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Posted on April 24, 2021
Learn about the various business structures and registration processes right here with the
Kanakkupillai Team – Your very own Virtual Accountant!
The Start-Up India initiative well-trusted by Indian government has been turning the entrepreneurial tides in economy’s favor. The start-up ecosystem in our nation seems to be at the start of a highly lucrative boom cycle. With such good tidings in sight, there is an obvious increase in the number of new companies getting registered wide across the nation. As important is the decision for folks to start-up a new venture, another equally important factor for them to decide is picking out the right company structure for their business.
1) One Person Company (OPC) :
“One Person Company” is a new concept introduced by the Companies Act 2013 Section 2(62). As the name suggests, a one person company is formed with only one person as its member. It enables a sole-proprietor to carry on his work and still be part of the corporate framework. This works similar to a private limited with much lesser legal compliance. An Individual who is a resident of India can be the director. A nominee is appointed to continue the business in case of director’s demise. A one person company which has an annual turnover more than 2 Crores loses its eligibility to continue as one person company (OPC). Within a period of 180 days it should be converted as a private limited with minimum of two directors and shareholders.
Advantage– Tax holiday for first 3 years under Start-up India Campaign. Higher benefits on depreciation and No tax on dividend distribution.
2) Limited Liability Partnership (LLP) :
A Limited Liability Partnership Registration ( LLP ) is a new corporate body which is just an extended version of a partnership firm. Like a company, LLP stands as a separate entity apart from its partners. An LLP requires a minimum of 2 designated partners. Anyone, who is a citizen of India and runs a business as per law can be registered as an LLP. No partner is liable for an independent misconduct of other partners. If the liability arises due to partner’s misconduct then the liability is unlimited. A statement of accounts should be filed on behalf of LLP every year.
Advantage :– Receives tax benefits on depreciation.
3. Private Limited Company (PLC) :
A Private Limited Company Registration can be done with a minimum of two directors and there is no minimum paid up capital. Shareholders operate their business themselves and directors can be appointed in a company. The main advantage of forming a private limited company is its liability, which is limited to the capital contributed to the company. Each individual is regarded as an employee of the company. The only disadvantage of a private limited company is that an IPO (Initial public offer cannot be made). Also the company’s share transfer is restricted to a considerable extent. If the creditor lose money due to director’s misconduct, then the director’s individual assets are liable in a company.
Advantage :– Tax holiday for first 3 years under Start-up India Campaign. Higher benefits on depreciation.
4) Public Limited Company (PLC) :
Being a Public Limited Company (PLC) is much more complex and is usually reserved for larger companies. To be called a PLC a company must have, amongst other things, more than one director and a trading certificate from Companies House. PLCs can sell their shares on the stock market so anyone can buy them. Whilst it is easier to raise money using this method it also means that the company accounts are in the public domain. The company must also be audited and make certain information available to Companies House. Plus, PLCs can be bought out by other shareholders.