The different Types of Business Entities in India

Doing business in India requires one to pick 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 from the business entity is reliant 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 establish 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, generally if 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 thus. It is not possible to transfer the ownership of a Sole Proprietorship from one in order to individual another. However, assets of which firm may be sold from one person 1. Proprietors of sole proprietorship firms infinite business liability. This mean that 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 be subject to maximum of 20 partners. A partnership deed is prepared that details you may 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 based upon The Indian Partnership Act. A partnership is also allowed to purchase assets in the name. However web-sites such assets will be partners of the firm. A partnership may/may not be dissolved in case of death of partner. The partnership doesn’t really have its own legal standing although other 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 as being a result 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 an issue 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 within a court of statute.

Limited Liability Partnership

Limited Liability Partnership (LLP) firm is often 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 policy cover. The maximum liability of each partner inside LLP has limitations to the extent of his/her purchase of 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 private 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 significantly like a C-Corporation in north america. Private Limited Company allows its owners a subscription to company shares. On subscribing to shares, owners (members) become shareholders in the company. A private Limited Clients are a separate legal entity both must taxation as well as liability. Private liability within the shareholders is limited to their share finances. A private limited company could be formed by registering company name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Actual Association are able and signed by the promoters (initial shareholders) of the company. All of these then published to the Registrar along with applicable registration fees. Such company possess between 2 to 50 members. To maintain the day-to-day activities of the company, Directors are appointed by the Shareholders. A personal Company has more compliance burden when compared to 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 an additional must be ready in accordance with Tax Act and also 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 is capable of turning without affecting the operational or legal standing within the company. Generally Venture Capital investors in order to invest in businesses are usually Private Companies since it allows great a higher separation between ownership and operations.

Public Limited Liability Partnerhsip Registration Online India Company

Public Limited Company is related to a Private Company utilizing difference being that connected with shareholders of a Public Limited Company could be unlimited having a minimum seven members. A Public Company can be either listed in a stock game or remain unlisted. A Listed Public Limited Company allows shareholders of business to trade its shares freely throughout the stock return. 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 Ceo. As in the case in a Private Company, a Public Limited Clients are also motivated legal person, its existence is not affected the particular death, retirement or insolvency of its stakeholders.