Well Began Is Half Done

Over the years, setting up a company in India has become increasingly seamless and hassle-free. Various Government-led initiatives have helped simplify the process of incorporating a company in India. The ease of doing business in India was never this high.

However, entrepreneurs and enterprises often need assistance in identifying the type of company they should incorporate. This critical decision is influenced by various aspects like the nature of business, its goals, expansion plans, hierarchy, resources available, operating model, geography, etc.

Deciding the Right Company Structure

The first and the most common question faced by any new business is deciding the corporate structure and type of entity to be incorporated. This step has widespread consequences throughout the life of the entity and has significant implications for the tax structure and compliance requirements.

A carefully planned company structure is forward looking and scalable. It lends flexibility to operations, allows efficient tax planning, and facilitates fund raising and expansion initiatives.

Key Considerations/ Deciding Factors for Type of Entity

  • Nature of activity and business (manufacturing/ trading/ service sector, etc.)
  • Area of operations (Geographical area/ online client base, etc.)
  • Method/ sources for fund raising
  • Future growth/ expansion plan

Common Forms of Business Entities in India

  • Company
  • Limited Liability Partnership
  • Partnership Firms
  • Sole Proprietorship

Pvt Ltd or Partnership or LLP?

Here is a short comparative analysis that highlights the various features and benefits of the three types of company structures

Particulars Company LLP Partnership
Governing Law The Companies Act, 2013 Limited Liability Partnership Act, 2008 Indian Partnership Act, 1932
Liability of Owners Limited Liability of Shareholders Limited Liability of Partners Unlimited Liability of Partners
Cost of Incorporation Highest among the three types of business entities in India Lower than Company Incorporation and more than Partnership Lowest among the three types of business entities in India
Shareholding and Ownership vs Management Ownership is with shareholders, but they do not normally participate in management Partners are the owners and handle the management Partners are the owners and handle the management
Compliance Highest compliance requirement Lesser than companies and more than Partnership Least compliance involved
Audit Company Audit is Compulsory No concept of company audit but annual accounts to be certified No compliance required under Company Audit
Time for Incorporation Lengthy process and requires highest time frame Simpler process and requires lesser time Simple and quick incorporation. Registration can be done subsequently
Dividend Distribution Tax Applicable Not applicable Not applicable
Talk to us

If you are planning to start a company in India or are looking for assistance for setting up a business in India, feel free to contact us Company incorporation experts at V. Purohit & Associates can help you identify the most efficient form of business entity for your operations.

We are a new-age financial accounting company, that upholds age-old values and principles of Chartered Accountancy. We offer a fairly-differentiated set of services, tailored to specific business goals and challenges.