It’s critical to choose the right kind of business structure which complements the business of the company. As the chosen entity will have financial, legal and operational implications. We will be focusing on the three most popular business structures of online company registration in India that are as follows:
Sole Proprietorship:
It’s the simplest form of business where the owner and the business are considered as the same. The online registration available for sole proprietorships are GST registration and MSME registration. Time taken for sole proprietorship registration are 5-7 working days. It is always recommended for sole proprietorships to open a separate bank account as it is better for auditing and accounting purposes. No separate tax return is required to be filed for sole proprietorships as no separate PAN card is required for the proprietorship’s. It’s easy to register and gives the proprietor complete control of the business. It’s a good choice for low risk business and for those who want to implement their business idea before forming a legal structure.
Partnerships:
Partnerships can be unlimited partnerships and the other being Limited liability partnership.
- Partnership require two or more people who agree to enter into a lawful business which they start together by registering the partnership deed wherein the roles, duties, liabilities, procedures, profit and loss ratio are predefined. The management, control and operations rest in the hands of partners or any of them acting on behalf of all the partners. It is always advisable to get the partnership registered to avoid any future disagreements and conflicts.
- Limited Liability Partnership: It’s a newer concept wherein all the partners have limited liability. We can say it’s a combination of benefits derived from partnership and company form of business. Unlike partnership registration LLP registration is mandatory under the LLP Act. This kind of business structure is recommended for the service sector majorly professional consultancy and advisory including CA services.
Company:
Company Incorporation is the most popular form of business structure. Minimum two individuals are required to form a company both can be director and shareholder. Company registration is done with the Ministry of corporate affairs. It enjoys the status of a separate legal entity providing limited liability to its shareholders and is the most recommended business structure. The time taken to for Company registration is 10-12 working days depending upon MCA approval. The online company incorporation is India includes various types of companies:
- One Person Company
- Private Limited Company
- Public Company
- Section 8 company
Related Blog – All you need to know about Company Registration as a startup
Proceeding further one needs to analyse the various factors for deciding the suitable business structure according to their requirements:
- Business Taxes: Income tax, corporate tax, goods and services tax and other tax implications if any.
- Industry: Operations, common practices and specified requirements differ for various industries.
- Liability: Each business structure brings with it a specified/unspecified amount of liability which can extend to personal liability as well.
Keeping in mind all these points choose the right kind of business structure for a successful business.