Chosing the most appropriate form of business becomes critical for giving the right start and direction to your business. We help you chose the most suitable business given your business conditions, taxation point of view and technical viability.
In these changing scenarios and increasing reporting requirements, we help you analyse the business form. A brief introduction and comparative analysis of different features is given for your reference.
Choose the Right Entity type for your business...
Private Limited Company
A Private Limited Company is the most preferred form of business for Startup India, It is easy to incorporate and manage. Angel investor and any other long-term investor insist on a Company for making the investment. Further options for issuing ESOP is available in a company.
Limited Liability Partnership
Limited Liability Partnership is an advancement over the traditional partnership firms, with some characteristic features of a company. The process of incorporation of an LLP is simple and quick. However, its is not suitable for a highly scalable business owing to fund raising restrictions on LLP.
One Person Company
Now you can form a company with just one person as the shareholder as well as the director. The sole member must appoint a nominee. However, an OPC will need to be converted into a private/public company in case its capital crosses 50 Lacs, and the turnover exceeds 2 Crores
General Partnership
Its an old form of business. You can start a partnership firm by just signing a partnership deed. Even its registration is not mandatory.
Sole Proprietorship
It is for small business with a low budget, like small shops may open their store as a proprietorship concern. It’s a one-person show where all profits and loss goes to the proprietor alone. Proprietorship business cannot be registered as such. However, all other registration may apply
Features | Sole Proprietorship | General Partnership | Limited Liability Partnership (LLP) | Private Limited Company (PLC) |
Liability | Owner personally liable for business debts. | Partners have unlimited liability and jointly and severally liable for their acts | Liability limited to contribution and protection from negligence, misdeeds of other partners | Liability of shareholder limited to share capital invested |
Taxation | Owner reports profit or loss on his or her personal tax return. | Owner (partners) reports profit or loss on his or her personal tax returns. | Tax benefits over PLC | Flat 30% rate applicable with MAT and DDT provisions also applicable |
Formation | Simple and inexpensive to create and operate. No filing necessary. | Simple and inexpensive to create and operate. No filing necessary. | Suitable mainly for companies that invest in real estate. | More expensive to create than partnership or sole proprietorship. |
Scalability | Only by investing own funds | Partners capital required | Partners capital required | Highly scalable with equity from investors/ shareholders |
Compliance Requirements | Very low | Very low | Quite lower than PLC. Exemptions from ROC and Income Tax | More compliance than Sole proprietorship and partnership in terms of ROC and Income tax filings |
Start up cost | Very low | Very low | Much lesser than PLC | Most expensive of above 3 |