Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Shares, instruments and a cap table
A company issues equity shares and instruments like CCPS and convertible notes, so an investor can take a defined percentage at a defined price and see exactly who owns what. An LLP has ‘capital contribution’ and profit-sharing ratios, not shares — which does not map onto how venture deals, valuations and ESOP pools work.
Governance and protection
A company has a board, statutory filings and audited accounts, giving investors transparency and a seat at the table. It also gives limited liability and a separate legal identity, and supports investor protections (liquidation preference, anti-dilution) through preference shares that an LLP cannot easily replicate.
Exit and an example
Investors need a clean exit — a sale of shares or an IPO — which is straightforward for a company and difficult for an LLP. Example: a fund offering a term sheet will almost always require the startup to be (or convert to) a Private Limited company before it wires the money — and standard instruments like preference shares and convertible notes simply do not exist for an LLP, so the deal mechanics would have to be reinvented. That friction alone is usually enough for investors to insist on a company. If you are an LLP planning to raise, see converting to a Private Limited company and Pvt Ltd vs LLP. Our startup service can advise on the structure.