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

Business Registration

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

 

Author Bio

Qualification: CS
Company: GAMISH ADVISORS LLP
Location: New Delhi, New Delhi, IN
Member Since: 07 Sep 2020 | Total Posts: 3

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