7 Main Types of Company in India | Startup & MSME Business Guide | Choose the Right Entity

Starting a business in India is exciting, but before you launch, it’s essential to choose the right type of company. The structure you select determines your liability, taxation, legal compliance, ownership, and fundraising options. Choosing wisely can save you time, money, and legal issues.

In this guide, we focus on the simplest to the most investor-ready structures, with insights specifically for Indian startups, MSMEs, and solo entrepreneurs.

Proprietorship Firm and OPC: The Easiest Business to Start

For freelancers, small shop owners, and solo entrepreneurs, simplicity and speed matter. Proprietorship Firms and One Person Companies (OPC) are the fastest to set up.

1. Sole Proprietorship

A sole proprietorship is the simplest and most common business type, owned and managed by a single person.

Key Features:

• Owned by one individual

• Minimal legal formalities

• Owner has unlimited liability

Pros:

• Easy to start and manage

• Complete control over decisions

• Minimal compliance and paperwork

Cons:

• Owner’s personal assets are at risk

• Limited scope for expansion

Best For: Small businesses, freelancers, and startups with low investment

2. One Person Company (OPC)

Introduced in India under the Companies Act, 2013, an OPC allows a single entrepreneur to enjoy limited liability benefits.

Key Features:

• Only one shareholder

• Separate legal entity

• Limited liability

Pros:

• Best option for solo entrepreneurs

• Better credibility than proprietorship

• Limited liability

Cons:

• Cannot raise funds through equity

• Compliance requirements exist

Best For: Solo founders who want corporate recognition

Proprietorship Firm vs. One Person Company (OPC): The Key Difference

• Proprietorship is simpler but offers no liability protection.

• OPC provides limited liability and corporate recognition, but compliance is slightly higher.

Feature	Sole Proprietorship	One Person Company (OPC)
Liability	Unlimited	Limited
Legal Entity	Not separate	Separate
Compliance	Very Low	Moderate
Funding Options	Personal funds	Loans, personal funds
Best For	Freelancers, small traders	Solo entrepreneurs

Does a Proprietorship Firm Provide Liability Protection?

No. In a proprietorship, the owner is personally liable for all business debts and legal actions.

Documents Required for Sole Proprietorship Registration in India

• PAN card of the owner

• Address proof

• Business registration or Shop Act certificate (optional)

• GST registration (if applicable)

Limited Liability Partnership (LLP): Flexibility and Low Compliance

An LLP is perfect for professional services and startups that need flexibility and limited liability. It is governed by the LLP Act, 2008.

Key Features:

• Partners’ liability is limited to their capital contribution

• Perpetual succession

• Separate legal entity

Pros:

• Limited liability protection

• Easier compliance than a Private Limited Company

• Perpetual succession

Cons:

• Higher compliance cost than partnership

• Not ideal for very large-scale businesses

When is a Statutory Audit Mandatory for an LLP in India?

• LLPs with annual turnover exceeding ₹40 lakh or contributions exceeding ₹25 lakh must undergo statutory audit.

How is Management Different in an LLP vs. a Private Limited Company?

• LLP: Managed by designated partners, flexible decision-making

• Pvt Ltd: Managed by directors under stricter governance rules

LLP Tax Slab in India: Key Advantages Over a Company

• LLP pays a flat 30% tax on profits (plus surcharge & cess)

• No dividend distribution tax as in Pvt Ltd companies

• Simpler accounting requirements

Is an LLP the Best Business Structure for MSME Registration in India?

• LLPs are widely adopted by MSMEs due to lower compliance, limited liability, and flexible structure

• Suitable for businesses aiming to avail MSME benefits like priority loans and government schemes

The Private Limited Company: Best for Startup Funding and Scaling

A Private Limited Company (Pvt Ltd) is the most popular choice for Indian startups planning to raise funds and scale.

Key Features:

• Minimum 2 and maximum 200 members

• Shares cannot be publicly traded

• Separate legal identity from owners

Pros:

• Limited liability for shareholders

• Easy to raise funding from investors and venture capitalists

• Strong brand credibility

Cons:

• More compliance and regulations

• Cannot freely trade shares

Why is a Private Limited Company Preferred by VCs and Angel Investors?

Investors prefer Pvt Ltd companies because:

• Limited liability for owners

• Ability to issue shares and raise equity

• Transparent governance

The Challenge of ROC Compliance: Director Identification Number (DIN) and DSC

• Every director requires a DIN (Director Identification Number)

• Digital signatures (DSC) are mandatory for filings

• Ensures accountability but adds compliance steps for founders

Annual ROC Filing Requirements for a Private Limited Company

• Filing of Annual Return (Form MGT-7)

• Filing of Financial Statements (Form AOC-4)

• Holding at least one board meeting every six months

FDI Rules: Can a Foreign Director Incorporate a Company in India?

Yes, subject to Foreign Direct Investment (FDI) policies and approvals from the Reserve Bank of India (RBI) where applicable.

