Doing business in India requires one to pick a type of business entity. 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 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 numerous government departments are required only on a need basis. For example, in case the business provides services and service tax is applicable, then registration with the service tax department is applicable. Same is true for other indirect taxes like VAT, Excise etc. It is not possible to transfer the ownership of a Sole Proprietorship from one in order to individual another. However, assets of the firm may be sold from one person various. Proprietors of sole proprietorship firms have unlimited business liability. This mean 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 susceptible to maximum of 20 partners. A partnership deed is prepared that details you may capital each partner will contribute into 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 based upon The Indian Partnership Act. A partnership is also allowed to purchase assets in its name. However web pages such assets will be 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 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 connected to meet business liability claims of the partnership firm. Also losses incurred with 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 making use of 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 from a court of legislated rules.
Limited Liability Partnership
Limited Liability Partnership (LLP) firm can be a new type of 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 a great LLP has limitations to the extent of his/her purchase of the set. 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 Online LLP Formation in India. Somebody or Public Limited Company as well as Partnership Firms might be converted into a Limited Liability Partnership.
Private Limited Company
A Private Limited Company in India is much like a C-Corporation in the particular. Private Limited Company allows its owners a subscription to company shares. On subscribing to shares, the owners (members) become shareholders on the company. A private Limited Clients are a separate legal entity both treated by simply taxation as well as liability. Individual liability of this shareholders is fixed to their share funding. A private limited company could be formed by registering business name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Piece of Association are prepared and signed by the promoters (initial shareholders) with the company. These are then submitted to the Registrar along with applicable registration fees. Such company can have between 2 to 50 members. To maintain the day-to-day activities for this company, Directors are appointed by the Shareholders. A personal 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 must be called. Accounts of the company must prepare in accordance with Taxes Act as well as Companies Conduct themselves. 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 good side, Shareholders of such a Company are able to turn 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 greater level separation between ownership and operations.
Public Limited Company
Public Limited Company is related to a Private Company with no difference being that quantity of shareholders connected with Public Limited Company can be unlimited using a minimum seven members. A Public Company can be either indexed by a stock market or remain unlisted. A Listed Public Limited Company allows shareholders of the organization to trade its shares freely throughout the stock exchange. Such a company requires more public disclosures and compliance from federal government including appointment of independent directors within the board, public disclosure of books of accounts, cap of salaries of Directors and Chief executive officer. As in the case associated with 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 some of its stakeholders.