketing and Scaling

Even the best AI solution won’t go far without the right Go-To-Market (GTM) strategy.

Marketing Channels:

  • Content Marketing & SEO – Educate, don’t sell
  • LinkedIn & Twitter/X – Engage with the tech and founder community
  • Product Demos & Webinars – Show real-world use cases
  • Partnerships – Integrate with existing platforms or systems

Challenges and Considerations

AI startups in India face unique challenges. Be prepared for:

  • High Development Costs: GPUs and infrastructure aren’t cheap.
  • Access to Quality Data: Clean, labelled data is hard to come by.
  • Talent Gaps: Skilled AI engineers are in high demand.
  • Evolving Regulations: Compliance is still catching up with innovation.
  • Ethical Concerns: Bias, misinformation, and explainability are real issues.

Build lean, partner with academia, and stay agile. Solve real problems, not just technically impressive ones.

Frequently Asked Questions (FAQs)

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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

How to start an AI startup in India?

Here’s a step-by-step guide to getting started:

  • Conduct Market Research
  • Finalise Your Business Model
  • Choose a Legal Structure
  • Register Your Business
  • Secure IP Rights
  • Build the Tech Stack
  • Hire Your Core Team
  • Set Up Compliance
  • Launch Your MVP or Pilot
  • Seek Funding or Grants

Do I need to register my business for AI services in India?

Yes. Registering your business gives it legal recognition and enables you to operate officially, open bank accounts, raise funding, and sign client contracts.

What legal structure is best for an AI business in India?

A Private Limited Company is preferred for AI startups due to easier fundraising, limited liability, and scalability. LLP is also a good option for smaller teams.

What licenses and certifications are required for an AI business?

There are no AI-specific licenses, but you may need:

  • Company registration with the MCA
  • GST registration (if turnover exceeds ₹20 lakh/₹40 lakh)
  • Data protection compliance (DPDP Act or GDPR if operating globally)

How much does an AI startup cost?

Initial costs depend on product complexity, team size, and infrastructure. Major expenses include development, cloud services, compliance, and marketing.

Are there any benefits for AI startups under Indian government schemes?

Yes. Schemes like Startup India, Digital India, and MeitY-backed AI centres offer tax exemptions, funding support, and incubation opportunities.

Is GST registration mandatory for AI startups?

It is not mandatory unless your turnover exceeds the threshold (₹20 lakh for service providers) or if you plan to work with businesses that require GST-compliant invoices.

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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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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Equity Dilution in India - Definition, Working, Causes, Effects

Equity Dilution in India - Definition, Working, Causes, Effects

Equity dilution is a concept that every founder, early investor, and shareholder needs to understand, especially as a company moves beyond the seed stage and starts to scale. It typically comes into play during funding rounds, when issuing Employee Stock Option Plans (ESOPs), onboarding strategic partners, or executing mergers and acquisitions.

In India’s rapidly evolving startup and investment ecosystem, it is really important to know how equity dilution works to maintain control, value, and strategic direction in a company.

This blog aims to simplify the concept of equity dilution by explaining what it is, how and why it happens, its implications for founders and shareholders, and, most importantly, how it can be managed smartly within the Indian business and regulatory ecosystem.

Table of Contents

What is Equity Dilution?

Equity dilution refers to the reduction in existing shareholders’ ownership percentage due to the issuance of new shares. Although it doesn't necessarily mean a loss in actual monetary value, it does mean reduced voting power, ownership stake, and potential control over the company.

For example, if a founder owns 50% of a company before a funding round and 40% after new shares are issued to investors, the 10% drop is equity dilution.

Causes of Equity Dilution in India

Several scenarios in India lead to equity dilution:

  • Fundraising through equity: When a company raises capital by issuing new shares to investors (angel, VC, PE).
  • ESOPs (Employee Stock Option Plans): Issuing shares to employees for retention and motivation.
  • Convertible instruments: When convertible debentures or notes convert to equity.
  • Mergers and acquisitions: New shares issued as part of a transaction.
  • Bonus or rights issues: Depending on the structure, these can also dilute holdings if not proportionally subscribed.

Impact of Equity Dilution

Dilution can affect stakeholders in various ways:

  • Founders: Loss of control or voting power if too much equity is given away early.
  • Investors: Reduced ownership percentages, which may affect decision-making influence.
  • Employees: If ESOPs are diluted too often, their potential upside gets reduced.
  • Company valuation: Though dilution reduces percentage ownership, it can lead to growth and higher valuations, offsetting the effect in monetary terms.

How Does Share Dilution Happen?

Share dilution occurs when a company issues additional shares, reducing the ownership percentage of existing shareholders. While the total number of shares increases, each existing shareholder’s slice of the pie becomes smaller — unless they participate in the new issue.

