The right answer depends almost entirely on one question: do you intend to raise outside capital or give equity to employees.
| Proprietorship | LLP | Private Limited | |
|---|---|---|---|
| Separate legal entity | No | Yes | Yes |
| Personal liability | Unlimited | Limited | Limited |
| Can raise equity funding | No | Very difficult | Yes |
| ESOPs to employees | No | No | Yes |
| Compliance burden | Minimal | Moderate | Highest |
| Minimum people | 1 | 2 partners | 2 members, 2 directors |
Private limited company
Registered under the Companies Act, 2013. It is what every venture investor expects, it is the only common structure that supports ESOPs and preference shares, and it gives the cleanest cap table. The cost is real compliance: board meetings, annual filings with the Registrar of Companies, statutory audit regardless of turnover, and director obligations that carry personal consequences.
LLP
Under the Limited Liability Partnership Act, 2008. Limited liability with much lighter compliance and no mandatory audit below the prescribed turnover and contribution thresholds. Excellent for consultancies, agencies and professional firms. Poor for anything that will raise institutional money, because investors will require conversion first.
One Person Company
A private company with a single member and a nominee. It gives limited liability to a solo founder, but it carries most of the compliance of a private limited company and has restrictions, so many solo founders simply incorporate a private limited with a second nominal shareholder.
Raising money or issuing ESOPs, ever: private limited from day one. A services business you will fund from revenue: LLP. Testing an idea with no revenue and no risk exposure: proprietorship, and convert later. Converting an LLP to a company is possible but it is paperwork and time you will resent during a funding round.
Separately from structure, check whether you need GST registration, Shops and Establishments registration, professional tax and any sector licence. Those apply regardless of which form you choose.