Types of Company in India
There are many legal hurdles in doing business in many part of the world so is it in India many Corporate sectors, Business Tycoons so is International company claim that doing business in India is very hard as well as far as it goes for start up procedure,,the simple answer to this question is YES, but can it be simplified the answer is YES.
Now lets see the common hurdles arising during setting up of Company / Business by Indian Company or by any International company who wants to set up company in India step by step.
Just think for a second, most required component to set up business the answer is simple Money so called Capital in accordance to Business plan the common mistake made by any Industrialist is they have good plan best marketing strategies best capital but forget to add hidden cost to it but now what is hidden cost it is something which actually doesn't exist in your account books for which any industrialist might not be prepared for which later on when the project starts adds extra burden to their cost line or capital index.
Now India as simplified its procedure for setting up of Company, and now many Entrepreneurs are taking benefit from it but what this entrepreneurs do they are the start up owners of the company who put their best in putting their effort behind the growth of the company and once company is able to stand and run they raise funds by listing it NSE / BSE to raise working capital as well as expansion of business in all, with around and more than forty types of taxes in India a really big hurdle for start ups. Usually start ups can register their company under 'Partnership, LLP or under Companies act
A great amount of apprehension and curiosity have been flowing around the idea of different business forms that can be taken up by enterprises and start ups in India. However very little is known to the public and hence mislead who are not well versed with it.
Setting up of Business and running the business without hurdle is two different things, as the term itself says how easily one can start up a business in India that is, how many formalities he has to go through or what are the impediments that the investors face while starting up, funding and raising capital. In accordance to index given by world bank every year. One of the impediment investors have always faced while starting and doing any business in India is that procedure is too difficult and generally requires a very long approval process. Unfortunately, India’s ranking on the World Bank’s ‘Ease of Doing Business Index List’ has remained more or less stagnant, in the 130s and 140s, over the last few years in a list of 189 countries. India has been ranked142nd on the Ease of Doing Business Index and 158th on Ease of Starting a Business as said earlier Doing a Business and Starting a Business are two different activities where capital flow is at large. And it is a delight for the investors as once company is stablised and there is a profit margin the promoters or owners of the company to raise capital issue IPO / Shares where investors come into picture. The key highlight and object of this scheme intiated by Government of India is to make it easier to do business in India and to facilitate ‘make in India’. The government is taking several steps to bring India into the top ranks.
Steps initiated by Government of Indian for simplifying procedure for setting up business in India.
Government of India as introduced INC - 29 to simplify registration of company in India. INC- ( Integrated Incorporation form as merged process of getting DIN ( Director Identification Number ), Name Approval and Incorporation application into one single process which reduces time taken to start a business in India. Earlier eight forms had to be filled which is merged into one which means if document as no rectification the entire process will take just forty eight hours.
Partnership firm LLP Company
Now India as simplified its procedure for setting up of Company, and now many Entrepreneurs are taking benefit from it but what this entrepreneurs do they are the start up owners of the company who put their best in putting their effort behind the growth of the company and once company is able to stand and run they raise funds by listing it NSE / BSE to raise working capital as well as expansion of business in all, with around and more than forty types of taxes in India a really big hurdle for start ups. Usually start ups can register their company under 'Partnership, LLP or under Companies act
A great amount of apprehension and curiosity have been flowing around the idea of different business forms that can be taken up by enterprises and start ups in India. However very little is known to the public and hence mislead who are not well versed with it.
Setting up of Business and running the business without hurdle is two different things, as the term itself says how easily one can start up a business in India that is, how many formalities he has to go through or what are the impediments that the investors face while starting up, funding and raising capital. In accordance to index given by world bank every year. One of the impediment investors have always faced while starting and doing any business in India is that procedure is too difficult and generally requires a very long approval process. Unfortunately, India’s ranking on the World Bank’s ‘Ease of Doing Business Index List’ has remained more or less stagnant, in the 130s and 140s, over the last few years in a list of 189 countries. India has been ranked142nd on the Ease of Doing Business Index and 158th on Ease of Starting a Business as said earlier Doing a Business and Starting a Business are two different activities where capital flow is at large. And it is a delight for the investors as once company is stablised and there is a profit margin the promoters or owners of the company to raise capital issue IPO / Shares where investors come into picture. The key highlight and object of this scheme intiated by Government of India is to make it easier to do business in India and to facilitate ‘make in India’. The government is taking several steps to bring India into the top ranks.
