Doing business in India requires one to pick a type of business body. In India one can choose from five different types of legal entities to conduct industry. These include Sole Proprietorship, Partnership Firm, Limited Liability Partnerhsip Registration in India Online 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 best man entities in detail
This is the most easy business entity to determine in India. It doesn’t need 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 imperative. 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 in order to person another. However, assets of which firm may be sold from one person 1. Proprietors of sole proprietorship firms have unlimited business liability. This radically, and 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 susceptible 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 businesses The Indian Partnership Act. A partnership is also in order to purchase assets in the name. However the one who owns such assets include the partners of the firm. A partnership may/may not be dissolved in case of death of this partner. The partnership doesn’t really have its own legal standing although a separate Permanent Account Number (PAN) is allotted to the partnership. Partners of the firm have unlimited business liabilities which means their personal assets can be linked 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 your ROF, it may not be treated as legal document. However, this won’t prevent either the Partnership firm from suing someone or someone suing the partnership firm from a court of law.
Limited Liability Partnership
Limited Liability Partnership (LLP) firm is really a new involving 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 cover. The maximum liability of each partner in an LLP is restricted to the extent of his/her purchase of the organisation. 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 personal or Public Limited Company as well as Partnership Firms are permitted to be converted to a Limited Liability Partnership.
Private Limited Company
A Private Limited Company in India is in order to a C-Corporation in the united states. Private Limited Company allows its owners to subscribe to company shares. On subscribing to shares, owners (members) become shareholders of this company. A private Limited Company is a separate legal entity both when considering taxation as well as liability. Individual liability of the shareholders is restricted to their share monetary. A private limited company could be formed by registering the company name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Item of Association have decided and signed by the promoters (initial shareholders) for this company. Usually are all products then published to the Registrar along with applicable registration fees. Such company can have between 2 to 50 members. To care for the day-to-day activities with the company, Directors are appointed by the Shareholders. A private Company has more compliance burden assigned a Partnership and LLP. For example, the Board of Directors must meet every quarter and at least one annual general meeting of Shareholders and Directors end up being called. Accounts of business must prepare in accordance with Income tax Act and also Companies Federal act. Also Companies are taxed twice if earnings 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 associated with Company can change without affecting the operational or legal standing of the company. Generally Venture Capital investors in order to invest in businesses that are Private Companies since permits great a higher separation between ownership and processes.
Public Limited Company
Public Limited Company is a Private Company utilizing difference being that associated with shareholders of the Public Limited Company can be unlimited having a minimum seven members. A Public Company can be either mentioned in a stock market or remain unlisted. A Listed Public Limited Company allows shareholders of they to trade its shares freely close to stock alternate. 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 Boss. As in the case of a Private Company, a Public Limited Company is also an unbiased legal person, its existence is not affected from your death, retirement or insolvency of any one its investors.