Key takeaway
A private limited company is the usual choice if you plan to raise equity, issue shares to investors or employees, or need flexibility on foreign investment. An LLP is simpler to run and suits professional or closely held businesses, but foreign investment into LLPs is allowed only in sectors open to 100% FDI under the automatic route without performance conditions. Both need at least one resident director or designated partner in India.
Side by side
| Private limited company | LLP | |
|---|---|---|
| Law | Companies Act, 2013 | Limited Liability Partnership Act, 2008 |
| Minimum members | 2 shareholders, 2 directors | 2 partners, 2 designated partners |
| Resident requirement | At least one director resident in India as defined in the Act | At least one designated partner resident in India as defined in the Act |
| Foreign investment | Per FDI policy by sector; automatic or approval route | Only in sectors with 100% automatic-route FDI and no FDI-linked conditions |
| Raising capital | Equity, preference shares, ESOPs | Partner contributions; no shares |
| Compliance | Board meetings, statutory audit, annual filings | Lighter; audit only above thresholds |
FEMA: repatriable or non-repatriable investment
NRIs and OCIs can invest on a repatriation basis (treated as foreign investment and reported to the RBI through the prescribed filings) or on a non-repatriation basis, which is generally treated on par with domestic investment. The choice affects reporting and your ability to take money out later. Get it right at incorporation.
Incorporation basics
- Digital signature certificates and director/partner identification numbers.
- Name approval and incorporation through the Ministry of Corporate Affairs portal.
- Foreign directors and partners need apostilled or consularised identity and address documents.
- PAN, TAN, bank account and, where applicable, GST registration.
- FEMA reporting of the foreign investment within the time allowed.
Tax at a glance
Companies and LLPs are taxed differently: companies pay corporate tax and distributions are taxed as dividends; LLP profit share is generally exempt in partners’ hands after the LLP is taxed. Choose with a tax adviser, considering your country of residence.
Setting up a business in India?
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Related guides
- All NRI legal guides
- Setting up a business in India from overseas
- Investing in India from abroad
- Business setup in India for NRIs (service)
References
- Companies Act, 2013, section 149(3); Limited Liability Partnership Act, 2008, section 7 — India Code
- FEM (Non-Debt Instruments) Rules, 2019, Schedules I, IV and VI; Consolidated FDI Policy
- Ministry of Corporate Affairs — incorporation forms
Last reviewed: November 2026.
The information provided is for general educational purposes only and does not constitute legal advice. Applicable laws and procedures may vary depending on the facts, jurisdiction, and circumstances of each matter. Consult a qualified legal professional before taking action.
