A comparison of common structures. General legal information only; tax and funding needs should be discussed with an adviser.
Main options
- Private limited company: a separate legal entity with limited liability for shareholders; suited to raising investment and issuing shares. More compliance.
- Limited liability partnership (LLP): separate legal entity with limited liability for partners and flexible internal governance; lighter compliance; not suited to equity-style investment.
- One person company: a company with a single member, with conversion rules once thresholds are crossed.
- Partnership firm: simple, but partners have unlimited liability.
- Sole proprietorship: no separate legal identity; the owner is personally liable.
How to choose
- Do you plan to raise equity funding? A company is usually the expected form.
- How important is limiting personal liability?
- What compliance can you handle?
- Will you have foreign investors or foreign ownership?
Incorporation of a company
A company is incorporated by filing with the Registrar of Companies, through the central portal, with the name approval, the memorandum and articles of association, and director details. Directors need a Director Identification Number.
Founders’ agreement
Co-founders should record roles, equity, vesting, decision-making, intellectual property assignment and exit in writing from the start.
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Important disclaimer: This article is general legal information, not legal advice. It does not create a lawyer-client relationship and is not an advertisement or solicitation under Bar Council of India rules. Verify current statutes, rules and judgments before relying on it.