Steps initiated by Government of Indian for simplifying procedure for setting up business in India.
Government of India as introduced INC - 29 to simplify registration of company in India. INC- ( Integrated Incorporation form as merged process of getting DIN ( Director Identification Number ), Name Approval and Incorporation application into one single process which reduces time taken to start a business in India. Earlier eight forms had to be filled which is merged into one which means if document as no rectification the entire process will take just forty eight hours.
Partnership firm LLP Company
Advantage Disadvantage
Partnership firm miscellaneous Cost for formation is very less compared to that of LLP Transferability of Ownership is not possible at all Cost of formation is very less Foreign nationals alone cannot form company.
Audit
is not mandatory ( but tax audit is required as per Income Tax Act)
Reputation of the firm is based on goodwill of the partners and indeed how good they can get accustomed in the firm. No requirements of statutory meetings to be convened Transferability of
Ownership is not at all possible but with prior intimation and acknowledgement of all the concerned partners to the firm.
Statutory compliances are
very less Liability of partners Is unlimited and hence will affect their
personal wealth Partners are free to enter into any contract with the any other company during their ongoing business transaction when all the concerned partners to the firm give their consent for the same.
Every partner is responsible for act of other partners and that of the firm Audit is not mandatory( but tax audit is required as per Income Tax Act) Liability of partners Is unlimited and hence will affect their personal wealth
Every partner is responsible for act of other partners and that of the firm.
Every partner is responsible for act of other partners and that of the firm Audit is not mandatory( but tax audit is required as per Income Tax Act) Liability of partners Is unlimited and hence will affect their personal wealth
LLP Transferability of ownership is easier than that in Partnership firm where ownership is not transferable at all Formation cost is high compared to that of partnership firms Cost of formation is very less Foreign nationals alone cannot form company
More reputation among public since goverened by statutory act LLP act 2008 Audit is mandatory for LLPs' having turn over greater than Rs.40 Lacs or contribution less than Rs.25 Lacs. No requirements of statutory meetings as in the case of companies Transferability of Ownership is not easy since governed by LLP Act
The good think about this type of business is liability of shareholders/members is limited and hence will not affect their personal wealth. Partners are free to enter into any contract with the LLP Reputation of companies Is High among public because of its stringent compliances.
Partners of company will not be held responsible for any act of other partners. Audit is not mandatory for LLPs' having turn over less than Rs.40 Lacs or contribution less than Rs.25 Lacs LLP can be formed for profit motive only.No LLPs' like Section 25 companies can be formed.
Very Less Statutory compliances -
Only two designated partners need to obtain DPIN rather than for all directors in case of a company -
No restriction on the maximum number of persons in LLP.
In India, there are three main types of business structures that can be formed:
1. Sole Proprietorship
2. Partnership
3. Company
1. Sole Proprietorship
Sole Proprietorship is the simplest form of starting business, where business is registered in name of One Person (Individual) which is less cumbersome process. All the losses, liability, profit & gains are attributable to Individual. The sole proprietorship firm name can be unique or in the name of individual, this depends upon his choice as he is the only one who shall be responsible for profits as well as loss arising during the course of business. As the matter of its registration, individual not to need its registration but for opening of bank Account registration is necessary. Individual can register his Proprietorship Firm according to nature of his business. For example, if he is selling goods then he must register in State VAT (Sale Tax) or if he proving Services then he register in Service tax. Otherwise he may opt for Shop & Establishment registration when the numbers of employee is kept around eighteen to twenty when exceeds this limit Provident Fund, Gratuity, Workmen's Compensation act gets attracted.
