India is now living at the heart of globalization and industrialization. Presently, India is one of the prominent countries that offers positive global-structure environment. The growing interest among the investors from all over the world, the growing opportunity of a prosperous business, percipience of the World Wide Web among almost every smaller city and the increasing awareness of learning and capability of venturing into different business is giving India the spotlight as one of the inviting and profitable center of global investment.
While being a part of such a hub offering both opportunity and functionality, starting up a business needs proper structuring. While India is brimming with so many possibilities and new ideas, starting up a business does not only about strategies and the courage to execute it or accepting all the risks; choosing the appropriate legal structure is one of the most crucial steps of business startup.
If we consider the business structure, there are several interdependent and inter-related factors, such as the volume of the business, the size of the market, the nature of the business, the financial requirements etc. The amount of risk and liabilities and the amount of control and privacy are also essential factors influencing a business startup. However, the function of a legal structure to any business start up in India is the undeniable base.
As it is very crucial to understand the full range of options available to startup a business, the legal entities that any startup business in India can choose from are described here.
A solo-partnership is one of the oldest models of business structure and perhaps the easiest way of starting a business and requires a different registration. Under this entity, all the assets of the company are considered as the property of the proprietor. Here, no separate tax returns are filed, as the income of the company and the proprietor is considered as one.
A partnership involves two or more people who agree to share both the profits and loss faced by the company. Registering under the Indian Partnership Act, 1932, the partnership does not bear the tax issues because there can be usually some tax advantages by reporting your share of profits and losses on your personal tax return.
Public Limited Company
Starting up as a public limited company, registration under The Indian Companies Act of 1956, a PLC should have a minimum of 7 members and the company has a separate legal existence, except its members. Such companies are actually run by the board of directors and it is not the members who take the decisions. This type of ownership minimizes the risk factor.
Private Limited Company
The concept of a private limited company is also defined by The Companies Act of 1956. However, here the members are left with a very limited liability, the setting up of this type of companies are easier compared to the public limited companies.
Limited Liability Company
Here, the partners have a limited liability in the actual shares of the company; however, they can directly oversee the business directly. This kind of entity hybrids the best features of partnerships and corporations.
One Person Company
A one person company is a private business organization that has only one director and one shareholder. The main benefit of a one person company is that one person can claim all its shares.
Also, a business can be a not-for-profit entity as well, i.e. a company registered under Section 25, Indian Companies Act, 1956. The legal structure that you select for your company is one of the most important steps in a new business startup. It is the legal business structure that decides the amount of paper works a business will need and the tax consequences it’ll have to face.
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