Private Limited Company vs. LLP

Feature	LLP	Private Limited Company
Liability	Limited to contribution	Limited for shareholders
Ownership	Partners	Shareholders
Minimum Members	2	2
Maximum Members	No strict limit	200
Compliance	Moderate	High
Funding Options	Moderate (loans, partners)	Easy (VC, investors)
Ideal For	Professionals, SMEs	Startups, scalable businesses

LLP vs Pvt Ltd Company Registration Cost: The PAN-India Fee Breakdown

• LLP: ₹10,000–₹20,000 approx. (government and professional fees)

• Pvt Ltd: ₹15,000–₹30,000 approx., depending on service providers

Transferability of Shares: LLP Partner vs. Private Company Shareholder

• LLP: Transfer requires partner consent, limited liquidity

• Pvt Ltd: Shares can be issued or transferred under Articles of Association, easier to attract investors

When to Choose an LLP and When to Choose a Pvt Ltd

• Choose LLP if you need flexibility, professional partnership, limited compliance

• Choose Pvt Ltd if you aim for investment, growth, and scalability

Other Types of Companies in India

1. Partnership Firm

Key Features:

• Governed by the Indian Partnership Act, 1932

• 2–20 partners

• Share profits, losses, and liabilities

Pros:

• Easy to form

• Shared responsibilities and investments

• More resources compared to proprietorship

Cons:

• Unlimited liability of partners

• Disputes can affect business

2. Public Limited Company

Key Features:

• Minimum 7 shareholders, no upper limit

• Shares can be traded publicly

• Strict compliance requirements

Pros:

• Can raise large capital

• High public trust

• Shares easily transferable

Cons:

• Expensive to start and maintain

• High level of regulation

3. Section 8 Company (Non-Profit Organization)

Key Features:

• Formed for charitable purposes

• No profit distribution

• Tax benefits available

Pros:

• Suitable for NGOs and social enterprises

• Can receive grants and donations

Cons:

• Cannot distribute profits

• Strict compliance

Company Type	Liability	Members Required	Funding Options	Compliance Level	Best For
Sole Proprietorship	Unlimited	1	Limited (personal funds)	Very Low	Freelancers, small traders
Partnership Firm	Unlimited	2–20	Limited (partners’ contributions)	Low	Small businesses, friends/family
Limited Liability Partnership (LLP)	Limited to contribution	2+	Moderate (partners, loans)	Moderate	Professionals, MSMEs, startups
Private Limited Company (Pvt Ltd)	Limited	2–200	Easy (VCs, investors)	High	Startups, scalable businesses
Public Limited Company	Limited	7+	High (IPO, public investors)	Very High	Large corporations, IPO-ready firms
One Person Company (OPC)	Limited	1	Limited (personal or loans)	Moderate	Solo entrepreneurs
Section 8 Company (Non-Profit)	Limited	2+	Donations, grants	High	NGOs, charitable institutions

Conclusion: Choosing the Right Business Entity in India

Selecting the right types of company in India depends on your business goals, growth plans, and funding needs:

• Sole Proprietorship & Partnership: Quick start, minimal compliance, but unlimited liability

• OPC: Solo entrepreneurs wanting limited liability and corporate recognition

• LLP: Flexible, low compliance, ideal for MSMEs and professional services

• Private Limited Company: Investor-friendly, high scalability, and legal protection

• Public Limited Company: Large-scale operations and IPOs

• Section 8 Company: NGOs, social enterprises, and charitable organizations

Next Steps:

• Check company name availability on the MCA website

• Consult a professional before registration to ensure compliance with Indian laws

• Decide on the best structure based on funding needs, liability protection, and long-term growth plans

FAQ: Types of Companies in India

1. What are the 4 types of companies?

In India, the four most common types of companies are:

1. Sole Proprietorship – Owned by one person, simple setup.

2. Partnership Firm – Two or more partners sharing profits and liabilities.

3. Limited Liability Partnership (LLP) – Partners enjoy limited liability.

4. Private Limited Company (Pvt Ltd) – Suitable for startups, investors, and scalable businesses.

2. What are the 7 types of companies in India?

The seven main types of companies in India include:

1. Sole Proprietorship

2. Partnership Firm

3. Limited Liability Partnership (LLP)

4. Private Limited Company (Pvt Ltd)

5. Public Limited Company

6. One Person Company (OPC)

7. Section 8 Company (Non-Profit Organization)

3. Who is the No. 1 company?

The term “No. 1 company” can vary by industry. In India, Reliance Industries Limited (RIL) is often considered the largest company by market capitalization and revenue.

4. What is an MNC company?

An MNC (Multinational Company) is a business that operates in multiple countries. Examples include Google, Microsoft, and Tata Group, which have offices, subsidiaries, or operations across the globe.

5.Which type of company is best for Indian startups?

Private Limited Companies are preferred for funding and scaling, while LLPs suit small partnerships.

6.Can a single person start a Pvt Ltd Company in India?

No. OPC is the option for solo entrepreneurs.

7.Does a Proprietorship Firm provide liability protection?

No, owners are personally liable for business debts.

8.How much does LLP registration cost in India?

₹10,000–₹20,000 approx. depending on state and professional fees.

9.Can foreign nationals start a Pvt Ltd in India?

Yes, subject to FDI rules and approvals.