2. Partnership Firm
If there are more than one person involved in the business then we must go for Partnership firm or Company.
Partnership firm can be created by three methods:
a. Normal Partnership Deed.
b. Registered Partnership Firm under current State law.
c. Limited Liability Partnership.
But the procedure and the Documents and Agreements pertaining to the said changes as per requirements of the Person intending to start business by adopting any of the above method:
If we adopt for "a." then all the partner just need to make a partnership deed on stamp paper by paying stamp duty as per state law and notarized the same and start business. On the basis of Partnership Deed, one can apply for PAN CARD for Partnership Firm. This creates a separate Legal Entity different from Partner.
If we adopt for “b” then we must follow same procedure as mentioned in above “option a” but difference is that we must register this partnership deed under state registration. This option is quite much complex and involves huge time and money. It is not mandatory to register a partnership, but if registered, legal complications and delays can be avoided during disputes.
If we adopt for “c” then we have to register partnership firm according to LLP Act, 2008. In this option Partnership Firm is registered with Ministry of Corporate Affairs of India. Once the Firm is registered it can put LLP in the end of firm name. For eg. ABC LLP. If we open www.mca.gov.in then there is detail procedure related to registration. This is new concept in India but day by day LLP firms’ increases. There is main difference between this LLP and Traditional Partnership Firms is that, In LLP Partners liability are limited according to their Contribution and One partner is not responsible for act of other Partner but in Traditional Partnership Firms ALL partner is liability are unlimited.
3. Company
Company can be of following types Private Limited Company and Public Limited Company. There is minimum requirement of two directors in case of private limited and 3 directors in public limited. In this Business Structure all founder willing to invest their money becomes share holder and Directors. Company is Separate Legal Entity, this means that Company can buy sell anything in his name. Here the Owners are called Share Holders and they hold shares in lieu of their contribution. Companies are registered under Companies Act, 2013 with Registrar of Companies. So in the future if their company incurs any debts or liabilities, the co-founders are not liable. Members in a private limited company can leave or join without any restrictions. Death, bankruptcy or withdrawal of any of the members does not stop the functioning of the company.
If they want investors like, angel/venture capital/private equity on board, they can raise capital
by selling their shares but this is possible in the case of Public
Limited Companies.
Overall, private limited companies provide transparency at all levels for a starting a company and helps the clients or any other person in dealing with Company.
There is quite longer procedure for forming a company for more detail you can go for http://mca.gov.in/ Some key point in this procedure is as follows:-
Step 1: Apply A DIN(Director Identification Number)
Step 2: Approval of Name
Step 3: File MOA & AOA and other forms like form 1, 18,32
Step 4: Once approved a certificate of Incorporation will be issued.
Some Useful Links :
1] http://mca.gov.in/
2] http://www.ipindia.nic.in/
3] http://foodlicensing.fssai.gov.in
4] http://www.makeinindia.com/
5] www.worldbank.org/
6] http://pib.nic.in/archieve/others/2015/mar/d2015031208.pdf
7] http://pib.nic.in/newsite/PrintRelease.aspx?relid=116935
8] http://indiainbusiness.nic.in/newdesign/index.php?param=newsdetail/11455
9]http://www.business-standard.com/article/pf/10-taxes-you-should-know-about-114041100175_1.html
1. Sole Proprietorship
2. Partnership
3. Company
1. Sole Proprietorship
Sole Proprietorship is the simplest form of starting business, where business is registered in name of One Person (Individual) which is less cumbersome process. All the losses, liability, profit & gains are attributable to Individual. The sole proprietorship firm name can be unique or in the name of individual, this depends upon his choice as he is the only one who shall be responsible for profits as well as loss arising during the course of business. As the matter of its registration, individual not to need its registration but for opening of bank Account registration is necessary. Individual can register his Proprietorship Firm according to nature of his business. For example, if he is selling goods then he must register in State VAT (Sale Tax) or if he proving Services then he register in Service tax. Otherwise he may opt for Shop & Establishment registration when the numbers of employee is kept around eighteen to twenty when exceeds this limit Provident Fund, Gratuity, Workmen's Compensation act gets attracted.
