Doing business in India requires one to pick a type of business thing. 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 in the business entity is obsessed with various factors such as taxation, ownership liabilities, compliance burden, investment options and exit strategy.
Lets look at all of these businesses entities in detail
This is the most easy business entity to determine in India. It does not have 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, generally if the business provides services and repair tax is applicable, then registration with the service tax department is required. 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 such firm may be sold from one person diverse. 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 prone to maximum of 20 partners. A partnership deed is prepared that details the quantity 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 as per The Indian Partnership Act. A partnership is also allowed to purchase assets in the name. However web pages such assets include 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 other Permanent Account Number (PAN) is used on the partnership. Partners of the firm have unlimited business liabilities which means their personal assets can be connected to 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 be 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 most likely is not treated as legal document. However, it doesn't prevent either the Partnership firm from suing someone or someone suing the partnership firm in a court of policies.
Limited Liability Partnership
Limited Liability Partnership (LLP) firm is a new regarding business entity established by an Act of the Parliament. LLP allows members to retain flexibility of ownership (similar to Partnership Firm) but provides a liability immunity. The maximum liability of each partner inside LLP is proscribed to the extent of his/her investment in the rigid. 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 are permitted to be converted into a Limited Liability Partnership.
Private Limited Company
A Private Limited Company in India is significantly like a C-Corporation in u . s. Private Limited Company allows its owners to subscribe to company shares. On subscribing to shares, owners (members) become shareholders belonging to the company. Somebody Limited Company is a separate legal entity both treated by simply taxation as well as liability. Private liability of this shareholders is limited to their share capital. A private limited company could be formed by registering business name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Article of Association are able and signed by the promoters (initial shareholders) with the company. Fundamental essentials then submitted to the Registrar along with applicable registration fees. Such company possess between 2 to 50 members. To tend to the day-to-day activities within the company, Directors are appointed by the Shareholders. A non-public Company has more compliance burden n comparison to the a Partnership and LLP Formation Online in India. For example, the Board of Directors must meet every quarter and a minumum of one annual general meeting of Shareholders and Directors end up being called. Accounts of the company must prepare in accordance with Tax Act and also Companies Federal act. Also Companies are taxed twice if profits are to be distributed to Shareholders. Closing a Private Limited Company in India is a tedious process and requires many formalities to be completed.
One good side, Shareholders of such a Company are able to turn without affecting the operational or legal standing within the company. Generally Venture Capital investors prefer to invest in businesses in which Private Companies since it allows great greater level separation between ownership and processes.
Public Limited Company
Public Limited Company will be a Private Company with no difference being that associated with shareholders of a typical Public Limited Company can be unlimited using a minimum seven members. A Public Company can be either placed in a stock market or remain unlisted. A Listed Public Limited Company allows shareholders of business to trade its shares freely through the stock alternate. Such a company requires more public disclosures and compliance from brand new including appointment of independent directors throughout the board, public disclosure of books of accounts, cap of salaries of Directors and Boss. As in the case of a Private Company, a Public Limited Clients are also a separate legal person, its existence is not affected from your death, retirement or insolvency of its stakeholders.