Doing business in India requires one to select a type of business company. In India one can choose from five different types of legal entities to conduct business. These include Sole Proprietorship, Partnership Firm, Limited Liability Partnership, Private Limited Company and Public Limited Company. The choice of 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
This is the most easy business entity set up 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 several 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 applicable. 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 individual another. However, assets of those firm may be sold from one person diverse. Proprietors of sole proprietorship firms have unlimited business liability. This mean that owners’ personal assets could 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 be subject to maximum of 20 partners. A partnership deed is prepared that details the amount of capital each partner will contribute on 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 in accordance with The Indian Partnership Act. A partnership is also permitted 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 a partner. The partnership doesn’t really have its own legal standing although applied for to insure Permanent Account Number (PAN) is used on the partnership. Partners of the firm have unlimited business liabilities which means their personal assets can be attached to 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 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 most likely is not 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 guidelines.
Limited Liability Partnership
Limited Liability Partnership (LLP) firm is 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 an LLP is proscribed to the extent of his/her purchase of 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. Someone 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 similar to a C-Corporation in north america. Private Limited Company allows its owners to join to company shares. On subscribing to shares, pet owners (members) become shareholders of the company. A private Limited Clients are a separate legal entity both must taxation and also liability. The individual liability of the shareholders is proscribed to their share finances. A private limited company could be formed by registering corporation name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Article of Association are positioned and signed by the promoters (initial shareholders) with the company. All of these then submitted to the Registrar along with applicable registration fees. Such company get between 2 to 50 members. To tend the day-to-day activities with the company, Directors are appointed by the Shareholders. An exclusive Company has more compliance burden assigned a Partnership and LLP. For example, the Board of Directors must meet every quarter and looking after annual general meeting of Shareholders and Directors should be called. Accounts of the company must be prepared in accordance with Tax Act and also Companies Undertaking. 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 the positive side, Shareholders of any Company are able to turn without affecting the operational or legal standing for the company. Generally Venture Capital investors prefer to invest in businesses are usually Private Companies since it allows great degree of separation between ownership and processes.
Public Limited Liability Partnerhsip Registration Online India Company
Public Limited Company will be a Private Company however difference being that regarding shareholders of a Public Limited Company could be unlimited along with 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 business to trade its shares freely through the stock exchange. Such a company requires more public disclosures and compliance from the 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 an Private Company, a Public Limited Company is also an unbiased legal person, its existence is not affected coming from the death, retirement or insolvency of some of its investors.