Picking the right company structure for your business is as important as any other business-related activity. The right business structure will allow your enterprise to operate efficiently and meet your required business targets. In India, every business must register themselves as part of the mandatory legal compliance. Before we learn how to register a company, let’s try and understand the types of business structures in India.
Let’s try and understand the types of business structures available in India:
A proprietorship firm can be established and managed by a single person. Only one person runs the business, and it is ideal for small business owners with low investments. The entire control of the business will be with the sole proprietor, who can enjoy the profits, but he/she will also have to bear all the business losses.
Two or more persons enter into a partnership and establish a partnership firm. The partners of the firm equally share the profits derived from the business. They will also have to bear the losses of the firm. The partnership firm is regulated under the Partnership Act, 1932. It is ideal for small businesses run by two or more persons with low investment.
Recently introduced in the year 2013, an OPC is the best way to start a company if there exists only one promoter or owner. It enables a sole proprietor to carry on his work and still be part of the corporate framework. It is registered under the Companies Act, 2013. It is ideal for small businesses who want to raise capital.
An LLP is a separate legal entity where the liabilities of partners are only limited only to their agreed contribution. An LLP is established under the Limited Liability Act, 2008 with the Registrar of Companies (ROC). It has features of both the partnership firm and the company. It is ideal for businesses established by partners who want limited liability.
A PLC in the eyes of the law is regarded as a separate legal entity from its founders. The directors of the company look after the affairs of the company. The shareholders (stakeholders) invest in the company and are part owners. A PLC is registered under the Companies Act, 2013 with the ROC. It is ideal for medium to big businesses who wish to raise capital.
A Public Limited Company is a company established by seven or more members under the Companies Act, 2013. The directors are responsible for the affairs of the company. It has a separate legal existence and the liability of its members are limited to the shares they hold. It is ideal for medium to big businesses who wish to raise capital from the public.
It is important to choose your business structure carefully as your Income Tax Returns will depend on it. While registering your enterprise, remember that each business structure has different levels of compliances that need to be met with. For example, a sole proprietor has to file only an income tax return. However, a company has to file an income tax return as well as annual returns with the Registrar of Companies.
(partners in case of LLP). Any one of the below documents can be submitted as proof of identification:
Pan card
Aadhar card
Driving license
Passport
Proof of address of all the directors and shareholders (partners in case of LLP).
Any one of the below documents can be submitted as address proof:
Latest telephone bill (not older than 2 months)
Latest electricity bill (not older than 2 months)
Bank account statement having address
DIN (DPIN in case of LLP) and DSC of all the directors (partners in case of LLP)
Documents of the Company/LLP
Proof of registered office of the company.
The below documents must be submitted as address proof of the company:
Tenancy/rental agreement between the landlord and company/LLP
Letter or NOC from the landlord of his/her permission to use the office/premises as the LLP’s/company’s registered office.
Sale deed of the company/LLP office premises in the name of the company/LLP
The Memorandum of Association (MoA) which contains the objects of the company for which the company is going to be incorporated and the liability of the members of the company.
The Articles of the Association (AoA) which lays down the by-laws on which the company will operate.
Minimum number of directors/partners, which are as follows:
Minimum of one director for OPC
Minimum of two directors for PLC
Minimum of three for Public Limited Company
Minimum of two partners for LLP
Minimum of one member for OPC
Minimum of two members for PLC
Minimum of seven members for Public Limited Company
DSC for all designated directors/partners.
DIN for all directors of a company/DPIN for all designated partners of LLP.
Name of the company/LLP, which is not similar to any existing name of a company, LLP or trademark.
Authorised capital in case of an OPC, PLC or Private Limited Company.
Capital contribution by the partners of the LLP, in the case of LLP.
MoA and AoA in case of an OPC, PLC or Private Limited Company.
LLP agreement between the partners, in the case of LLP.
Proof of registered office of the company/LLP.
A company registration provides many advantages. A licensed company makes it genuine and enhances the business’ credibility.
Protects against personal obligation, and defends against other threats and losses.
Builds goodwill and also supports more customer attraction
Gives reliable investors bank credits and good investment with ease.
Provides cover of the responsibility to protect the company’s assets
Bigger commitment to wealth and greater stability
Increases the ability to develop and grow large
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