Quick Answer
If there is any realistic chance of equity investment — angel, seed, ESOPs, a foreign investor — incorporate a private limited company now rather than an LLP that converts later. An LLP cannot issue shares, cannot run an ESOP, and takes FDI only in sectors under the 100% automatic route with no performance conditions; converting an LLP to a company under section 366 of the Companies Act is a fresh incorporation with the LLP's consents, a new PAN, new GST registration and new bank account, and investors will not close into an LLP while that runs. Choose an LLP when the business will be owned by its partners for the foreseeable future, profit is distributed rather than reinvested, and audit cost matters — an LLP needs a statutory audit only above ₹40 lakh turnover or ₹25 lakh contribution (rule 24(8), LLP Rules), while a company is audited from day one. The year-one cost difference between the two is mostly audit and the Companies Act filings; the tax difference is small for a reinvesting start-up and real for a distributing partnership (no dividend tax in an LLP). An NRI can be a director of either and incorporate remotely; a foreign parent can set up a subsidiary while its documents are being authenticated, provided the resident-director and registered-office requirements are met first.
Reviewed: 4 November 2026 | Law: Companies Act, 2013 (ss. 2(62), 2(85), 3, 4, 7, 10A, 12, 149(3), 152, 366); Companies (Incorporation) Rules, 2014 (rules 8, 8A, 25, 25A); Companies (Appointment and Qualification of Directors) Rules, 2014 (rule 12A, as amended with effect from 31 March 2026); ss. 164(2), 206, 207; Limited Liability Partnership Act, 2008 (ss. 7, 34, 35); LLP Rules, 2009 (rule 24(8)); FEM (Non-Debt Instruments) Rules, 2019 (Schedule VI); Income-tax Act, 1961 (ss. 10(2A), 115BAB, 184) | Author: CA V. Viswanathan, FCA, ACS, CFE, IBBI Registered Valuer (IBBI/RV/03/2019/12333)
Answer: Private limited, because the angel round is the deciding fact. The year-one cost comparison, itemised by what the law requires rather than by package price:
| Item | Private limited | LLP |
|---|---|---|
| Government incorporation fee | Nil MCA fee for authorised capital up to ₹15 lakh; stamp duty on MoA/AoA at the state rate (Karnataka differs from Tamil Nadu and Maharashtra) | MCA fee by contribution slab; stamp duty on the LLP agreement at the state rate |
| DSC and DIN/DPIN | Two DSCs; DIN allotted in SPICe+ | Two DSCs; DPIN allotted in FiLLiP |
| Statutory audit | Mandatory from year one (s.139); auditor appointed within 30 days (s.139(6)) | Not required below ₹40 lakh turnover and ₹25 lakh contribution (rule 24(8)) |
| Annual ROC filings | AOC-4, MGT-7A (small company), ADT-1, DIR-3 KYC, INC-20A once, DPT-3 if applicable | Form 8, Form 11, DIR-3 KYC |
| Board and member meetings | First board meeting within 30 days; at least two board meetings a year for a small company (s.173(5)); AGM | As per LLP agreement; no statutory meetings |
| Income-tax | 22% (s.115BAA) or 15% for new manufacturing (s.115BAB); dividends taxed in the shareholder's hands | 30% + surcharge; partner's share of profit exempt (s.10(2A)); partner remuneration deductible within s.40(b) limits |
| Raising equity / ESOP | Yes — ss.42, 62; ESOP under rule 12 | No shares; new partner admission only; no ESOP |
Our fee for either starts from the figure on the relevant service page and government fees, stamp duty and DSC costs are extra and state-specific; we itemise them in the quote. The real year-one difference is the audit and the heavier ROC calendar — and the real year-two difference, if the angel round happens, is that the LLP has to convert first (Q31).
