Established in the year 2016, we are an emerging chartered accountancy firm based in Bengaluru rendering comprehensive professional services which include audit, management consultancy, tax consultancy, accounting services and secretarial services.

Quote of the Day: "Greatness comes by doing a few small and smart things each and every day... it comes from taking little steps, consistently"

Tuesday, 30 May 2017

Choosing the right Form of Business

Choosing the right business entity allows an entrepreneur to reduce liability exposure, minimize taxes, and ensure that the business can be financed and run efficiently. It also provides business owners with a mechanism for ensuring that the business operations will continue, rather than being automatically terminated, upon the death of an owner. Formalizing the business also clarifies the ownership of all participants in the venture.
When choosing a business entity, you should consider:
(1) the degree to which your personal assets are at risk from liabilities arising from your business;
(2) how to best pursue tax advantages and avoid multiple layers of taxation;
(3) the ability to attract potential investors;
(4) the ability to offer ownership interests to key employees; and
(5) the costs of operating and maintaining the business entity.

Comparative Study:
Features
Sole Proprietorship
Partnership
Limited Liability Partnership
Private Limited Company
Starting up
No registration required
Registration is optional
Mandatory registration
Mandatory Registration
Business Name
No approval required. Should not infringe trademark or copyright
No approval required. Should not infringe trademark or copyright
Approval required prior to incorporation
Approval required prior to incorporation
Legal Status
Not a legal entity
Not a separate legal entity
Separate legal entity
Separate legal entity
Foreign Nationals
Not allowed
Not allowed
Allowed. Min 1 resident Designated partner needed
Allowed
Persons
Min: 1, Max: 1
Min: 2, Max: 20
Min: 2, Max: No Limit
Min: 2, Max: 50
Repatriation
Not allowed
Not allowed
Not allowed
Allowed
Charter Document
None
Partnership Deed
LLP Agreement
Memorandum of Association (MoA) and Articles of Association (AoA)
Business Licenses
Applicable as per business requirements
Applicable as per business requirements
Applicable as per business requirements
Applicable as per business requirements
Validity
Till death of Owner
Dissolved on death of a partner. Can be dissolved at the will of all partners or even one partner can give notice for dissolving.
Perpetual succession
Perpetual succession
Registering Authority
None
Registrar of Firms
Registrar of Limited Liability Partnerships, MCA
Registrar of Companies, MCA
Governing Act
None
The Indian Partnership Act, 1932
The LLP Act, 2008
The Companies Act, 2013
Compliance Requirements
Low
Low
Moderate
High
Income Tax Rates
Individual rates
30%
30%
25-30%
Profit Sharing
Taxable
Exempt from tax
Exempt from tax
Taxable
Liability
Unlimited. Personal property is also covered
Unlimited. Personal property is also covered
Limited upto contribution in LLP (except in case of Fraud)
Limited upto extent of shares hold (except in case of Fraud)
Capacity to Sue
Individual level
As a Firm (in case of registered firms). Individually/ Collectively (in case of not registered firms)
As a Firm
As a Company
Market Reputation
Low
Low
Moderate
High
Winding up/ Dissolution
Easy
Easy
Prescribed process to be followed
Prescribed process to be followed
Preetham Shetty and Co. offers a Cost effective & Easy Business Registration Services packages for its Clients with in Bengaluru. For more info contact info@preethamandco.com

1 comment:

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