Here are the most common ways share dilution happens in India:

1. Fundraising (Equity Rounds)

During seed, Series A, or later funding rounds, new investors are issued fresh equity. To accommodate them, the company increases its authorised and paid-up share capital, diluting the percentage held by existing shareholders.

Example:
A founder owns 100% of a startup with 1,00,000 shares. After raising funds from investors who are issuing 50,000 new shares, the founder’s ownership drops to 66.67%.

2. Issuing ESOPs (Employee Stock Option Plans)

Startups often set aside 5–15% of their cap table for ESOPs to attract and retain top talent. These options, once vested and exercised, convert into shares — reducing the percentage stake of other shareholders.

3. Conversion of Convertible Instruments

Instruments like convertible notes, SAFE (Simple Agreement for Future Equity), or CCDs (Compulsorily Convertible Debentures) convert into equity at a future date. When they convert, new shares are issued, which dilute existing ownership.

4. Mergers or Acquisitions

In some mergers or acquisitions, equity may be offered as part of the consideration to the merging entity or its shareholders. This leads to the issuance of new shares and causes dilution.

5. Bonus Shares to Select Stakeholders

Occasionally, a company might issue bonus shares to certain shareholders or employees as incentives, which can result in uneven dilution.

Reasons for Equity Dilution

  • Capital infusion: To fund growth, R&D, hiring, marketing, etc.
  • Strategic partnerships: Issuing equity to partners or advisors.
  • Debt conversion: Debt turning into equity through convertible notes.
  • Regulatory compliance: SEBI regulations may require public companies to maintain a certain free float, triggering new issuance.

Managing Equity Dilution in India

Equity dilution is inevitable as your startup grows — but managing it smartly can protect both your control and long-term value. Indian founders must understand the tools, strategies, and legal frameworks available to reduce unnecessary dilution and align all stakeholders.

1. Plan Your Cap Table Early

Create a 5–7 year cap table projection. Visualise future funding rounds, ESOP pools, convertible instruments, and expected dilution at each stage.

2. Raise What You Need, Not What You Can

Avoid over-raising in early rounds. Each round of funding comes at the cost of equity. Only raise what’s required to hit the next set of milestones.

3. Negotiate Better Valuations

Valuation is key to how much equity you give up. Strengthen your fundamentals, traction, and pitch to negotiate higher valuations, thus minimising dilution per rupee raised.

4. Use Convertible Instruments Strategically

Instruments like SAFE notes or CCDs can delay dilution until a priced round. Use them in early or bridge rounds to preserve equity while bringing in capital.

5. Be Thoughtful with ESOP Allocation

ESOPs are critical to building a strong team, but don’t over-allocate too early. Start with a lean pool (5–10%) and expand as your team grows and funding allows.

6. Include Anti-Dilution Provisions (If You're an Investor or Co-Founder)

While often investor-friendly, certain anti-dilution clauses can protect your equity in down rounds. Founders should understand these clauses and negotiate fair terms.

7. Consider Non-Dilutive Capital

Explore grants, government schemes (like Startup India Seed Fund, MeitY TIDE, or NIDHI), or revenue-based financing. These options offer capital with no equity dilution.

8. Maintain Founder Alignment

If co-founders have significantly unequal stakes, align expectations early. Future dilution can compound tensions if not addressed at the start.

How Shareholders Can Handle Equity Dilution?

  • Pre-emptive rights: Ensure agreements include rights to participate in future rounds to maintain shareholding.
  • Anti-dilution clauses: Particularly for investors, these can protect them from value dilution in down rounds.
  • Monitor ESOP pools: Oversized ESOP pools dilute all shareholders.
  • Regular cap table reviews: Stay updated to avoid surprises in ownership shifts.

Conclusion

Equity dilution is a natural part of a growing business, especially in India's thriving startup and investment landscape. While it may seem negative on the surface, it often enables access to capital, talent, and partnerships that fuel long-term value creation. 

The key lies in understanding, planning, and strategically managing dilution to protect stakeholder interests while supporting the company’s growth.

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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 does equity dilution occur?

Equity dilution happens when a company issues new shares, usually during funding rounds, ESOP allocations, or while converting instruments like convertible notes. This increases the total number of shares, reducing the ownership percentage of existing shareholders.

Is equity dilution always bad?

Not always. Dilution is a natural part of growth, especially if you're raising capital to build a bigger, more valuable company. What matters is how much value you're gaining in return for the equity you're giving up.

How can I protect myself from equity dilution?

