This is the only genuine decision in setting a label up. Everything else is paperwork with one correct answer; this one has three defensible answers and the right one depends on you.
What actually separates them
Traditional partnership firm. Every partner is liable jointly and severally for the acts of the firm done while they are a partner. That is unlimited personal liability, and it extends to acts of your fellow partners as well as your own. Simple to form and to run.
Limited Liability Partnership. A separate legal entity. The LLP is liable to the full extent of its assets, but a partner’s liability is limited to their agreed contribution, and no partner is liable for another partner’s independent or unauthorised acts. Governance is by contractual agreement between the partners. It needs at least two partners with no upper limit, and at least two designated partners of whom at least one must be resident in India. It is often described as a hybrid of a company and a partnership.
Private limited company. Also a separate entity with limited liability, but its internal governance is regulated by statute rather than set by agreement, and it carries the separation of management from ownership that neither partnership form has.
The descriptions above are drawn from the Ministry of Corporate Affairs’ own published material on the nature of an LLP and the liability of partners. We have deliberately not linked it: the MCA pages carrying that material were returning “Access Denied” when we last checked, and a link that fails a reader is worse than none. Search the MCA site directly for the current text.
Everything after this point is our own experience of setting one up, not a statement of law, we are a music label, not advisors.
What it changes for a label specifically
Liability exposure. A label signs distribution agreements, takes assignments of rights, and warrants that it owns what it releases. Those warranties are where liability actually arises in this business. In a traditional partnership that exposure reaches the partners personally.
Compliance load. Simplicity has a real value when there are two of you and no employees. Corporate forms bring filing obligations that do not pause because you had a quiet year.
How you look to counterparties. Every application asks for the entity type, IMI’s registrant form has a tick-box for it, IPRS records it against the membership. All three forms are accepted; the question is what suits you, not what they will take.
Bringing people in. If you expect to add partners, take investment, or split ownership from management, that pushes toward the corporate forms. If it is two people who intend to stay two people, it does not.
What we did, and the honest caveat
We set up as a partnership firm, and our paperwork throughout (the deed, the memberships, the filings) reflects that. It suited two partners running a small catalogue with a low compliance appetite.
That is not a recommendation. We are a music label, not advisors, and we are not in a position to tell you what fits your risk or your tax position. What we can say is that it is much easier to decide once at the start than to migrate later: changing form means new registrations, and revisiting every membership, agreement and filing that names the old entity, with a catalogue attached to it.
Talk to a chartered accountant or a company secretary before you form anything. It is one conversation and it is the cheapest part of the whole exercise.
Next: the order to do it all in.