A sole proprietorship is a type of enterprise that is owned and run by one natural person and in which there is no legal distinction between the owner and the business entity. The owner is in direct control of all elements and is legally accountable for all the liabilities of such business and this may include debts, loans, loss, etc. Some of its beneficial features are:-
Easy Establishment It is one of the easiest form of business entity to start with minimal formalities. However, after starting up a Proprietorship, it is relatively harder to open a bank account or obtain a payment gateway in the name of the business - since more
Own Funds They can invest their own capital into the business, or may be able to access business loans and/or overdrafts.
Tax Benefit Proprietorship with less than Rs. 3 lakhs of income is not required to pay any income tax, as proprietorship's are taxed as the individual owing the business. However, unlike a company or LLP, a proprietorship cannot enjoy some of the tax deductions, which could potentially increase the tax liability.
Partnership
A partnership is a formal arrangement in which two or more parties cooperate to manage and operate a business. Various partnership arrangements are possible in which all partners might share liabilities and profits equally or some partners may have limited liability. Not every partner is necessarily involved in the management and day-to-day operations of the venture, such as in the case of a "silent partner. Some of its beneficial features are:-
Easy Establishment A Partnership is easy to form as no such legal formalities are involved. Even its registration is optional. However, if the firm is not registered, it will be deprived of certain legal benefits.
Partnership Deed It is a written agreement which will determine the ownership of the firm, profit sharing ratio, rights and responsibilities of each of the Partner. A partnership deed can be registered with the Registrar.
Sharing Responsibility Partnerships bring the benefit of "economy of scale" with the sharing of both responsibility and funding requirements.
Minimizing Your Weaknesses This may come as a shock, but you are not awesome and amazing at everything you do. Entrepreneurs know the key to success is not trying to be amazing at every aspect of business, but figuring out what your biggest strengths are — and how those strengths can help contribute to the business — then find other people (with different strengths) to fill in the gaps.
Limited Liability Partnership
Limited Liability Partnership (LLP) was introduced in India by way of the Limited Liability Partnership Act, 2008. It is a partnership in which some or all partners have limited liabilities. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. With an easy incorporation process and simple compliance formalities, LLP is preferred by Professionals, Micro and Small businesses that are family owned or closely-held. Some of its beneficial features are:-
Separate Legal Entity The LLP and partners are distinct from each other.
Less Restrictions And Compliances Less restrictions and compliances are applicable on LLP as compared to company.
Can Sue And Be Sued A LLP as a legal person can sue in its name and be sued by others. The partners are not liable to be sued for dues against the company.
Audit Not Required A LLP does not require audit if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution. Therefore, LLPs are ideal for startups and small businesses that are just starting their operations and want to have minimal regulatory compliance related formalities.
Company
The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. With notification of Chapter II of the Companies Act, 2013 with effect from 01.04.2014, it is now permitted to incorporate a One Person Company under the provisions of the Companies Act, 2013 and some important features are:-
Ownership of a business can be easily transferred in a company by transferring shares. The signing, filing and transfer of share transfer form and share certificates is sufficient to transfer ownership of a company.
A company being a separate legal person, is unaffected by the death or other departure of any member and continues to be in existence irrespective of the changes in ownership.
OPC can be registered only as a private company which means that all the provisions applicable to private company will be applicable to an OPC, unless otherwise expressly excluded in the Act or rules made there under.
Benefits And Previliges Available To OPC
Retirement by rotation is not applicable.
Total managerial remuneration payable by a one person company, to its directors, including managing director and whole-time director, and its manager in respect of any financial year may exceed eleven percent of the net profits.
Need not to hold annual general meeting.
Limitations Of OPC
OPC cannot be incorporated or converted into Section 8 Company (i.e. company with charitable objects, etc.) or carry out non-banking financial activities, including investment in securities of any body corporate.
A public limited company is a form of business organization that operates as a separate legal entity from its owners. It is formed and owned by shareholders. Shares of a public limited company are listed and traded at a stock exchange market freely. Shareholders of a public limited company are limited to potentially lose only the amount they have paid for the shares they own.
Public Limited Companies requires at least 3 directors, seven members and there is no cap on the maximum number of members. A public limited company has all the advantages of private limited company and the ability to have any number of members, ease in transfer of shareholding and more transparency.
Some basic features of public limited company are:-
Perpetual Succession A company has 'perpetual succession', that is continued or uninterrupted existence until it is legally dissolved. A company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.
Separate Legal Entity Public limited company is a legal entity established under the Companies Act, 2013. Hence, a company has a range of legal capacities including opening of a bank account, hiring of employees, taking on equity or obtaining licenses and more as an independent corporate entity. The members (Shareholders/Directors) of a company have no personal liability to the creditors of a company for company's debts.
Raising Capital Through Public Issue Of Shares The most obvious advantage of being a public limited company is the ability to raise share capital, particularly where the company is listed on a recognised exchange. Since it can sell its shares to the public and anyone is able to invest their money, the capital that can be raised is typically much larger than a private limited company. It’s also possible that having stock listed on an exchange could attract investment from hedge funds, mutual funds and other institutional traders.