  • Plan your cap table in advance
  • Negotiate better valuations
  • Use convertible instruments smartly
  • Keep ESOP pools lean
  • Explore non-dilutive funding (grants, revenue-based capital)
  • Use pre-emptive rights to maintain your stake in future rounds

What is a pre-emptive right?

Pre-emptive rights allow existing shareholders to buy new shares before they're offered to others. This helps them maintain their ownership percentage and avoid unwanted dilution during future fundraising rounds.

Nipun Jain

Nipun Jain is a seasoned startup leader with 13+ years of experience across zero-to-one journeys, leading enterprise sales, partnerships, and strategy at high-growth startups. He currently heads Razorpay Rize, where he's building India's most loved startup enablement program and launched Rize Incorporation to simplify company registration for founders.

Previously, he founded Natty Niños and scaled it before exiting in 2021, then led enterprise growth at Pickrr Technologies, contributing to its $200M acquisition by Shiprocket. A builder at heart, Nipun loves numbers, stories and simplifying complex processes.

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Can a Foreign National Register an OPC in India? Updated Rules 2025

Can a Foreign National Register an OPC in India? Updated Rules 2025

India is becoming an increasingly attractive destination for global entrepreneurs and investors. With a rapidly growing economy, digital-first policies, and a supportive startup ecosystem, many foreign nationals are exploring business opportunities here. However, when it comes to choosing a business structure, not all options are open to them, particularly the One Person Company (OPC). 

In this blog, we’ll explore whether a foreign national can register an OPC in India, the updated rules for 2025, and the alternatives that are available.

Table of Contents

Why Start a Business in India as a Foreigner?

India offers a compelling value proposition for global business owners:

  • Fast-growing economy: India is among the top emerging markets with consistent GDP growth.

  • Large consumer base: With over 1.4 billion people and a rising middle class, the domestic market is vast and varied.

  • Startup-friendly policies: Programs like Startup India, Make in India, and Digital India support new ventures with tax benefits, funding access, and ease of registration.

  • Improved ease of doing business: Recent reforms have simplified company incorporation, tax filing, and compliance.

  • Strategic location: India’s proximity to other Asian markets makes it a strong base for regional operations.

  • Skilled talent: A large English-speaking, tech-savvy workforce makes it easier to scale.

  • Cost-effective operations: Lower labour and operational costs compared to many developed markets.

Additionally, FDI relaxations across sectors like tech, manufacturing, and services have made India a preferred destination for companies like Amazon, IKEA, and Walmart.

Popular Business Structures for Foreigners in India

Foreign nationals looking to start a business in India can choose from a few key structures:

  • Private Limited Company (Pvt Ltd): Most preferred structure; allows 100% FDI in most sectors.
  • Limited Liability Partnership (LLP): Suitable for service businesses and professional firms; FDI permitted in select cases.
  • Liaison Office: Ideal for companies wanting to explore or represent without full operations.
  • Branch Office: Allows foreign companies to conduct full-scale business in India.
  • Project Office: Meant for foreign companies executing specific projects.

Note: One Person Company (OPC) and sole proprietorships are not allowed for foreign nationals or NRIs due to FDI restrictions.

Looking to register a business in India? Explore private limited company or LLP options with expert help today.”

Type of Company that NRIs and Foreign Nationals Can Register

While OPC is off the table, foreign nationals and NRIs can register the following:

  • Private Limited Company
  • Public Limited Company
  • Limited Liability Partnership (LLP) – subject to FDI conditions

Under automatic FDI routes, many sectors do not require prior government approval for investment. However, some sectors are still under the approval route or have FDI caps.

The Private Limited Company remains the most flexible and founder-friendly choice, especially for technology, services, and product-based businesses.

Can a Foreigner Own 100% of an Indian Company?

Yes! Foreign nationals can own 100% of equity in Indian companies, provided the business operates in a sector under the automatic FDI route. This means:

  • No need for government approval in most sectors.
  • A resident Indian director is mandatory (must stay in India for at least 182 days in a financial year).
  • Some sectors like defence, telecom, and insurance have FDI caps or require prior approvals.

Pre-requisites for Registration of a Private or Public Limited Company

Private Limited Company:

  • Minimum 2 shareholders and 2 directors
  • At least 1 Indian resident director
  • Registered office address in India
  • Digital Signature Certificate (DSC) for all directors
  • Company name approval from the MCA

Public Limited Company:

  • Minimum 7 shareholders and 3 directors
  • Other requirements same as above

For foreign nationals, documents must be apostilled or notarised as per regulatory norms.

