Business Registration

CS GARIMA GOYAL 23 Aug 2021 1,374 Views 0 comment Print CA, CS, CMA | Articles

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TO START A NEW BUSINESS, NO. OF QUESTION COME IN OUR MIND WHICH NEED TO KNOW BEFORE STARTING A BUSINESS AND TO GROW YOUR BUSINESS WITH LAW AND COMPLIANCE ANS ANSWERS TO ALL THAT QUESTIONS IN BELOW TABLE.

BASIS	Sole Proprietorship	Partnership Firm	Limited Liability Partnership (LLP)	Private Limited Company
Minimum Person involved	Only one person can start the business	2 Partners Maximum 20	2 Partners Unlimited No. of Partners	2 Director and 2 shareholders (both person can be same or different) Maximum: 200 person
Legal existence	No separate existence	No separate existence	Separate Legal Entity	Separate Legal Entity
Name of Entity	No security of name, any name of your choice but it is not reserved i.e., any one can use that name.	No security of name, any name of your choice but it is not reserved i.e., any one can use that name.	Name is secured and unique or reserved by Roc i.e., no outsider use same name for their business Word “LLP” add	Name is secured and unique or reserved by Roc i.e., no outsider use same name for their business Word “Pvt Ltd” add
Management & ownership	Manage by proprietor and owned by proprietor i.e. 100% control in hands of Proprietor.	Partners	Partners	Manage by Directors and Ownership hold by Shareholders
Liability	Proprietor is liable for all the act done under proprietorship.	Partners Liability Unlimited & they are Jointly Liable i.e. partners are personally liable for the Liability of Firm	Partners are not personally liable for the liability of company. Limited upto the contribution of Partners	Directors and shareholder are not personally liable for the liability of company. Limited Liability ie. Upto share capital of Promoters
Tax Rate	Income earned under firm will be taxed in hand of Proprietor under the slab rate of individual.	Flat @30% Separate Pan	Flat @30% Separate Pan	@22%, 25%, 30% based on turnover Separate Pan

ALL THAT QUESTIONS IN BELOW TABLE.

Basis	Sole Proprietorship	Partnership Firm	Limited Liability Partnership (LLP)	Private Limited Company
Audit	Statutory Audit:- Not Required Tax Audit:- depend upon turnover	Statutory Audit:- Not Required Tax Audit:- depend upon turnover	Statutory Audit Not mandatory Except turnover exceed Rs.40 lakhs or contribution exceed Rs.25 lakhs in any financial year. Tax Audit:- depend upon turnover	Statutory Audit:- Mandatory Tax Audit:- depend upon turnover
Governing Documents	NA	Partnership deed	LLP Deed	MOA AOA of company
Compliance	Very low compliance as only ITR need to be file annually	Low Compliance as they need to file ITR mandatory	Annually 2forms are mandatory to file with Roc and ITR is also file	Quite few forms need to be file by company yearly with ITR & balance sheet and Audit report
Fund raising from VC	Very less possibility	Less possibility	Better possibility	High possibility
Credit Worthiness of organization	Less	Less	Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company	Due to Stringent Compliances & disclosures under various laws, Companies enjoys high degree of creditworthiness.
Ideal for	Only one person want initiate his idea with small amount of Funds	Two or more person involve in business and Partners want to separate business income and personal income	No high capital investment but entity grown; mostly service oriented entity much interested	High Turnover and High risk involved in business then to minimize the risk and liability; to raise funds; totally separate entity
Registration & set up cost or time	Very Less	Less	Moderate	Medium