How to select a business structure while applying for company registration in India?


Let’s take a look at some vital questions every entrepreneur must ask himself before he/she finally chooses upon a business structure.

How many owners/partners, will your industry have?
If you are a single person who owns the entire initial asset required for the business, a  Single Person Company would be ideal for you. On the other hand, if your business has two or more owners and is aggressively seeking investment from other parties a Limited Liability Partnership (LLP) or Private Limited Company would suit you best.  

Should your basic investment determine your choice of business structure?
Yes if you need to pass less initially, it would be wise to go in for a Sole Proprietor, or a HUF or a Partnership. But, if you are definite that you will be able to recover the setup and compliance costs, you can opt for a One Person Company, LLP or a Private Limited Company


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Willingness to bear the entire liability of the industry
Business structures similar to sole proprietors, HUF, and partnership firms have unlimited liability. This means, in case of any defaulting in loans, the entire money will be recovered from the members or partners in the income sharing ratio. The hazard to personal assets is high in these cases.
Whereas, Companies and LLPs have a limited liability section. This means that the liability of its memberships is restricted to the amount of the contribution made by them or the value of shares each member holds.

 Income Tax Rates appropriate to businesses
the profits tax rates applicable to a sole proprietorship and a HUF are the normal slab rates. In the instance of a sole proprietorship, the business income is clubbed with the individual’s other income. But in the case of other entities like partnership and company a tax rate of 30% is applicable.

Plans for getting money after investors
As stated earlier, it is hard to get investments when your business structure is unregistered. Entities similar to LLP and Private Limited Company are trusted when it comes to investment. Make guaranteed you choose the correct structure, seek the help of a skillful so that you register under proper guidance.

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Location: Mumbai, Maharashtra, India

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