Documents Required for Foreign Directors & Shareholders

Foreign nationals need to submit the following documents:

  • Passport (identity proof): notarised/apostilled
  • Address Proof (bank statement, utility bill, not older than 2 months)
  • Passport-size photograph
  • Digital Signature Certificate (DSC) application form, duly signed
  • Board resolution or power of attorney (in case of a foreign entity shareholder)

If applicable:

  • PAN Card (mandatory for directors earning income in India)

 Process to Register a Company in India as a Foreigner

  1. Obtain DSCs for all proposed directors
  2. Apply for name approval on the MCA portal
  3. Draft incorporation documents (MoA, AoA, declarations, etc.)
  4. File incorporation application online via SPICe+ form
  5. Receive Certificate of Incorporation from MCA
  6. Apply for:
    • PAN & TAN
    • GST Registration (if applicable)
    • Bank account in the company’s name

Note: One resident Indian director is compulsory.

Taxation for Foreign-Owned Companies in India

Companies registered in India (even if foreign-owned) are treated as domestic companies for tax purposes:

  • Corporate Tax: 25% (plus cess and surcharge) if turnover ≤ ₹400 crore

  • GST: Mandatory if turnover exceeds ₹20 lakh (or if interstate services are provided)

  • TDS: Deduction obligations apply when making payments to employees, contractors, or foreign entities

  • Transfer Pricing Regulations: Apply for transactions with foreign affiliates or holding companies

India has Double Tax Avoidance Agreements (DTAAs) with many countries to reduce tax burden.

Company Types for Foreign Nationals

Features Partnership Firm Limited Liability Partnership (LLP)
Legal Identity Not a separate legal entity A separate legal entity
Liability of Partners Unlimited Limited to the extent of the contribution
Registration Optional Mandatory under MCA
Compliance Burden Low Moderate
Perpetual Succession No Yes
Number of Partners Minimum 2, Maximum 50 Minimum 2, No Maximum
Foreign Investment (FDI) Not permitted Permitted under the automatic route

Conclusion

While foreign nationals cannot register an OPC in India due to FDI restrictions, there are multiple flexible options available with the Private Limited Company being the most recommended. With the right legal support and compliance, India offers a rich, growth-oriented environment for foreign entrepreneurs to launch and scale their ventures.

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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

Do I need a business visa to start a company in India?

Yes, foreign nationals planning to start or manage a business in India must obtain a valid Business Visa. This visa allows you to engage in business activities, attend meetings, and oversee operations legally.

Can a foreign resident be a director of an Indian company?

Yes, a foreign resident can be appointed as a director in an Indian company. However, at least one director must be a resident Indian (i.e., has stayed in India for at least 182 days in the previous calendar year).

Can a foreigner register a Private Limited Company in India?

Yes, foreigners can register a Private Limited Company in India. 100% foreign ownership is allowed in most sectors under the automatic route, provided compliance with FEMA and FDI guidelines.

Can an NRI register an OPC in India?

No, NRIs and foreign nationals are not eligible to register a One Person Company (OPC) in India. OPCs are reserved for Indian citizens who are also residents of India.

Can a foreign citizen be a nominee in an OPC?

No, a foreign citizen cannot be appointed as a nominee in an OPC. Both the sole member and nominee must be Indian citizens and residents.

Can a foreign company do business in India without registration?

No, a foreign company must register its presence in India to conduct business legally. This can be through a subsidiary, branch office, liaison office, or project office- each with specific registration and compliance norms.

Can a foreigner become a shareholder in an Indian company?

Yes, foreign nationals can become shareholders in an Indian company. Shareholding is allowed under the FDI policy, subject to sector-specific limits and compliance with FEMA regulations.

Akash Goel

Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.

His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.

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How to Convert a Partnership Firm into an LLP in India

How to Convert a Partnership Firm into an LLP in India

As Indian businesses evolve, many traditional partnership firms are transitioning into Limited Liability Partnerships (LLPs). This shift is primarily due to LLPs offering the dual benefits of limited liability and flexible management. If you’re running a partnership firm and planning to scale or raise capital, converting into an LLP could provide a more secure and growth-friendly structure. 

This blog walks you through the key differences, reasons for conversion, and the step-by-step process involved.

Table of Contents

Partnership vs LLP

Income Range Tax Rate
Up to ₹3 lakh -
₹3 lakh – ₹6 lakh 5%
₹6 lakh – ₹9 lakh 10%
₹9 lakh – ₹12 lakh 15%
₹12 lakh – ₹15 lakh 20%
Above ₹15 lakh 30%

Why Choose LLP Instead of a Partnership Firm?

  • Limited Liability: Unlike partnership firms, LLPs protect the personal assets of partners.
  • Separate Legal Identity: An LLP can own property, sue, and be sued in its own name.
  • Ease of Ownership Transfer: Ownership and management can be easily transferred.
  • Tax Benefits: LLPs are taxed as partnerships but enjoy exemption from dividend distribution tax (DDT).
  • Investor Friendly: LLPs are seen as more credible and structured by banks and investors.
  • Perpetual Existence: Business continuity is not affected by partner exit or death.

