Hello Friends, as per worldwide survey data, approx 85-90% startup closed in the first 5 Years of their opening. The main reason for their failure is no proper strategy planning before starting their business and no control over cost after starting a business. Today, I am going to elaborate on the topic ‘How to start your Startup in Testing Phase’.

India, the fastest growing economy of the world, having a lot of potentials to start a new business and if you plan and execute business strategy properly, you can build a very good business within a short span of time. Many youngsters have very unique Idea, which has very huge potential to get success in the future but failed due to failure in the execution of the Business Plan and lost control over Initial Set up & Operational Cost.

In India, many Youngsters are planning to start their startup but got confused under which constitution they will start their business. Where they Incorporate a Private Limited Company or Partnership Firm or Proprietorship Firm. Now I am going to discuss these different business formats along with Their Cost-Effectiveness.

Proprietorship Firm: If you have no business family background and not having good knowledge about how to run a business and your business is also in Hit & Try stage, this is the most favorable business format. In this Business Constitution, entry and exit from the Market are very Easy with the least compliance and Taxation Cost.

By Just Taking GST Registration, you can start your business. In this form compliance cost is the very minimum which primary condition is at the time of starting of business. In the initial stage of your business, if your Setup and Operational cost are minimum, then there is a high probability that your business can run in a long way. Along with this, In taxation matter also, it is very beneficial at the starting phase because in this case, you have to pay Income Tax according to slab rates. If you are not able to run your business then it is very easy to exit from the Market.

Partnership Firm: 2 or More Person can create a partnership Firm. Firstly, they have to create a partnership deed and then apply for PAN Allotment, after which they can open their current account and starts their business. The Main drawback of Partnership firm is that, if there is no proper understanding between the partners then there are very high chances that, after some time their mutual interest starts conflicting and business has to suffer due to their conflict. So, it is suggested that proper clarification must be entered in Partnership deed on all matters due to which possible conflict may arise in the future and the way of the solution in such a situation.

The second drawback is the taxation aspect, in case of partnership Firm taxation rate @ 30% plus Cess, which is even more than the Corporate taxation rate. These factors must be considered before forming a Partnership Firm.

Company Incorporation: This form is mostly adopted by Startup’s but due to a lack of proper knowledge and guidance they regret at later stage. The main pain area is its compliance part. In India, Limited companies have to do the most compliance parts and exit from this format is also difficult.

Further, the taxation rate also varies from 15% to 30% plus cess. So it is suggested that kindly make a proper analysis of Cost and Compliance before stating of new business.

Disclaimer: This blog is for the purpose of information and shall not be treated as a solicitation in any manner and for any other purpose whatsoever.  Readers are requested to verify the contents at their end before relying on the same.

The Author can be reached at mail shivsharma786@gmail.com and Mobile/Whats app – 9911303737.

Author Bio

Qualification: CA in Practice
Company: Shiv Kumar Sharma & Associates
Location: Delhi, New Delhi, IN
Member Since: 03 Dec 2018 | Total Posts: 21
My Self CA. Shiv Kumar Sharma. I am a member of "The Institute of Chartered Accountants of India" since 2012. I have Qualified my B.Com (H) in 2010 And Cleared CS- Executive Exam in June 2013. Currently, I am in Practice and dealing in Direct and Indirect taxation along with ROC Compliances. View Full Profile

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