Answer: Conversion is under section 366 of the Companies Act, 2013 read with the Companies (Authorised to Register) Rules, 2014: an LLP with two or more partners may register as a company. The sequence is: (1) consent of a majority of partners at a general meeting, and a newspaper advertisement in Form URC-2 (English and vernacular) with a 21-day objection window; (2) no-objection from secured creditors; (3) name reservation in RUN/SPICe+ Part A; (4) Form URC-1 with SPICe+ (Part B), e-MoA and e-AoA, the list of partners who become members and their shareholding, the latest audited accounts (or accounts not more than 15 days old if unaudited), and a CA/CS certificate; (5) certificate of incorporation, then a fresh PAN, TAN, GST registration (the LLP's cannot be migrated), bank account, and transfer of contracts and licences to the company. There is no specific capital-gains exemption in section 47 for an LLP becoming a company (section 47(xiiib) covers the reverse, company to LLP), and the treatment of the partners' capital accounts becoming share capital has been litigated, so that step needs tax review before the resolution. The investor will not close until the certificate is issued and the bank account is open — plan the round's timetable from the conversion date, not from the term sheet.
Answer: Yes. The constraints are two: section 149(3) requires at least one director who has stayed in India for 182 days or more in the financial year (a resident director), and the NRI's identity and address documents must be notarised and apostilled (Hague Convention countries) or consularised (others) — a copy of the passport and an overseas address proof not older than two months. The NRI's DSC is obtained on video verification; the DIN is allotted in SPICe+. Share subscription by the NRI is FDI: the subscription money comes through banking channels from abroad (or from an NRE/NRO account under Schedule I or Schedule III as applicable), with FC-GPR within 30 days of allotment, and the NRI's shares held on a repatriable or non-repatriable basis as declared. The incorporation itself is online end to end; what cannot be done remotely is the resident-director requirement, and the registered office must be a physical Indian address with proof (Q35). After incorporation: INC-20A declaration of commencement within 180 days (the subscription money must have been received), first board meeting within 30 days, auditor within 30 days.
Answer: Yes, if the critical path is managed around the apostille. What the apostille gates: the parent's board resolution authorising the subscription and the nominee, the parent's charter documents and certificate of incorporation, and the authorised signatory's identity proof — all must be apostilled (or consularised) before SPICe+ Part B is filed. What can start now and runs in parallel: name reservation (SPICe+ Part A is valid for 20 days, extendable on fee); DSCs for the resident director and for the parent's signatory (video KYC); the registered-office lease and NOC in Chennai; the resident director's appointment; the draft MoA/AoA and the shareholders' agreement if a nominee shareholder holds one share; the AD-bank relationship and KYC on the parent so that the subscription remittance is not held after incorporation; sector check under the NDI Rules; and the post-incorporation calendar (PAN, TAN, bank account, GST, INC-20A, FC-GPR within 30 days of the allotment to subscribers). The incorporation itself, once the apostilled set arrives, is a matter of days at the CRC if the name and forms are clean. The one thing not to do is file with an unapostilled document and hope for resubmission — a resubmission at CRC resets the queue.
Answer: Rule 8 and 8A of the Companies (Incorporation) Rules list what the CRC rejects: a name identical or too nearly resembling an existing company or LLP (ignoring type, case, spaces, punctuation and words like "the"); a name that is the same as a registered trademark or a pending application in the same class unless the owner's NOC is attached; names implying government patronage; words requiring approval (Bank, Insurance, Stock Exchange, Venture Capital and others in rule 8B need the regulator's approval). Before applying: search the MCA name database for similar names including phonetic variants; search the trademark registry (ipindiaonline) in classes 35, 36, 42 and your product class; check the domain; avoid generic single words that are already in use with a descriptor added, because "resemblance" ignores descriptors. Give two names in Part A in order of preference, make the second one structurally different rather than a variant of the first, and attach the trademark NOC or your own trademark application number where a mark exists. If rejected, Part A permits one resubmission; a second rejection means a fresh application and fee.