Requirements for Converting a Partnership Firm into an LLP

  1. The partnership firm must be registered under the Indian Partnership Act, 1932.
  2. All partners must consent to the conversion.
  3. There should be no security interest (like a charge) on firm assets at the time of conversion.
  4. All partners of the firm must become partners of the LLP.
  5. Digital Signature Certificates (DSC) and Director Identification Numbers (DIN) for designated partners are mandatory.
  6. The firm must comply with all necessary clearances and approvals (if any) before the conversion.

Ready to upgrade your partnership? Start your LLP registration with expert assistance today.

How do you convert a partnership firm into an LLP?

Here’s the step-by-step process:

Step 1: Obtain DSC & DIN

At least two designated partners need DSCs, which can be applied for in the FiLLiP form.

Step 2: Name Reservation (RUN–LLP)

To reserve the name, file the “Reserve Unique Name–LLP” (RUN–LLP) form with the MCA. It should ideally be the same as the partnership firm’s name.

Step 3: File Form FiLLiP

File Form FiLLiP (Form for Incorporation of LLP) with all partner details, registered address, and capital structure. This form can also be used to apply for DIN.

Step 4: File LLP Form 17 (Conversion Form)

This is the key form for conversion. It must be filed with all supporting documents (listed below) and submitted to the MCA.

Step 5: File LLP Form 2

Submit the incorporation document and subscriber details, including the proposed LLP Agreement.

Step 6: Certificate of Incorporation

Once all forms are verified and approved, the Registrar of Companies (RoC) will issue a Certificate of Incorporation for the LLP.

Documents to be Filed

  • Copy of the partnership deed
  • Statement of assets and liabilities (certified by a CA)
  • Latest Income Tax Return acknowledgement
  • Consent letters from all partners
  • NOC from creditors, if applicable
  • Proof of registered office (rent agreement + utility bill)
  • Identity and address proof of all partners
  • Copy of resolution (if applicable)
  • LLP Agreement (after incorporation)

Registration

Registration is completed once the Certificate of Incorporation is issued by the RoC under the LLP Act, 2008. This certificate legally establishes the LLP as a distinct entity.

The firm must also:

  • Apply for PAN & TAN in the LLP’s name.
  • Update bank accounts and register under GST, Shops & Establishment, etc.
  • File Form 3 with the MCA within 30 days to register the LLP Agreement.

Post-registration:

  • The original partnership firm is deemed dissolved.
  • All assets, liabilities, obligations, and rights of the firm get transferred to the LLP.
  • All contracts and agreements entered into by the partnership firm are considered valid under the LLP.
  • Business continuity is maintained under the new structure.

Partners' Liability Before Conversion

It’s important to note:

  • Partners remain personally liable for all firm obligations and liabilities incurred before conversion.
  • The LLP is not discharged from any previous liability just because of the conversion.

  • Creditors can enforce pre-conversion obligations against the LLP or partners individually, depending on the terms.

LLP Form No. 17

LLP Form 17 is an important conversion form to be submitted during the process. It includes:

  • Declaration by partners
  • Statement of assets and liabilities
  • Consent of all partners
  • Details of all secured creditors and their NOC
  • Copy of the latest ITR
  • Copy of the partnership deed

The form must be digitally signed and submitted with a prescribed fee.

Part A: Application

  • Name and registration details of the existing firm
  • Proposed name of the LLP
  • Details of all partners (name, PAN, address)
  • Statement of consent from partners
  • Statement of financial position of the firm

Part B: Statement

  • Statement confirming that the partners will be part of the LLP
  • Declaration that all regulatory and tax obligations have been complied with
  • Acknowledgement of previous liabilities

Attachments

  • Consent letters from all partners
  • NOC from creditors
  • Copy of PAN and Aadhaar of partners
  • Copy of the partnership deed
  • Digital signatures of partners
  • Latest IT return
  • Rental agreement and utility bill for registered office
  • LLP Agreement (to be filed within 30 days of incorporation)

Frequently Asked Questions (FAQs)

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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

Why should I convert my partnership firm into an LLP?

Converting into an LLP offers several benefits:

  • Limited Liability
  • Separate Legal Entity
  • Perpetual Succession
  • Increased Credibility
  • Ease of Compliance

Is it mandatory to convert a partnership firm into an LLP?

No, it is not mandatory. Conversion is voluntary and usually done when the partners want to enjoy the benefits of limited liability and a formal structure without the complexity of incorporating a company.

Do all partners need to agree to the conversion?

