Entity guide · FY 2026-27 · India
Private Limited Company
Default structure for venture-backed startups and growth businesses. Companies Act, 2013 — Section 2(68); incorporated via SPICe+.
Headline facts
Incorporation cost
₹15,000–40,000
Typical timeline
12–18 working days
Tax regime (FY 2026-27)
Base 25% (turnover ≤ ₹400 Cr), optional 22% under Section 115BAA, grandfathered 15% under 115BAB. MAT under 115JB does not apply to 115BAA/BAB opt-ins.
FDI eligible
Yes (100% automatic route in most sectors; government route or caps for regulated sectors)
Typical revenue band
₹1 crore–₹500 crore
Audit requirement
Statutory audit under Section 139 mandatory every year. Internal audit under Section 138 triggers at ₹200 Cr turnover or ₹100 Cr borrowings.
Who Pvt Ltd is best for
- A venture-backed startup raising priced equity from angels, VCs, or family offices.
- A growth-stage services or product company with 10+ employees needing ESOPs.
- A family business professionalising with independent directors and external capital.
- Any venture targeting IPO, M&A, or strategic foreign partnership within 3-7 years.
Who should NOT choose Pvt Ltd
- Single-founder practices with no fundraising plans and turnover under ₹1 Cr.
- Very small partnerships where joint-and-several risk is contained and compliance appetite is low.
- Sectors where LLP offers materially lower compliance with no commercial downside.
Pros & Cons
Pros
- Default vehicle for institutional equity — every standard SHA, term sheet, and ESOP template assumes a Pvt Ltd cap table.
- Eligible for 22% concessional rate under Section 115BAA — materially lower than LLP, partnership, or proprietor.
- Limited liability for shareholders under Section 2(68).
- Perpetual succession; share transfers relatively frictionless under articles.
- ESOPs under Section 62(1)(b) and sweat equity under Section 54 are natively supported.
- Section 80-IAC three-year tax holiday and Section 56(2)(viib) angel-tax exemption for DPIIT startups.
- FDI under automatic route enables global fundraising without RBI approval.
Cons
- Heaviest compliance among closely-held entities — AOC-4, MGT-7, ADT-1, DPT-3, MSME-1, DIR-3 KYC, plus board and general meetings.
- Minimum four board meetings per year; AGM within 6 months of FY-end under Section 96.
- Related-party transactions under Section 188 and director loans under Section 185 are closely regulated.
- Director remuneration, loans from members, and deposits heavily regulated under Chapter V.
- Setup and ongoing professional fees are the highest in this list.
- MCA penalty framework is punitive — delayed filings attract per-day fees with no cap plus director disqualification risk under Section 164(2).
Annual compliance
Filing forms: AOC-4 within 30 days of AGM, MGT-7 within 60 days, ADT-1, DIR-3 KYC by 30 Sep, DPT-3 by 30 Jun, MSME-1 half-yearly, ITR-6.
The heaviest calendar — 4+ board meetings under Section 173, AGM within 6 months under Section 96, AOC-4 within 30 days of AGM, MGT-7 within 60 days, ADT-1, DPT-3 by 30 Jun, MSME-1 half-yearly, DIR-3 KYC by 30 Sep, ITR-6 by 31 Oct, statutory and tax audits, transfer-pricing if applicable, GST, TDS. Board minutes, statutory registers, and Section 185/186/188 compliance are operational hotspots.
Conversion pathways
Public Ltd (Section 14 — alteration of articles + special resolution), LLP (Section 56 — generally not tax-neutral unless Section 47(xiiib) conditions met), OPC (limited cases under Rule 6)
Our team's take
The mistake we see most with funded startups is deferring the ESOP pool allocation until Series A discussions. By then, dilution math becomes politically fraught and early employees who joined on informal assurances find their promised equity sized down. Carve out a 10-15% ESOP pool in the initial share structure, before the first term sheet lands. It's cheap to adjust upward later; almost impossible to adjust after investors are on the cap table. Same principle for founder vesting — 4 years with a 1-year cliff, agreed in writing upfront.
— CA Siddharth A Shah & Associates · FRN 157167W
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Disclaimer
This tool provides general informational guidance on Indian business entity structures for FY 2026-27 and does not constitute professional advice, an engagement with CA Siddharth A Shah & Associates, or a substitute for personalised consultation with a qualified Chartered Accountant. Recommendations are based on the inputs you provide and may not address your complete legal, tax, or regulatory position.
© CA Siddharth A Shah & Associates · Chartered Accountants · FRN 157167W · Vadodara, Gujarat