2. Partnership Firm
If there are more than one person involved in the business then we must go for Partnership firm or Company.
Partnership firm can be created by three methods:
a. Normal Partnership Deed.
b. Registered Partnership Firm under current State law.
c. Limited Liability Partnership.
But the procedure and the Documents and Agreements pertaining to the said changes as per requirements of the Person intending to start business by adopting any of the above method:
If we adopt for "a." then all the partner just need to make a partnership deed on stamp paper by paying stamp duty as per state law and notarized the same and start business. On the basis of Partnership Deed, one can apply for PAN CARD for Partnership Firm. This creates a separate Legal Entity different from Partner.
If we adopt for “b” then we must follow same procedure as mentioned in above “option a” but difference is that we must register this partnership deed under state registration. This option is quite much complex and involves huge time and money. It is not mandatory to register a partnership, but if registered, legal complications and delays can be avoided during disputes.
If we adopt for “c” then we have to register partnership firm according to LLP Act, 2008. In this option Partnership Firm is registered with Ministry of Corporate Affairs of India. Once the Firm is registered it can put LLP in the end of firm name. For eg. ABC LLP. If we open www.mca.gov.in then there is detail procedure related to registration. This is new concept in India but day by day LLP firms’ increases. There is main difference between this LLP and Traditional Partnership Firms is that, In LLP Partners liability are limited according to their Contribution and One partner is not responsible for act of other Partner but in Traditional Partnership Firms ALL partner is liability are unlimited.
3. Company
Company can be of following types Private Limited Company and Public Limited Company. There is minimum requirement of two directors in case of private limited and 3 directors in public limited. In this Business Structure all founder willing to invest their money becomes share holder and Directors. Company is Separate Legal Entity, this means that Company can buy sell anything in his name. Here the Owners are called Share Holders and they hold shares in lieu of their contribution. Companies are registered under Companies Act, 2013 with Registrar of Companies. So in the future if their company incurs any debts or liabilities, the co-founders are not liable. Members in a private limited company can leave or join without any restrictions. Death, bankruptcy or withdrawal of any of the members does not stop the functioning of the company.
Company High reputation among public because of stringent compliances audit is mandatory. Foreign nationals alone can form company Formation cost is high.
Liability of shareholders/members is limited and hence will not affect their personal wealth Formation cost is high Transferability of Ownership is easy Statutory meetings has to be convened as per companies act 2013.
Liability of shareholders/members is limited and hence will not affect their personal wealth Formation cost is high Transferability of Ownership is easy Statutory meetings has to be convened as per companies act 2013.
Overall, private limited companies provide transparency at all levels for a starting a company and helps the clients or any other person in dealing with Company.
There is quite longer procedure for forming a company for more detail you can go for http://mca.gov.in/ Some key point in this procedure is as follows:-
Step 1: Apply A DIN(Director Identification Number)
Step 2: Approval of Name
Step 3: File MOA & AOA and other forms like form 1, 18,32
Step 4: Once approved a certificate of Incorporation will be issued.
Some Useful Links :
1] http://mca.gov.in/
2] http://www.ipindia.nic.in/
3] http://foodlicensing.fssai.gov.in
4] http://www.makeinindia.com/
5] www.worldbank.org/
6] http://pib.nic.in/archieve/others/2015/mar/d2015031208.pdf
7] http://pib.nic.in/newsite/PrintRelease.aspx?relid=116935
8] http://indiainbusiness.nic.in/newdesign/index.php?param=newsdetail/11455
9]http://www.business-standard.com/article/pf/10-taxes-you-should-know-about-114041100175_1.html
