Many times startups need to borrow money and take things on credit. In case of normal Partnerships, Partners personal savings and property would be at risk incase business is not able to repay its loans. In a, LLP, OPC or private limited company, only investment in business is lost, personal assets of the directors are safe.
To be eligible under Startup India Scheme the Startup must be registered as a Company under the Companies Act 2013 or LLP.
LLP or Pvt. Ltd. company enjoys wide options to raise funds through bank loans, Angel Investors, Venture Capitalists, in comparison to normal Partnership firm or proprietorship.
Investors love to invest in Private Limited companies as it is well structured and less strings attached. Most important it is very easy to exit from a private limited company.
For startups putting together a team and keeping them for long time is a challenge, due to confidence attached to private limited structure, it is easy to hire people as well motivate them with corporate designations and stock options.
Private Ltd. is easy to sell, very less documentation and less cost is involved in selling a Pvt. Ltd. company.