Other Finance Opportunities Banks and other financial institutions may be more willing to extend finance to a public limited company, particularly one that is listed. The company could also be in a better position to negotiate favourable interest rates and repayment terms on loans.
Private limited company registration is governed by the Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014. To register a private limited company, a minimum of two members and two directors are required. It is a type of company that offers limited liability, or legal protection for its shareholders but that places certain restrictions on its ownership. These restrictions are defined in the company's bylaws or regulations and are meant to prevent any hostile takeover attempt.
The major ownership restrictions are:-
Shareholders cannot sell or transfer their shares without offering them first to other shareholders for purchase,
Shareholders cannot offer their shares to the general public over a stock exchange, and
The number of shareholders cannot exceed a fixed figure ( maximum 200)
Some basic features of private limited company
Limited Liability The greatest benefit of private limited companies is limited liability. If anything happens to the company, its members are not personally affected; members are only liable for unpaid shares.
Tax Advantages Private limited companies enjoy tax advantages in addition to limited liability. These companies pay corporation tax on their taxable profits and tend to be exempt from higher personal income tax rates.
Owning Property Private Limited Company being an artificial person, can acquire, own, enjoy and alienate, property in its name. The property owned by a company could be machinery, building, intangible assets, land, residential property, factory, etc., No shareholder can make a claim upon the property of the company - as long as the company is a going concern.
Separate Legal Entity Private Limited Company is a legal entity established under the Companies Act,2013. Hence, a company has a range of legal capacities including opening of a bank account, hiring of employees, taking on equity or obtaining licenses and more as an independent corporate entity. The members (Shareholders/Directors) of a company have no personal liability to the creditors of a company for company's debts.
Producer Company is a company registered under the Companies Act 2013 and shall carry on any of the following activities:
(A)Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of members or import of goods or services for their benefit;
(B) Processing including preserving, drying, distilling, brewing, venting, canning and packaging of produce of its members; and
(C)Manufacture, sale or supply of machinery, equipment or consumables mainly to its members.
Over 85% of the Farmers in India are small and marginal farmers with land holdings of less than 2 hectares. This fragmentation in farmers and farm lands, leads to disorganization and it is not viable for Indian farmers to adopt the latest technologies. By organization of these farmers into producer companies, economies of scale can be unlocked and the livelihood of farmers can be improved. Thus the concept of producer company is aimed at empowering farmers by creating clusters of farmers organized as a Producer Company.
Some of its features are:-
Seperate Legal Entity: A producer company is a legal entity established under the Act. Therefore a producer company has wide legal capacity and can own property and also incur debts. The members (Directors) of a producer company have no liability to the creditors of a producer company.
Tax Benefits: The Indian Income Tax Act, 1961(“the IT Act”) specifically exempts tax on agricultural income under section 10(1). However, IT Act does not essentially provide any special benefits or exemptions to producer companies by definition. But subject to the kind of agricultural activity carried out, certain tax benefits can be availed.
Member Benefits : The members will initially receive the value for the produce or products pooled and supplied as the directors may determine. Even they are eligible to receive bonus shares in proportion to their shareholding.
A nidhi company, is one that belongs to the non-banking Indian finance sector and is recognized under section 406 of the Companies act, 2013. They are regulated by Ministry of Corporate Affairs. Reserve Bank of India is empowered to issue directions to them in matters relating to their deposit acceptance activities. Their core business is borrowing and lending money between their members. They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. Nidhi means a company which has been incorporated with the object of developing the habit of thrift and reserve funds amongst its members and also receiving deposits and lending to its members only for their mutual benefit.
Benefits of nidhi company are:-
Limited RBI Regulations: Owing to their non-dealing with the funds of any person other than their members, the regulations imposed upon the Nidhi’s by RBI is limited. These companies follow the Nidhi Rules, 2014 issued by the center in respect of the activities and workings of Nidhi Companies.
Limited Capital Requirement: The Ministry of Corporate Affairs has done away with the minimum capital requirement of INR 5 Lakhs for Nidhis. It is only after Nidhi Rules, 2014, that mandated the infusion of INR 10 lakhs for such companies.
Ease Of Formation: Unlike other NBFCs, Nidhis don’t have to obtain a license from RBI. They just have to incorporate themselves as a public company with the MCA, infuse the required amount of capital as per Nidhi Rules, 2014 and they are all set to go.
When a person or an association of persons proposed to be registered under this Act as a limited company, having object of the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object and intends to apply its profits or other incomes in promoting its object and intend to prohibit to make any payment of dividend to its members.
That company is known as section 8 company
Tax Benefits: Numerous Tax exemptions are provided to Section 8 Companies, specifically to the donors who are contributing to Section 8 Companies, they can claim the Tax exemption against the donation they made to a Section 8 company.
No Minimum Capital Restriction: There is no prescribed limit over section 8 companies for the minimum capital requirement unlike other entities such as public limited, but the capital structure can be altered at any stage as the required for the growth of the company.
Name: Section 8 Companies can be registered with names that contain words like Association, Foundation, Society, Council, Club, Charities, Institute, Academy, Organisation, Federation, Chamber of Commerce, Development and more.