Comparison of Proprietorship, Partnership, LLP, and Company
| Feature | Proprietorship | Partnership | LLP (Limited Liability Partnership) | Company |
|---|---|---|---|---|
| Definition | A single-person, unregistered business entity. | A registered/unregistered association of two or more individuals to operate a business. | A hybrid structure combining the flexibility of a partnership with limited liability. | A registered entity offering limited liability to owners/shareholders with a separate legal identity. |
| Ownership | Sole Proprietor | Minimum 2 Partners, Maximum 50 Partners. | Minimum 2 Designated Partners. | - Minimum 2 Directors and 2 Shareholders. - Maximum 15 Directors, 200 Shareholders. - OPC: 1 Director + 1 Nominee Director. |
| Legal Identity | Not distinct from the owner. | Not distinct from partners. | Separate legal identity distinct from partners. | Separate legal identity distinct from shareholders and directors. |
| Liability | Unlimited liability—personal assets are at risk. | Unlimited liability—partners are personally liable. | Limited liability—partners’ personal assets are protected. | Limited liability—liability is limited to shareholding or guarantee. |
| Registration Time | No formal registration required. | Registration optional, but deed required for clarity. | 7–9 working days for registration with MCA. | 15–20 working days for incorporation with the Registrar of Companies (ROC). |
| Compliance Burden | Minimal—income tax filing required if turnover exceeds ₹2.5 lakhs. | Moderate—requires partnership deed, and ITR filing. | Moderate—annual filings (Form 11, Form 8), ITR, and statutory compliance under LLP Act. | High—annual filings (MCA compliance, ITR, board meetings), auditor appointment for larger companies. |
| Documentation | - MSME Registration (optional). - GST Registration. | - Partnership Deed. | - LLP Agreement. - Incorporation Certificate. | - Memorandum of Association (MOA). - Articles of Association (AOA). - Incorporation Certificate. |
| Governance Framework | None. | Partnership governed by the Indian Partnership Act, 1932. | Governed by the LLP Act, 2008. | Governed by the Companies Act, 2013. |
| Transferability | Non-transferable—ownership cannot be transferred. | Limited transferability of ownership rights. | Ownership rights are transferable as per the LLP Agreement. | Fully transferable through share transfer mechanisms as per the Companies Act, 2013. |
| Taxation | Taxed as individual income under personal tax slab. | Taxed as a partnership firm. | Taxed as a partnership firm; profits taxed at 30%. | Corporate tax structure applies—varies based on type (private, public, or OPC) and turnover thresholds. |
| Capital Contribution | Limited to the proprietor's funds. | Contribution by all partners based on agreement. | Flexible—partners contribute as per LLP agreement. | Share capital contribution by shareholders; includes equity and preference shares. |
| Ease of Winding Up | Simple—minimal legal formalities. | Moderate—requires dissolution agreement and settlement of liabilities. | Complex—requires formal procedures and approval from authorities. | Most complex—requires shareholder approval, creditors’ clearance, and ROC filing for closure. |
| Audit Applicability | - Required under Income Tax Act if turnover exceeds ₹1 crore for businesses or ₹50 lakhs for professionals. | - Required under Income Tax Act: - Turnover exceeds ₹1 crore for businesses or ₹50 lakhs for professionals. - Profit is below 8% of turnover (under Section 44AB). | Mandatory if turnover exceeds ₹40 lakhs or contribution exceeds ₹25 lakhs. | Mandatory for all companies, irrespective of turnover. |
