TO START A NEW BUSINESS, NO. OF QUESTION COME IN OUR MIND WHICH NEED TO KNOW BEFORE STARTING A BUSINESS AND TO GROW YOUR BUSINESS WITH LAW AND COMPLIANCE ANS ANSWERS TO ALL THAT QUESTIONS IN BELOW TABLE.
BASIS
Sole Proprietorship
Partnership Firm
Limited Liability Partnership (LLP)
Private Limited Company
Minimum Person involved
Only one person can start the business
2 Partners Maximum 20
2 Partners Unlimited No. of Partners
2 Director and 2 shareholders (both person can be same or different)Maximum: 200 person
Legal existence
No separate existence
No separate existence
Separate Legal Entity
Separate Legal Entity
Name of Entity
No security of name, any name of your choice but it is not reserved i.e., any one can use that name.
No security of name, any name of your choice but it is not reserved i.e., any one can use that name.
Name is secured and unique or reserved by Roc i.e., no outsider use same name for their businessWord “LLP” add
Name is secured and unique or reserved by Roc i.e., no outsider use same name for their businessWord “Pvt Ltd” add
Management & ownership
Manage by proprietor and owned by proprietor i.e. 100% control in hands of Proprietor.
Partners
Partners
Manage by Directors and Ownership hold by Shareholders
Liability
Proprietor is liable for all the act done under proprietorship.
Partners Liability Unlimited & they are Jointly Liablei.e. partners are personally liable for the Liability of Firm
Partners are not personally liable for the liability of company.Limited upto the contribution of Partners
Directors and shareholder are not personally liable for the liability of company.Limited Liability ie. Upto share capital of Promoters
Tax Rate
Income earned under firm will be taxed in hand of Proprietor under the slab rate of individual.
Flat @30%Separate Pan
Flat @30%Separate Pan
@22%, 25%, 30% based on turnoverSeparate Pan
Basis
Sole Proprietorship
Partnership Firm
Limited Liability Partnership (LLP)
Private Limited Company
Audit
Statutory Audit:- Not Required Tax Audit:- depend upon turnover
Statutory Audit:- Not Required Tax Audit:- depend upon turnover
Statutory Audit Not mandatory Except turnover exceed Rs.40 lakhs or contribution exceed Rs.25 lakhs in any financial year.Tax Audit:- depend upon turnover
Statutory Audit:- MandatoryTax Audit:- depend upon turnover
Governing Documents
NA
Partnership deed
LLP Deed
MOA AOA of company
Compliance
Very low compliance as only ITR need to be file annually
Low Compliance as they need to file ITR mandatory
Annually 2 forms are mandatory to file with Roc and ITR is also file
Quite few forms need to be file by company yearly with ITR & balance sheet and Audit report
Fund raising from VC
Very less possibility
Less possibility
Better possibility
High possibility
Credit Worthiness of organization
Less
Less
Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company
Due to Stringent Compliances & disclosures under various laws, Companies enjoys high degree of creditworthiness.
Ideal for
Only one person want initiate his idea with small amount of Funds
Two or more person involve in business and Partners want to separate business income and personal income
No high capital investment but entity grown; mostly service oriented entity much interested
High Turnover and High risk involved in business then to minimize the risk and liability; to raise funds; totally separate entity