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To make a clear choice between different business structures, it is best for an entrepreneur to talk to a business consultant who will guide you on different business models which will help in incorporating the business in the right legal structure and cost effective manner.
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Private Limited Company registration is the most popular legal structure option for businesses in India. A private limited company can have a minimum of two members and a maximum of fifty members. The directors of a private limited company have limited liability to creditors. In a case of default, banks/creditors can only sell company’s assets but not personal assets of directors. If you want to start a company in India then make sure your company is registered as Company Registration should be your first priority. It is very important to register your company as a registered company have multiple advantages from easy to register to easy to dissolve.
LLP is an alternate Corporate Business vehicle that provides the benefits of limited liability ( one partner is not responsible or liable for another partners misconduct or negligence) and allows its members the flexibility of organising their internal structure as a partnership based on a mutually arrived agreement.
LLP is one of the easiest types of companies to embed and manage in India. Ease of incorporation and simple compliance procedures have made LLPs a preferred choice among small businesses and professionals.
Public Limited Company is a business entity which offers its shares to the public or whose securities are traded in the stock market. Such companies can raise substantial capital through the issue of shares to the general public. Minimum three Directors, seven shareholders and a registered office are required to incorporate a Public Limited Company in India. In a Public Limited Company, the members have to follow strict compliances as compared to a Private Limited Company. If you want to start a Public Limited Company, then you have landed on the right platform. This piece of information will give comprehensive knowledge about the procedure, eligibility, documents required for Public Limited Company Registration.
Section 2(62) of Companies Act defines a one-person company as a company that has only one person as to its member. So, an OPC is effectively a company that has only one shareholder as its member.
If there is only one promoter/founder, One Person Company (OPC) is the best way to start a company. OPC is one of the significant milestones of the Companies Act, 2013, introduced to encourage self-employment.
An OPC gives the advantage of limited liability to entrepreneurs, whereby the liability of the member will be limited to the unpaid subscription money. This benefit is not available in case of a sole proprietorship.
A partnership is a type of business organization in which two or more people come together to run and operate a Firm in accordance with the conditions and purposes set out in the partnership deed.
Partnership deed is an agreement between the partners in which rights, duties, profitsshares and other obligations of each partner is mentioned.
A Partnership is easy to form, and the compliance is minimal as compared to companies.
A sole proprietorship firm is a type of business entity that is owned, controlled and managed by an individual person. A sole proprietor has complete control and decision-making power over the business.
Sole proprietorship businesses typically require less paperwork and are easier to maintain than partnerships or corporations. The business owner is responsible for the debts and liabilities, and the accounting and record keeping methods are usually simple and straightforward.
In simple words, sole proprietorship is a one man Business organisation.
The term HUF stands for ‘Hindu Undivided Family’ and comprises of all successors of a common male ancestor and includes their wives and unmarried daughters.
A HUF Consists of a Karta, coparceners and members.
Karta manages the entire business and makes the final decision. Normally, the eldest member (Male or Female) of the family takes the position of Karta.
A HUF, as such, can consist of a very large number of members including female members as well as distant blood relatives in the male line.
However, out of this, coparceners are only those males and females who are within 4 degrees of the lineal descendent from the common male ancestor. The relevance of the concept of the coparcener is that only coparceners can ask for partition in property. The other family members; i.e., other than coparceners in the HUF, have no direct claim over HUF property, but can claim only through the coparceners
» Access to 1.3 billion potential customers.
» Availability of cheap and skilled labour.
» Low paid-up capital requirements.
» Attractive tax incentives.
» Low operational costs.
» Business-friendly government’s initiatives.
Yes but subject to conditions specified under different forms of business structure
Yes, business registration is compulsory for all types of business entities except sole proprietorship and partnership firm for whom registration is not mandatory. However, it is advisable to register to avail legal advantage in the eyes of law in case of disputes.
The process to set up a business entity in India is generally the same, regardless of the specific entity structure you select. This process typically involves:
» Selecting a unique trading name for the company.
» Selecting an appropriate business structure.
» Obtaining a Director Identification Number and Digital Signature Certificate.
» Preparing registration documents.
» Registering with the Registrar of Companies/Firms/Local bodies.
» Registering for social security of employees and other business registrations like GST and Income Tax.
» Opening a Bank A/c.
Only the stated entities qualify as a “Startup” for the purpose of Government schemes:-
» Private Limited Company
» Registered Partnership Firm
» Limited Liability Partnership
Further conditions are:
1. Not more than 5 years have passed from the date of its incorporation/ registration.
2. Turnover for any of the financial years has not exceeded ₹ 25 crore.
3. It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
A Sole proprietorship can be converted into:-
» Partnership firm
» One Person Company
»Private Limited company (By acquiring the Sole proprietorship firm)
A Partnership Firm can be converted into:-
» Private Limited Company
One Person Company can be converted into:-
» Private Limited Company
A Private Limited Company can be converted into:-
» One Person Company
» Public Limited Company
In case you are looking to raise equity capital or offer ESOP to your employees in the future, Private Limited Company will be the best suited entity for you. However, if you do not wish to raise equity capital or offer ESOP to the employees, you can opt for a Limited Liability Partnership or a simple Partnership depending on the financial liability or the nature of the business.