Selecting the Business Structure
To work legally, in India, every business has to subscribe itself. The process of company registration starts by deciding the structure than it. By selecting the proper structure, a company can:
Meet targets set easily.
Operate at its highest efficiency.
A Business Structure – the Vital Necessity from it
The structure of an corporation determines two essential factors:
The filing of Income Tax returns.
The compliances that must be adhered to.
To provide a clearer picture take this situation:
A business registered as being a company has to file taxes returns along with annual returns to the Registrar of Companies. On the other hand, a firm registered like a sole proprietorship merely has got to file income tax returns. Moreover, a business’s financial books need should be audited once a year which means extra expenses of:
Tax filing authorities.
Another example of how an enterprise composition is going to influence the company is:
Some structures being a PLC or LLP have the image of being investor-friendly since they’re separate legal entities. It signifies that a business which hopes to obtain a monetary backup later on would fare better like a PLC or LLP. If the owner chooses to register as a sole proprietor, he or she may face issues costly for outside investors.
Essentially, it means consider many factors before electing the company structure since they impact the venture ultimately.
Four Primary Business Structures in India
The options operator has when deciding occurance of business are:
One Person Company allots just one individual since the sole-proprietor of the firm. This sort of structure is perfect for an organization that has one owner or promoter. It was introduced in 2013.
Limited Liability Partnership has multiple owner. Called partners, you will find there’s restriction around the liability they need to bear. It is equal on the contribution they made. The LLP is a separate legal entity.
Private Limited Company is and a separate legal entity from the creator. The most common kind of structure, it has directors and shareholders. The firm considers these as employees.
Public Limited Company even offers a separate legal existence, and just like an LLP, the liability of their members is bound to their shares. This structure is formed by “a voluntary association of members.”
A Business Structure – How to Select the Right One While Applying a Company Registration Online
To pick the right choice of your business structure, ask the subsequent questions.
What will be the number of owners of the business?
An OPC is ideal when anyone is adding the total initial capital. An LLP or possibly a Private Ltd. Co. could be better suited for companies that have 2 or more owners and tend to be looking for further investment by new entities.
Does the original investment customize the structure?
Yes, it can influence the decision. For example, owners who don’t need a substantial investment with the starting can select:
A Hindu Undivided Family.
Entrepreneurs who will be sure to recoup compliance and setup cost can pick:
Private Limited Company.
How much liability might be borne?
Structures like PLC and LLP have a very clause for restricted liability. It indicates that in case there’s a default of loans the members will only repay the amount equal to:
Value of shares held.
In other structures for example partnership, HUF, and sole-proprietor, the liability does not have any limit. They members or owners have to repay the whole cost which can put personal assets at risk.
What will be the applicable tax rates of the business enterprise structures?
For an entity registered as a business or partnership, a flat tax rate of 30% does apply. For HUF and sole-proprietorship, the slab rates applied are standard.
Will others be investing in the organization?
Any business that hopes to get investments from vc’s or other parties should register it being a Private Limited company or LLP. They are measured as trusted entities and therefore easier to acquire financial backup.
The Process to Registering a New Business
A new company Registration or startup in India can be easily registered easily online. The new process was incorporated from the Ministry of Corporate Affairs many years back. The basic steps that need to be taken to register a small business are:
Get a Digital Signature Certificate, also referred to as DSC.
Get a Director Identification Number, also called DIN.
Accurately add the New User Registration form, also called as eFrom.
Submit the eForm.
The company is now registered and able to work in India legally.
It is obvious that to perform a legitimate business in the country registering it’s mandatory. While the process has been significantly simplified these days, it’s something which includes no scope for errors.