If you are planning to start a new business, it’s crucial to have the right business structure. Everything from Taxation, Compliances, and Regulations that you will have to follow depends on it.
When it comes to business structure in India, there are multiple options available as per the law. Every business is unique in its self and hence needs. You can choose any of them that best suits your business.
I will be discussing multiple forms of companies that you can choose from here.
So let’s begin.
Various types of Business Registration in India
Take a look at various types of registration.
Sole proprietorship
This is one of the simplest and common forms of companies that exist in India. A single individual sets up, runs, and manages the Sole Proprietorship business.
The business and business owners are considered as a single entity under this type of firm. So there are unlimited liabilities for the business owner.
All the taxation, accounting, and bookkeeping have to be done in the name of the business owner. As there are no partners or shareholders, all the profit and losses are born by the owner.
No separate registration is required for this type of firm.
Partnership firm
Partnership firms are governed by the Indian Partnership Act, 1931. A mutually signed Partnership deed establishes this type of firm by the partners. There is an explicit agreement between them about their shares, their positions, and their responsibilities in the firm.
Although there is no need for any registration for establishing a partnership firm, a registered Partnership deed acts as governing documents. But we would suggest getting your Partnership firm registered to avail of multiple benefits.
There are specific requirements that must be fulfilled to get registered as a Partnership firm.
Let’s take a look at these requirements
- A registered Partnership deal signed by all the partners is mandatory.
- The firm applying for this registration must have a registered office in India.
- The minimum number of partners can be two and the maximum can be 20.
Limited Liability Partnership (LLP)
This is instead a new concept in India. It has a separate legal status as per the Companies Act 2013. It’s a hybrid structure that offers the flexibility of a Partnership firm and limited liabilities of a Private ltd company.
In this type of registration, the liability of every shareholder is in the proportion of the number of shares it holds. This flexibility provides the necessary protection to all the shareholders from future legal issues.
There are specific requirements that must be fulfilled to get registered as an LLP firm.
Let’s take a look at these requirements
There should be a minimum of two partners. There is no maximum limit for the number of partners.
All partners can be corporate bodies except one individual partner.
Out of all the registered partners, one partner should be an Indian resident.
As each partner makes some contribution, there is no need for shared capital.
Minimum Authorized Capital should be INR 1 lakh.
Private Ltd Company
The companies are registered under the Companies Act, 2013. Any small businesses that are required to register as a private business entity can choose this type of registration.
The most important feature of this registration is the distribution of responsibilities and liabilities. Here, all shareholders divide liability amongst them. This reduces their personal weaknesses and protects them from any legal troubles.
In this type of registration, personal & business assets are treated differently, offering better protection to the personal assets of shareholders. The total value of assets of such companies is the total assets of the shareholders.
Remember, this is not a public limited company, and hence the share of a private limited company cannot be traded publicly.
Specific requirements must be fulfilled to get registered as a Private Limited firm.
Let’s take a look at these requirements
- The minimum number of Directors must be two, and the maximum number of Directors can be 15.
- The minimum number of shareholders must be two, and the full numbers of shareholders can be 200.
- At least one of the directors must be an Indian resident.
- The firm applying for this registration must have a registered office in India.
- The minimum authorized capital should be 1 lakh.
One Person Company (OPC)
This is an excellent option for small business owners and entrepreneurs. It can be seen as a hybrid structure of Sole Proprietorship and a Private Ltd Company.
This type of registration offers the benefit of total control over the company to the owner and protection from liabilities. It simplifies the management and decision-making process as there is only one decision-maker.
There are specific requirements that must be fulfilled to get registered as a One Person Company firm.
Let’s take a look at these requirements
- The Promoter must be a natural-born citizen of India.
- The appointment of a nominee is mandatory during registration.
- The minimum authorized capital should be INR 1 lakh
- It the turnover of such a company rises above INR 2 crores or the paid-up capital shoots above INR 50 lakh, it should be converted into a Private Limited Company
- Financial businesses cannot opt for this registration.
Public Limited Company
As the name implies, the shares of these companies can be traded publically. Registered under the Companies Act 2013, there is no limitation on the number of shares that can be traded on the stock market.
SEBI (Securities and Exchange Bureau) keeps an eye on the trading of these shares. Every person with the shares becomes the official shareholder of the company.
There are individual requirements that must be fulfilled to get registered as a
Let’s take a look at these requirements
- Such companies have to obtain the Certificate of Registration from the Registrar of Companies (ROC)
- The minimum number of directors should be three, and one of them must be a resident of India.
- The minimum number of shareholders must be seven.
- The firm applying for this registration must have a registered office in India.
- The minimum authorized capital should be INR 5 lakh.
Final thougts
India’s rules and regulations offer a variety of business structures to choose from. Depending on the type of business you are doing and at what stage your business, you can choose anyone. These different structures boost the ease of doing business in India and help in scaling-up the Indian Economy.
Probal Consulting Group is a leading Taxation, Accounting and Compliance firm that helps individuals, MSMEs and other businesses manage their accounting, taxation regulatory compliance affordably.
