From Last 5 years, I have had long 121 sessions with various #StartUp mentoring them on choosing a right Legal Entity.

LLP vs Private Limited Company.

Let me discuss the Key Decision making areas.

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Timing of Funds:
If you are expecting Seed/Angel Investment in near future, you may opt for Pvt Ltd. Company because Investors would want shares.

If you are bootstrapped in initial years, LLP would have much lesser legal compliance and better ease of doing business.

(2/n)

Would your Prospective Investor gain only through Exit by Liquidating his shares or would he actually get a Pie of #Startups profits ? And as #Founder , are you capable of doing various Rounds of Funding ?
In first case, you would need to play on Valuation so Company...
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may be formed.

But in second case, I call it #Strategic #Investment whr Investor is inclined to get an IRR more than the returns on the alternative use of his funds. LLP might be helpful in this scenario.Also useful whr Investor looking for forward or backword integration
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Cash Burn vs Cash rich. Does your #Startup require huge Cash burn in initial years or your Business Model will help to achieve surplus at the end of the month/qtr leading to another TO cycle. In later case, #LLP would be better when investment is for working capital need
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In #Company, you would be taxed twice. Once on profits of the Company where you pay corporate income taxes and then again if the Company distributes remaining profit as dividends, same would be taxed in hands of Individual shareholder. In #LLP, distribution is exempt.

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For this reason, I ask the #Founder what are you going to do with Remaining Profit. If he states that he will reinvest into business expansion, go with Company. If wants to buy Car, buy in the name of Company but if he needs to withdraw for personal, better form #LLP.

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If you are going to take Unsecured Loan from #Friends and remote Family for #Startup , amended Companies Act 2013 restricts deposits and has huge penalties for violation. So LLP would be a good option in such case.

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Lastly remember that if you form a #Company and are looking for Angel Investment, take #StartUp Recognition and #Angeltax exemption from GOI without fail otherwise you might end up paying 25% tax on Investment without any profits.

DM me for guidance on this
#startupindia
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