Part 1: Compliance Requirements

Formation

At least 2 designated partners, 1 must be a resident of India

Minimum of 2 shareholders and 2 directors, 1 must be a resident of India

Annual Filing

Annual statement of accounts and solvency, and annual return

Annual financial statements and annual return

Meetings

No mandatory meetings

Mandatory board and annual general meetings

Statutory Audit

An LLP is required to get its accounts audited if its annual turnover exceeds ₹40 lakhs or its contribution exceeds ₹25 lakhs

Mandatory regardless of turnover

Part 2: Taxation & Audit

Taxation

Taxed as a partnership firm @30%

Taxed as a separate entity, subject to corporate taxes @25% or 24.2%

Dividend Distribution Tax (DDT)

No DDT on profit distribution

Subject to DDT (though abolished in Finance Act 2020)

Part 3: Maintenance Cost

Compliance Costs

Lower compliance costs due to fewer requirements

Higher compliance costs due to more regulatory requirements

Administrative Costs

Generally lower administrative costs

Higher administrative costs due to structured governance

Part 4: Investor Point of View

Foreign Direct Investment (FDI)

Permitted under automatic route in sectors with 100% FDI

Permitted under automatic route in most sectors

Capital Raising

Less attractive to investors due to flexible structure

More attractive to investors due to structured governance

Investor Entry/Exit

Long Process of approx. 2 months

Easy & Fast Process of 1 Week Max.

Part 5: Others

Legal Status

Separate legal entity from its partners

Separate legal entity from its shareholders

Flexibility

More flexible, suitable for small and professional businesses

More structured, suitable for scaling businesses

Continuity and Succession

Perpetual succession, easier to dissolve

Perpetual succession, continues to exist despite ownership changes

Conversion and Exit

Can be converted into a Pvt Ltd Co, easier exit strategy

Can be converted into a public company, more complex exit strategies