When a person decides to start a business, there are various options such as
The choice of any particular legal structure would impact mainly the capital structure, ease of doing business, its scalability, compliance aspects and long term vision of the business.
Disadvantages of sole proprietorship
Unlimited liability partnership
Limited Liability Partnership
The advantage is that the partners have a limited liability. There are also fewer compliances as compared to a Company and the cost of formation is also less. FDI is permitted in LLPs through automatic route in sectors where 100% FDI is allowed.
Private Limited Company
A Minimum number of 2 shareholders and 2 directors are required to form a Pvt ltd Company.( however the directors and the shareholders can be the same person) A big advantage is the liability of the members is limited to the amount contributed towards its share. There are certain steps to be followed for incorporation of a Company including obtaining a digital signature and a director identification number.
For the Assessment Year 2016-17 and 2017-18, a domestic company is taxable at 30%. However, for Assessment year 2017-18, tax rate is 29% if turnover or gross receipt of the company does not exceed Rs. 5 crore.
Before opting for any particular form of business, an understanding of the advantages, disadvantages, legal compliances and method of accounting that would be followed would help in making it a success.
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