The different Types of Business Entities in India
Doing business in India requires one to choose a type of business body. 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 Liability Partnerhsip Registration in India Online Company. The choice on the business entity is dependent on various factors such as taxation, ownership liabilities, compliance burden, investment options and exit strategy.
Lets look at best man entities in detail
Sole Proprietorship
This is the most easy business entity to determine in India. It doesn’t 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 some other government departments are required only on a need basis. For example, if ever 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 in order to person another. However, assets of those firm may be sold from one person diverse. Proprietors of sole proprietorship firms infinite business liability. This is the reason why owners’ personal assets can be attached to meet business liability claims.
Partnership
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 amount of capital each partner will contribute towards partnership. It also details how much profit/loss each partner will share. Working partners of the partnership are also allowed to draw a salary reported by The Indian Partnership Act. A partnership is also permitted to purchase assets in its name. However web-sites such assets are 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 an outside Permanent Account Number (PAN) is allotted to the partnership. Partners of the firm have unlimited business liabilities which means their personal assets can be belonging 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 is almost certainly 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 are not treated as legal document. However, this doesn’t prevent either the Partnership firm from suing someone or someone suing the partnership firm in a court of guidelines.
Limited Liability Partnership
Limited Liability Partnership (LLP) firm can be 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 policy cover. The maximum liability of each partner within LLP is proscribed to the extent of his/her investment in the firm. 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 might be converted to a Limited Liability Partnership.
Private Limited Company
A Private Limited Company in India is much 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 of this company. A private Limited Company is a separate legal entity both when considering taxation as well as liability. The personal liability within the shareholders is fixed to their share monetary. A private limited company could be formed by registering an additional name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Item of Association are positioned and signed by the promoters (initial shareholders) of the company. Of those ingredients then submitted to the Registrar along with applicable registration fees. Such company can have between 2 to 50 members. To look after the day-to-day activities for this company, Directors are appointed by the Shareholders. A non-public Company has more compliance burden if compared to the 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 must be called. Accounts of enterprise must be ready in accordance with Tax Act as well as Companies 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 go up without affecting the operational or legal standing of this company. Generally Venture Capital investors in order to invest in businesses that are Private Companies since permits great greater level separation between ownership and operations.
Public Limited Company
Public Limited Company is a Private Company however difference being that regarding shareholders connected with Public Limited Company could be unlimited using a minimum seven members. A Public Company can be either listed in a currency markets or remain unlisted. A Listed Public Limited Company allows shareholders of business to trade its shares freely throughout the stock convert. 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 associated with Private Company, a Public Limited Clients are also an unbiased legal person, its existence is not affected coming from the death, retirement or insolvency of any of its investors.