Yes, all existing partners must unanimously agree to the conversion. Also, only the existing partners of the firm can become partners in the LLP at the time of conversion- no new partners can be added during this process.

Is there any limit on the number of partners in an LLP?

No, there is no upper limit on the number of partners in an LLP. However, a minimum of two partners is required to form an LLP. Unlike traditional partnership firms (which are capped at 50 partners).

Do I need to obtain a new PAN for the LLP after conversion?

Yes, after conversion, the LLP becomes a separate legal entity, so you must apply for a new PAN and TAN in the name of the LLP. You’ll also need to update other registrations (like GST, Shops & Establishments, bank accounts, etc.) to reflect the new entity.

ROC Compliance Calendar 2025–2026: Important Filing Due Dates for Companies & LLPs

ROC Compliance Calendar 2025–2026: Important Filing Due Dates for Companies & LLPs

Companies and LLPs in India are legally obligated to comply with annual filing requirements under the Companies Act, 2013, and the Limited Liability Partnership Act, 2008. These filings with the Registrar of Companies (ROC) must be completed annually or triggered by specific events. Timely compliance is crucial for companies and LLPs to avoid substantial penalties that can negatively impact business operations and reputation.

Table of Contents

The ROC is a regulatory body under India's Ministry of Corporate Affairs (MCA) responsible for company registration, statutory record maintenance, and ensuring adherence to the Company Act and associated regulations. Non-compliance with ROC filings can result in:

  • Fines and penalties
  • Legal actions against the company and directors
  • Damage to the company's credibility and reputation
  • Difficulties in seeking funding or partnerships

On the other hand, timely compliance demonstrates a commitment to transparency and good governance, which can attract customers, partners, and investors. It also helps avoid heavy penalties and late fees that can strain a company's finances.

ROC Filing Due Date: Detailed Calendar

Here are the key ROC compliance forms and ROC filing due dates for the financial year 2025-2026:

Form Purpose Applicable To Due Date
MSME-1 Reporting outstanding payments to MSMEs > 45 days All specified companies 30.04.2025 (Oct–Mar) 31.10.2025 (Apr–Sep)
NDH-3 Half-yearly return filing for Nidhi companies Nidhi companies 30.04.2025 (Oct–Mar) 30.10.2025 (Apr–Sep)
Form-11 (LLP) Annual return of LLP with business and partner details All registered LLPs 30.05.2025
FC-4 Annual return of foreign company Foreign companies 30.05.2025
NDH-1 Return of statutory compliances Nidhi companies (as applicable) 29.06.2025
DPT-3 Reporting deposits and loans Every company 30.06.2025
PAS-6 Share Capital Audit Report Reconciliation Unlisted public companies 30.05.2025 (Mar) 29.11.2025 (Sep)
FLA Annual return to RBI for FDI/ODI holders Companies with FDI/ODI 15.07.2025
DIR-3 KYC KYC of Directors/DPs All DIN/DPIN holders as on 31.03.2025 30.09.2025
FC-3 Filing annual accounts of foreign company Foreign companies’ branches, liaison, and project offices 31.12.2025
CRA-2 Appointment of Cost Auditor Companies requiring cost audit 30 days from BM or 180 days from 01.04.2025, whichever is earlier
ADT-1 Appointment of Auditor Every company 14.10.2025 (15 days post AGM) 11.10.2025 (OPC)
AOC-4 / XBRL / CFS Filing of annual financial statements Specified companies 29.10.2025 (30 days from AGM) 27.09.2025 (OPC)
MGT-14 Filing resolutions on board report and accounts adoption Limited companies 30 days from board meeting
Demat for Pvt Cos Mandatory demat compliance under amended rules Private companies (excluding small/govt. companies) 30.06.2025
Form-8 (LLP) LLP’s Statement of Account & Solvency Every LLP 30.10.2025
MGT-7 / MGT-7A Annual return with company details MGT-7: All companies MGT-7A: Small Co. / OPC 28.11.2025
CRA-4 Filing of Cost Audit Report Companies under cost audit 30 days from receipt of cost audit report
CSR-2 Reporting on Corporate Social Responsibility contribution Companies required to comply with CSR provisions Due date generally aligns with AOC-4 filing

It's important to note that these ROC filing due dates are tentative and may be revised by the regulatory authority from time to time. Additionally, certain event-based compliances are also applicable in addition to these basic annual compliance obligations. It's crucial to keep track of the applicable due dates for each form to ensure timely compliance and avoid penalties.

Frequently Asked Questions

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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

What is the due date for ROC filing?

