One-Person Companies (OPC) & Limited Liability Partnership (LLPs) in 2025

Introduction :  Are Relaxed Rules Truly Startup-Friendly ?

Starting a business in India was really tough because you had to deal with a lot of rules and regulations. For people who wanted to start a business on their own or with a team the One-Person Company and the Limited Liability Partnership were the easiest options. Now the government has made some changes to make these options even better for startups.

But are these changes helpful ?

Lets first understand what One - Person Companies and Limited Liability Partnerships are.

A One-Person Company is a company that has one owner. It was started to help entrepreneurs who wanted to protect their personal assets without needing to find co-founders or shareholders.

A Limited Liability Partnership is a mix of a partnership and a company. It helps partners protect their assets and also allows them to manage the business in a flexible way. This is an option for professionals, small businesses and startups with two or more founders.

What has changed?

For One-Person Companies

1. You do not have to change your company structure if it grows too big. Earlier if your One-Person Company made more than 2 crore in turnover or had more than 50 lakh in paid-up capital you had to convert it into a private limited company. Now you can grow your business without worrying about changing the structure.

2. People who live outside India can now start a One-Person Company. Earlier only people who lived in India could start a One-Person Company. Now people who live outside India can also start a business in India.

3. It is now easier to change your company structure if you want to. One-Person Companies can now convert into public companies without waiting for a specific reason. The process of changing the company structure has been made simpler.

For Limited Liability Partnerships

1. There is a type of Limited Liability Partnership called the "Small LLP". This type of partnership has fees and penalties making it easier for small businesses to register and comply with rules.

2. Some minor mistakes are no longer considered crimes. Earlier if you made a mistake in your paperwork you could be in trouble with the law. Now these mistakes will only result in a fine.

3. The fines for mistakes have been reduced. This means that small businesses will not have to pay much if they make a mistake.

Why are these changes helpful for startups?

You can grow your business without changing the structure. Earlier if your business grew too big you had to change the structure, which was expensive and time-consuming. Now you can grow your business without worrying about changing the structure.

It is cheaper to start a business. The new type of Limited Liability Partnership has fees and penalties making it easier for small businesses to start and comply with rules.

People who live outside India can now start a business in India. This is helpful for Indians who live outside India and want to start a business in their home country. You do not have to worry about going to court for mistakes. Earlier if you made a mistake you could be in trouble with the law. Now these mistakes will only result in a fine.

There are still some problems with these changes. One-Person Companies can only have one owner. If you want to add owners or raise money from investors you cannot do it with a One-Person Company. Limited Liability Partnerships cannot raise money from investors. Most investors want to invest in companies that can issue shares. Limited Liability Partnerships cannot do this. Limited Liability Partnerships are not recognized as startups. Even though the government says that Limited Liability Partnerships can be startups, most investors and startup programs do not consider them as such.

You still have to follow a lot of rules and regulations. Even though the government has made some changes you still have to maintain records, file paperwork and comply with rules, which can be time-consuming and expensive.

So who are these structures suitable for?

One-Person Company: This is suitable for founders who want to protect their personal assets without needing to find co-founders or shareholders. If you plan to add more owners or raise money from investors this is not the best option.

Small Limited Liability Partnership: This is suitable for two or more founders who want to start a services or consulting business without raising money from investors. If you want to raise money from investors or give shares to your employees this is not the best option.

Private Limited Company: This is suitable for startups that want to raise money from investors or give shares to their employees. If you want a simple structure with minimal rules and regulations this is not the best option.

Conclusion

The truth is that these changes are helpful but only for a type of startup. If you are a consultant who wants to start a formal business a One-Person Company is a good option. If you are a professional firm with two partners and no plans to raise money from investors a Limited Liability Partnership is a good option. For most startups that want to raise money from investors or give shares to their employees a Private Limited Company is still the best option. The government has made some changes but there is still a need for more flexible structures that can help startups grow and raise money.

Author: Lavanya Bhatt, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

Endnotes

1. The Companies Act, 2013, No. 18 of 2013 (India), §§ 2(62), 3 & related provisions, read with the Companies (Incorporation) Rules, 2014, as amended by the Companies (Incorporation) Second Amendment Rules, 2021(introducing liberalized eligibility criteria for One Person Companies, removal of paid-up capital and turnover thresholds for mandatory conversion, and permitting Non-Resident Indians to incorporate OPCs).

2. The Limited Liability Partnership Act, 2008, No. 6 of 2009 (India), as amended by the Limited Liability Partnership (Amendment) Act, 2021 (introducing the concept of Small LLPs, reducing compliance burdens, decriminalizing certain offences, and promoting ease of doing business for small enterprises).

3. Ministry of Corporate Affairs (MCA), Government of India, Companies (Incorporation) Second Amendment Rules, 2021, G.S.R. 107(E) (Feb. 1, 2021) (simplifying the incorporation and conversion framework for One Person Companies and expanding eligibility to resident and non-resident Indian entrepreneurs).

4. Department for Promotion of Industry and Internal Trade (DPIIT), Government of India, Startup India: Action Plan and Recognition Framework (updated guidelines), available at https://www.startupindia.gov.in(setting out the eligibility criteria, incentives, and recognition framework for startups, including eligible entity structures under the Startup India initiative).

5. Ministry of Corporate Affairs, Government of India, Report of the Company Law Committee (2019)(recommending reforms for One Person Companies and Limited Liability Partnerships to improve ease of doing business, reduce regulatory burdens, and encourage entrepreneurship in India).