Answer: For the Companies Act, yes: section 12 requires a registered office capable of receiving communications within 30 days of incorporation, and rule 25 requires proof — the co-working operator's lease or ownership document, a utility bill not older than two months in the operator's name, and the operator's NOC in favour of the company. A shared desk is acceptable if the operator will give the NOC and receive post. For GST, the test is stricter in practice: rule 8 of the CGST Rules requires proof of principal place of business, and officers under rule 9 and rule 25 (physical verification) will look for the company's name on the premises, a dedicated seat or cabin, and a consistent set of documents — the NOC, the operator's rent agreement with the building owner, and the utility bill. The REG-03 queries that arise on co-working addresses typically cite one of three things (illustrative, not a ranked list): the NOC is from the operator but the lease is in a different entity's name; the utility bill is older than permitted or in a third party's name; or the application form says "own" or "rented" where it should say "shared/consent". Get the operator's full document chain before applying, not after the query.
Answer: An OPC (section 2(62)) is a private limited company with one member and a nominee; it needs no second shareholder but a nominee's consent (INC-3) and cannot raise equity from investors without converting. Since 1 April 2021 the paid-up capital and turnover thresholds that forced conversion (₹50 lakh / ₹2 crore) have been deleted, so an OPC may now stay an OPC regardless of size, and may convert voluntarily at any time by passing the resolutions and filing INC-6 — no two-year waiting period. A solo founder who expects an investor within a year should incorporate a private limited company with a second (even nominal) shareholder from the start, because the investor's closing checklist will otherwise include the conversion. An OPC's annual compliance is lighter: one director is enough, no AGM, at least one board meeting in each half of the year (section 173(5)), MGT-7A and AOC-4.
Answer: From the certificate of incorporation:
Penalties that bite: INC-20A (₹50,000 on the company and ₹1,000 per day on each officer up to ₹1 lakh, s.10A(2)); AOC-4/MGT-7 (₹100 per day of delay in additional fee, with no cap, plus penalty under ss.137/92); DIR-3 KYC not filed by the triennial due date (DIN marked deactivated; restored on filing with the late fee — ₹5,000 as applied on the MCA portal; confirm the current fee at filing); failure to hold the AGM (s.99). The small-company thresholds — paid-up capital up to ₹10 crore and turnover up to ₹100 crore from 1 December 2025 — decide whether MGT-7A, the cash-flow-statement exemption and the two-meeting rule apply.
Answer: First check which regime the default falls under. Until 30 March 2026, rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014 required DIR-3 KYC every year by 30 September. The Amendment Rules, 2025 (notified 31 December 2025, in force from 31 March 2026) replaced that with a KYC once every three years — due by 30 June of the year following each third consecutive financial year, so a director whose KYC was current before the change is next due by 30 June 2028 — plus an event-based update in DIR-3 KYC-WEB within 30 days of any change in personal mobile number, e-mail or residential address. A DIN whose KYC is not filed by the due date is marked "Deactivated due to non-filing of DIR-3 KYC". There is no separate application to reactivate: file e-form DIR-3 KYC (not the web version) with the late fee — ₹5,000 as applied on the MCA portal; confirm the current fee at filing — and the DIN is restored on processing. While deactivated, the director cannot sign any e-form as a director (the DSC-DIN association fails), so the company's AOC-4, MGT-7A, ADT-1, PAS-3 and SPICe+ for a new company all stall; the director remains a director in law and liable as one. Distinguish this from disqualification under section 164(2) (three consecutive years of non-filing by any company the person directs), which deactivates the DIN for five years and is not cured by a fee — that needs the defaulting company's filings to be regularised or a writ, and the person cannot be appointed anywhere meanwhile. Check every director's DIN status on the MCA portal before a filing season, because a deactivated DIN found close to a due date delays every form that director must sign.