The due dates for ROC filing vary depending on the specific form and the company's financial year-end. Key due dates include:

  • Form-11 (LLP): Within 60 days from the end of the Financial Year
  • DPT-3: On or before 30th June
  • DIR-3 KYC: 30th September
  • AOC-4: Within 30 days of AGM conclusion
  • MGT-7: Within 60 days from AGM conclusion

Refer to the detailed list of forms and due dates in the article for more information.

How to check ROC compliance status?

You can check your company's ROC compliance status by following these steps:

  1. Visit the Ministry of Corporate Affairs (MCA) website: www.mca.gov.in
  2. Click on the "MCA Services" tab and select "View Company/LLP Master Data"
  3. Enter your Company Identification Number (CIN) or Limited Liability Partnership Identification Number (LLPIN) and captcha code

Click on "Submit" to view your company's master data, which includes the compliance status for various filings

What are the ROC compliances?

ROC compliances refer to the mandatory filings and disclosures that companies and LLPs must make with the Registrar of Companies (ROC) as per the Companies Act, 2013, and the Limited Liability Partnership Act, 2008. These include:

  • Annual filings such as AOC-4 (Financial Statements), MGT-7 (Annual Return), and Form-11 (Annual Return for LLPs)
  • Event-based filings such as PAS-6 (Share Capital Audit Report Reconciliation), ADT-1 (Appointment of Auditor), and MGT-14 (Filing of Resolutions)
  • KYC filings such as DIR-3 KYC for directors and designated partners
  • Other filings like DPT-3 (Return of Deposit), MSME-1 (Outstanding Payments to MSMEs), and CSR-2 (Corporate Social Responsibility Contribution)

How to do ROC form filing?

To file ROC forms, follow these general steps:

  1. Obtain a Digital Signature Certificate (DSC) for the authorised signatory
  2. Register on the MCA portal (www.mca.gov.in) using the DSC
  3. Select the appropriate e-Form from the MCA portal
  4. Fill in the required details and attach necessary documents
  5. Pay the applicable filing fees online
  6. Digitally sign the e-Form using the DSC
  7. Submit the e-Form on the MCA portal

Note that the specific process may vary slightly depending on the form being filed. It's advisable to consult a professional or refer to the MCA's detailed instructions for each form.

Are the forms that need to be filed with ROC monthly or yearly?

Most ROC forms are filed annually or based on specific events, rather than monthly. Some key annual filings include:

  • AOC-4 (Financial Statements)
  • MGT-7 (Annual Return)
  • Form-11 for LLPs (Annual Return)
  • DIR-3 KYC for directors and designated partners

However, certain forms like MSME-1 (Outstanding Payments to MSMEs) and PAS-6 (Share Capital Audit Report Reconciliation) are filed half-yearly. Event-based filings such as ADT-1 (Appointment of Auditor) and MGT-14 (Filing of Resolutions) are submitted as and when the relevant events occur.

Registering a Freelance Business in India: What You Need to Know

Registering a Freelance Business in India: What You Need to Know

The freedom to work on your own terms, choose your clients, and chart your career path makes freelancing an attractive option for many Indians today. With the rise of the digital economy, more professionals are ditching traditional jobs in favour of independent work.

Along with flexibility and autonomy comes the responsibility of understanding the legal, tax, and business aspects of freelancing in India. Many beginners wonder:

  • Do I need to register as a freelancer?
  • What about taxes and GST?
  • How do I protect myself legally with clients?

We’ll simplify everything you need to know, from why freelancing is worth considering to taxes, contracts, and registration requirements, so you can confidently start your freelance journey.

Table of Contents

Why Start Your Own Freelancing Business in India?

Freelancing is much more than just escaping the 9-to-5 grind. It’s a path to professional freedom and personal growth. Here’s why many choose to start their freelance business in India:

  • Independence: You control your schedule, projects, and clients.
  • Earning Potential: With the right skills, you can earn more than a fixed salary, often in foreign currency.
  • Learning Curve: Freelancing pushes you to learn business skills, client management, negotiation, and personal branding that regular jobs may not offer.
  • Creative Freedom: You get to work on diverse projects across industries, honing your skills and building a versatile portfolio.
  • Work-Life Balance: Freelancers often have more flexibility to balance personal and professional commitments.

If you value autonomy and are willing to take charge of your career, freelancing can be a rewarding and liberating choice.

Turn your freelance hustle into a registered business—get started with expert-led Company registration today.

What Are the Benefits of Freelancing in India?

Freelancing in India comes with tangible benefits that extend beyond financial gains:

1. Flexibility and Remote Work

Work from anywhere, anytime. Freelancers aren’t tied to office spaces or strict schedules, making it easier to balance other life priorities.

