Home Business Tips Features and Advantages of Various Business Entities
Features and Advantages of Various Business Entities

Features and Advantages of Various Business Entities

0
0

Features and Advantages of Various Business Entities

When beginning a new firm, one of the first legal decisions an entrepreneur makes is to choose a business entity. With the passage of the Limited Liability Partnership Act and the Companies Act of 2013, there are now more options for business entities. As a result, it is critical for the Entrepreneur or Promoter to grasp the benefits and drawbacks of each company organisation before selecting the best one. Few For-Profit structures, such as a proprietorship, partnership, limited liability partnership, and private limited company, are suitable for most entrepreneurs. Proprietorship vs Partnership vs LLP vs Private Limited Company are the types of entities we are comparing in this article.

 

Features Proprietorship Partnership LLP Private Limited Company
Registration Proprietorship does not require any legal registration. There are two types of partnerships: registered and unregistered. It is not necessary to register your partnership. Partnership is governed by the Partnership Act of 1932 if it is registered. The Limited Liability Partnership Act of 2008 will be used to register LLPs with the Ministry of Corporate Affairs. Under the Companies Act of 2013, a private limited company will be registered with the MCA or the Ministry of Corporate Affairs.
Name of the Entity The Proprietorship might be named after the Promoter’s choosing. It is not required to obtain permission before using a name; nonetheless, trademarked names should be avoided. The Partnership might take on the name chosen by the Promoters. It is not required to obtain permission before using a name; nonetheless, trademarked names should be avoided. The Promoter’s proposed name must be authorised by the Registrar of Companies. Only names that are not identical or similar to those of another business or LLP, as well as names that are not objectionable or unlawful, would be permitted. The entity’s name will include the terms “Limited Liability Partnership” or “LLP” at the end. The Promoter’s proposed name must be authorised by the Registrar of Companies. Only names that are not identical or similar to those of another business or LLP, as well as names that are not objectionable or unlawful, would be permitted. The entity’s name will conclude with the words “Private Limited Company.”
Legal Status of the Entity The promoter is personally accountable for the Proprietorship’s liabilities since the proprietorship is not recognised as a distinct legal organisation. The promoters are individually accountable for the partnership’s liabilities since the partnership is not recognised as a separate legal entity. The LLP Act of 2008 defines a limited liability partnership as a separate legal organisation. A LLP’s partners are not individually accountable for the LLP’s obligations. The Companies Act of 2013 defines a private limited company as a separate legal entity. A Private Limited Company’s Directors and Shareholders are not individually accountable for the company’s debts.
Liability of Members The proprietor has limitless responsibility and is accountable for all of the proprietorship’s responsibilities. Partners have limitless responsibility and are accountable for the Partnership’s responsibilities. Partners are only accountable to the level of their contribution to the LLP and have limited liability. Shareholders have limited responsibility and are only responsible up to the value of their shares.
Minimum Number of Members A single person can be a member of the group. To form a partnership, you’ll need at least two people. To form an LLP, you’ll need at least two people. To form a Private Limited Company, you’ll need at least two people.
Maximum Number of Members Only one individual may be a member. There may only be a maximum of 20 partners. A limited liability partnership (LLP) can have an infinite number of partners. The maximum number of shareholders or members in a Private Limited Company is 200.
Foreign Ownership Starting a Proprietorship is not permitted for foreigners. Foreigners are prohibited from forming a partnership. Foreigners can invest in a limited liability partnership (LLP) only with Reserve Bank of India and Foreign Investment Promotion Board (FIPB) authorisation. In most areas, foreigners are permitted to participate in a Private Limited Company using the Automatic Approval procedure.
Transferability It is not transferable. It is not transferable. The ownership can be transferred. Ownership transferring can be done by way of the transferring of share.
Existence A Proprietorship business’s survival is contingent on the Proprietor. The Partners are responsible for the Partnership’s survival. Due to the death of a partner, the relationship may be at risk of breakup. The existence of an LLP is not contingent on the presence of its partners. Only voluntarily or by order of the Company Law Board may it be dissolved. A Private Limited Company’s existence is not contingent on the presence of Directors or Shareholders. Only voluntarily or by Regulatory Authorities may it be disbanded.
Taxation Taxed as an individual, depending on the Proprietor’s total income. Profits from a partnership are taxed at 30% plus any relevant surcharges and cess. Profits from an LLP are taxed at 30% plus any relevant surcharges and cess. Profits from a private limited company are taxed at 30% plus any relevant surcharges and cess.
Annual Meetings There are no legal requirements to hold yearly statutory meetings. There are no legal requirements to hold yearly statutory meetings. There are no legal requirements to hold yearly statutory meetings. Board Meetings and General Meetings should be conducted on a periodic basis.
Annual Filings There are no obligations to file an annual report with the Registrar of Companies. The Proprietorship’s income must be reported on an income tax return. There are no filing obligations with the Registrar of Companies for yearly reports. For the Partnership, an income tax return is required. Each year, LLPs must file an Annual Statement of Accounts and Solvency as well as an Annual Return with the Registrar. The LLP must also file an income tax return. Every year, the Registrar of Companies requires Private Limited Companies to produce Annual Accounts and Annual Returns. The Private Limited Company must also file an income tax return.

 

 

LEAVE YOUR COMMENT

Your email address will not be published.

Please fill this form and we'll get back to you as soon as possible!


 

Easy Payment Options Available
No Spam. No Sharing. 100% Confidentiality