Answer: Section 206(1) lets the Registrar call for information, explanations or documents in writing where, on scrutiny of a filing or on information received, he thinks it necessary; the company must reply within the time in the notice (which the Registrar sets, and extends on request). It is an inquiry, not yet an inspection — section 206(3) is the next step (a further notice stating the grounds, and possibly a call to produce books), section 206(4) allows an inquiry into the company's affairs on the Registrar's own satisfaction or on a representation, and section 207 is the inspection of books. Reply within time, in writing, answering each question with the document that answers it (board minutes, the register, the bank statement, the agreement); do not volunteer analysis beyond the question. Where the letter concerns a specific filing (a related-party transaction in AOC-4, a loan in DPT-3, a charge not registered), fix the underlying default by the relevant form before replying, and say so. A reply that is incomplete or not given invites section 206(4) and, for a wilful failure, the penalty under section 206(7) on the company and every officer in default (₹1 lakh, plus ₹500 a day for a continuing failure). Keep the correspondence file: a section 206 letter is a disclosure item in the next investor's diligence and in the auditor's CARO reporting.
Send us the founders' residential status, whether any shareholder will be a foreign entity or individual, the business activity, the state of the registered office and whether investment is expected within 24 months. We confirm the entity, the document list by signatory, the state-specific stamp duty and the first-year calendar before any form is filed.
Ask which entity fits your plan
Sources: Companies Act, 2013 — sections 2(62), 2(85), 7, 10A, 12, 56(4), 96, 99, 115BAA/115BAB (Income-tax Act), 137, 139, 149(3), 173, 366; Companies (Incorporation) Rules, 2014 — rules 8, 8A, 8B, 25, 25A; Companies (Appointment and Qualification of Directors) Rules, 2014 — rule 12A, and the Companies (Appointment and Qualification of Directors) Amendment Rules, 2025 (notified 31 December 2025, in force 31 March 2026); Companies Act, 2013 — sections 164(2), 206, 207; Companies (Authorised to Register) Rules, 2014; Companies (Specification of Definitions Details) Amendment Rules (small company thresholds, effective 1 December 2025); MCA General Circular 5/2026 (AOC-4 and MGT-7 extension for FY 2025-26); LLP Act, 2008 and LLP Rules, 2009 — rule 24(8); Income-tax Act, 1961 — sections 10(2A), 40(b), 47(xiiib), 115BAA, 115BAB; FEM (Non-Debt Instruments) Rules, 2019 — Schedules I, III and VI; CGST Rules, 2017 — rules 8, 9, 25. Stamp duty and government fees are state- and slab-specific and are not quoted here.
A private limited company. An LLP cannot issue shares or run an ESOP and takes FDI only in 100% automatic-route sectors without performance conditions; converting under section 366 later means a fresh incorporation, new PAN, GST and bank account, and investors will not close until it is done.
Only when turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh (rule 24(8), LLP Rules, 2009). A private limited company is audited from its first year under section 139.
Yes. The NRI's passport and address proof must be notarised and apostilled or consularised, the DSC is issued on video verification, and at least one director must be resident in India for 182 days in the financial year (section 149(3)). The NRI's subscription is FDI reported on FC-GPR within 30 days of allotment.
Name reservation, DSCs on video KYC, the registered-office lease and NOC, the resident director's appointment, draft MoA/AoA, the AD-bank KYC on the parent, and the sector check. SPICe+ Part B waits for the apostilled board resolution, charter documents and signatory ID.
For the Companies Act, yes, with the operator's lease or ownership proof, a utility bill not older than two months and the operator's NOC. For GST, officers expect the company's name at the premises and a consistent document chain; most REG-03 queries on co-working addresses arise from a lease in a different entity's name or an old utility bill.
No. The ₹50 lakh paid-up capital and ₹2 crore turnover thresholds for mandatory conversion were deleted with effect from 1 April 2021. An OPC may convert voluntarily at any time by filing INC-6.