BUSINESS STRUCTURES IN INDIA
Before starting any business in India, choosing right type of business structure is very important. The right business structure helps to run business efficiently and meet business requirements. In India, every business must register itself as a part of mandatory legal compliance.
TYPES OF BUSINESS STRUCTURES IN INDIA
Sole Proprietorship is one of the oldest forms of business structure in India. This type of structure is owned and controlled by a single man, therefore it is also known as a one man army. It is basically suited for those businesses which are small in size or have limited investment. The liability of the sole proprietor is limited to the extent of capital contributed by the businessman. As it is run by a single owner, therefore all the profit and loss is shared by that single person only. All the assets and property of the business is owned by the owner himself.
A Partnership is an agreement between two or more persons who come together for a common objective to earn profits. The owners of the partnership business are individually known as partners. Different people of various skills, knowledge, and talent come together to form a business. It is a relation between various partners to share profit as well as loss in the agreed ratio. When it comes to registration of a partnership, it is not mandatory but it is always advisable to register it. When two or more partners come together for a business they make a partnership deed which is a written agreement specifying names of each partner, address, capital invested by each partner and profit sharing ratio.
3.LLP (LIMITED LIABILITY PARTNERSHIP)
Limited liability partnership is a combination of both partnership and corporation. It has the feature of both these forms. As the name suggests partners have limited liability in the company which means that personal assets of the partners are not used for paying off the debts of the company. Nowadays it has become very popular form of business as many entrepreneurs are opting this. There are a number of partners in the firm and hence they are not liable or responsible for others misconduct. Every one is liable for their own acts. All limited liability partnership is governed under the limited liability partnership act of 2008. However in India LLP was introduced in April 2009.
It is a separate legal entity distinct from its owners. It can enter into a contract and acquire property in its name.
4.ONE PERSON COMPANY
The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. One of the biggest advantages of a One Person Company (OPC) is that there can be only one member in a OPC, while a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership (LLP). Similar to a Company, a One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.
Though a One Person Company allows single entrepreneur to operate a corporate entity with limited liability protection, a OPC does have a few limitations. For instance, every One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the company – who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores.. Therefore, it is important for the Entrepreneur to carefully consider the features of a One Person Company prior to incorporation.
5.PRIVATE LIMITED COMPANY
A private limited company is a company which is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them. Shares of Private Limited Company cannot be publically traded.
Private Limited Company can be started with minimum of 2 members and maximum of 200 members. Liability of members or shareholders is limited. These companies have separate legal entity distinct from their own members. Mimimum 2 directors are required out of which atleast one director should be resident in India.
6.PUBLIC LIMITED COMPANY
A Public Limited Company under Company Act 2013 is a company that has limited liability and offers shares to the general public. It’s stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market. A Public Limited Company is strictly regulated and is required to publish its true financial health to its shareholders. The Public Limited Company are required to have minimum paid up capital of Rupess 5 lakh. These companies should have minimum 7 shareholders and minimum 3 directors. Provisions for these companies are very stringent. Public Limited Companies can only invite subscription from public.