LLP vs Proprietorship
Detailed comparison of Limited Liability Partnership vs Sole Proprietorship. Compare pros, cons, costs, compliance requirements, taxation, and get expert guidance to choose the right structure for your business.
View All ComparisonsQuick Comparison
| Aspect | LLP | Proprietorship |
|---|---|---|
| Liability Protection | LLP offers limited liability | LLP offers limited liability |
| Compliance | Proprietorship has minimal compliance | Proprietorship has minimal compliance |
| Fundraising | Both have limited ability | Both have limited ability |
| Costs | Proprietorship has lowest costs | Proprietorship has lowest costs |
| Credibility | LLP has better credibility | LLP has better credibility |
Detailed Comparison
Limited Liability Partnership
Pros
- Limited liability protection
- Can have multiple partners
- Separate legal entity
- Professional credibility
- Tax benefits
- Better for growth
Cons
- Higher costs than proprietorship
- Annual compliance required
- Minimum 2 partners needed
- More complex than proprietorship
Costs
- Registration: ₹8,000 - ₹15,000
- Annual: ₹5,000 - ₹10,000
- Compliance: ₹8,000 - ₹15,000 per year
Compliance Requirements
- • Annual return (Form 11)
- • Statement of accounts (Form 8)
- • Income tax return
- • GST compliance
Taxation
Partners taxed individually
Best For
- • Professional services
- • Consulting firms
- • Small businesses with partners
- • Service businesses
Sole Proprietorship
Pros
- Simplest structure
- No registration needed
- Lowest costs
- Complete control
- Easy to start
- Minimal compliance
Cons
- Unlimited liability
- Solo ownership only
- No separate entity
- Personal assets at risk
- Limited credibility
- Cannot raise funds
Costs
- Registration: ₹0 - ₹2,000
- Annual: ₹0 - ₹3,000
- Compliance: ₹2,000 - ₹5,000 per year
Compliance Requirements
- • Income tax return
- • GST registration (if applicable)
- • Basic bookkeeping
Taxation
Taxed as individual income
Best For
- • Solo entrepreneurs
- • Small businesses
- • Low risk ventures
- • Quick start
Expert Recommendation
Choose LLP if you have partners and want liability protection. Choose Proprietorship for solo operations, lowest costs, and simplicity.
Frequently Asked Questions
Common questions about LLP vs Proprietorship
Which structure is better for liability protection?
LLP offers limited liability, Proprietorship has unlimited liability
Which has lower compliance requirements?
Proprietorship has minimal compliance, LLP has moderate compliance
Which is better for raising funds?
Both have limited ability, but LLP is slightly better
Which has lower costs?
Proprietorship has lowest costs, LLP has moderate costs
Which offers better professional credibility?
LLP has better credibility
What are the tax implications?
Both offer similar tax benefits
Which is better for scaling the business?
LLP is better for scaling with partners
Can one structure be converted to another?
Proprietorship can be converted to LLP or OPC
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