2. Access to Global Clients

With platforms like Upwork, Fiverr, LinkedIn, and direct outreach, Indian freelancers have access to clients worldwide and often earn in USD, EUR, or GBP.

3. Diverse Projects and Skill Growth

You can work on multiple projects across different industries, which accelerates skill development and keeps work exciting.

4. Building a Personal Brand and Network

Freelancing pushes you to market yourself, opening doors to collaborations, partnerships, and a professional network that can lead to bigger opportunities.

5. Control Over Earnings

Unlike fixed salaries, freelancing income has the potential to grow as your skills, client base, and rates increase.

Freelancer’s Tax in India

As a freelancer, you’re considered a self-employed professional under Indian tax laws. Here’s what you need to know about taxes:

GST for Freelancers

If your annual turnover exceeds ₹20 lakh (₹10 lakh for Northeastern states), GST registration is mandatory under the GST Act. GST applies at 18% for most professional services, but you can claim Input Tax Credit on business-related expenses.

Freelance Income Tax

Freelancers are taxed under the “Profits and Gains from Business or Profession” head. You are subject to regular income tax slabs applicable to individuals.

Feature Description
Shared Objectives Both aim to achieve mutual business goals.
Resource Pooling Involves combining assets, expertise, or capital.
Contract-Based Governed by agreements that outline roles, rights, and responsibilities.
Profit Sharing Both involve sharing profits, though the ratio may differ.
Collaborative Decision-Making Decisions are made collectively or as per agreed terms.
Risk Sharing Losses and liabilities are often shared based on contribution or agreement.

Freelance Contract

A written agreement between a freelancer and a client that clearly outlines the scope of work, payment terms, deadlines, and other important conditions of the project. It helps protect both parties by setting clear expectations and serves as a legal safeguard in case of disputes.

Key Clauses to Include in a Freelance Contract:

  1. Scope of Work: Define the exact services you will provide. Include deliverables, timelines, and expectations.

  2. Payment Terms: Payment amount, mode, currency, and schedule. Specify advance payments, milestones, and late fees.

  3. Confidentiality Clause: Protect sensitive client information and intellectual property rights.

  4. Termination Clause: Define under what circumstances either party can terminate the contract.

  5. Revision & Change Requests: Set clear terms for additional work or revisions.

  6. Dispute Resolution: Choose a method for resolving disagreements (e.g., mediation, arbitration).

  7. Jurisdiction Clause: State the legal jurisdiction under which the contract will be governed (Indian Contract Act, 1872).

Frequently Asked Questions (FAQs)

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

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
rize image

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

Do freelancers pay tax in India?

Yes, they do. Freelancers in India are taxed just like any other self-employed individual. Your freelance income is treated as “Profits and Gains from Business or Profession” under the Income Tax Act, and you need to pay tax based on your total annual income.

Do freelancers need to file an ITR?

Yes, if your total income exceeds ₹2.5 lakhs in a financial year (₹3 lakhs if you're above 60), filing an Income Tax Return (ITR) is mandatory. Most freelancers use ITR-3 or ITR-4 (under the Presumptive Taxation Scheme), depending on their income and the nature of their business.

What is the TDS rate for freelancers?

If a client pays you more than ₹30,000 in a financial year, they’re usually required to deduct 10% TDS (Tax Deducted at Source) under Section 194J before making the payment. This amount gets credited to your PAN, and you can adjust it while filing your ITR.

Do freelancers need to pay both GST and income tax?

It depends.

  • Income Tax is always applicable if your annual income crosses the basic exemption limit.

GST (Goods and Services Tax) is required only if your annual turnover exceeds ₹20 lakhs (₹10 lakhs for special category states) or if you work with clients outside India (export of services), in which case registration is often recommended, even if optional.

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Prakhar Shrivastava
foxsell.app
We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
TBS Magazine
Hey, Guys!
We just got incorporated yesterday.
Thanks to Rize team for all the Support.
It was a wonderful experience.
CHEERS 🥂
#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
Nayan Mishra
https://zillout.com/
Smooth onboarding, seamless incorporation and a wonderful community. Thanks to the #razorpayrize team! #rizeincorporation
Dhaval Trivedi
Basanth Verma
shopeg.in
Exciting news! Incorporation of our company, FoxSell, with Razorpay Rize was extremely smooth and straightforward. We highly recommend them. Thank you Razorpay Rize for making it easy to set up our business in India.
@foxsellapp
#razorpayrize #rizeincorporation
Dhaval Trivedi
Prakhar Shrivastava
foxsell.app
We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
TBS Magazine
Hey, Guys!
We just got incorporated yesterday.
Thanks to Rize team for all the Support.
It was a wonderful experience.
CHEERS 🥂
#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
Nayan Mishra
https://zillout.com/