Doing business in India requires one to choose a type of business company. In India one can choose from five different types of legal entities to conduct web business. These include Sole Proprietorship, Partnership Firm, Limited Liability Partnership, Private Limited Company and Public Limited Company. The choice belonging to the business entity is an issue of various factors such as taxation, ownership liabilities, compliance burden, investment options and exit strategy.
Lets look at organizations entities in detail
This is the most easy business entity set up in India. It doesn’t involve its own Permanent Account Number (PAN) and the PAN of the owner (Proprietor) acts as the PAN for the Sole Proprietorship firm. Registrations with various government departments are required only on a need basis. For example, when the business provides services and repair tax is applicable, then registration with the service tax department is forced. Same is true for other indirect taxes like VAT, Excise many others. It is not possible to transfer the ownership of a Sole Proprietorship from one individual another. However, assets of this firm may be sold from one person 1. Proprietors of sole proprietorship firms infinite business liability. This signifies that owners’ personal assets can be attached to meet business liability claims.
A partnership firm in India is governed by The Partnership Act, 1932. Two or more persons can form a Partnership be subject to maximum of 20 partners. A partnership deed is prepared that details the amount of capital each partner will contribute towards the partnership. It also details how much profit/loss each partner will share. Working partners of the partnership are also allowed to draw a salary businesses The Indian Partnership Act. A partnership is also in order to purchase assets in its name. However internet websites such assets are the partners of the firm. A partnership may/may not be dissolved in case of death of any partner. The partnership doesn’t really have its own legal standing although a unique Permanent Account Number (PAN) is allotted to the partnership. Partners of the firm have unlimited business liabilities which means their personal assets can be attached with meet business liability claims of the partnership firm. Also losses incurred brought about by act of negligence of one partner is liable for payment from every partner of the partnership firm.
A partnership firm may or may not registered with Registrar of Firms (ROF). Registration provides some legal protection to partners in case they have differences between them. Until a partnership deed is registered with the ROF, it aren’t treated as legal document. However, it doesn’t prevent either the Partnership firm from suing someone or someone suing the partnership firm in the court of law.
Limited Liability Partnership
Limited Liability Partnership (LLP) firm is a new regarding business entity established by an Act of the Parliament. LLP Incorproation Online in India allows members to retain flexibility of ownership (similar to Partnership Firm) but provides a liability program. The maximum liability of each partner in an LLP is bound to the extent of his/her investment in the tone. An LLP has its own Permanent Account Number (PAN) and legal status. LLP also provides protection to partners for illegal or unauthorized actions taken by other partners of the LLP. A person or Public Limited Company as well as Partnership Firms can be converted into a Limited Liability Partnership.
Private Limited Company
A Private Limited Company in India is much a C-Corporation in the united states. Private Limited Company allows its owners to sign up to company shares. On subscribing to shares, the owners (members) become shareholders belonging to the company. A private Limited Company is a separate legal entity both when considering taxation as well as liability. The individual liability among the shareholders is proscribed to their share cash. A private limited company can be formed by registering corporation name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Article of Association are prepared and signed by the promoters (initial shareholders) of the company. Fundamental essentials then listed in the Registrar along with applicable registration fees. Such company get between 2 to 50 members. To tend to the day-to-day activities within the company, Directors are appointed by the Shareholders. An exclusive Company has more compliance burden when comparing a Partnership and LLP. For example, the Board of Directors must meet every quarter and looking after annual general meeting of Shareholders and Directors must be called. Accounts of enterprise must be prepared in accordance with Tax Act and also Companies Federal act. Also Companies are taxed twice if income is to be distributed to Shareholders. Closing a Private Limited Company in India is a tedious process and requires many formalities to be completed.
One the positive side, Shareholders of such a Company is capable of turning without affecting the operational or legal standing within the company. Generally Venture Capital investors in order to invest in businesses in which Private Companies since it allows great identify separation between ownership and processes.
Public Limited Company
Public Limited Company is a Private Company however difference being that connected with shareholders of a Public Limited Company can be unlimited along with a minimum seven members. A Public Company can be either indexed by a stock exchange or remain unlisted. A Listed Public Limited Company allows shareholders of they to trade its shares freely through the stock convert. Such a company requires more public disclosures and compliance from brand new including appointment of independent directors in the board, public disclosure of books of accounts, cap of salaries of Directors and Owner. As in the case in a Private Company, a Public Limited Clients are also motivated legal person, its existence is not affected by the death, retirement or insolvency of its shareholders.