Business Registration Guide
Hey Guys, In India when you start any business then first task is choose the right legal entity or comparison between the each type of the business form. so in this quick guide we compare between Pvt ltd company vs LLP vs OPC vs Partnership Firm vs Proprietorship Firm.
In India, there are 6 type of the legal entity which you have to choose for your business.
a) Private Limited Company Registration
b) Limited Liability Partnership
c) One Person Company
d) Sole Proprietorship Firm
e) Partnership Firm without Registrar of Firms
f) Partnership Firm with Registrar of Firms
So Let’s understand from Startup Point of view about the each legal entity or option for the business registration –
a) Private Limited Company
Requirements :- Need Minimum two Person for the Registration(Even you can also include your any family member on the paperwork if you have no partners)
Costing :- Nearby 11,000/-INR with the Government Charges in most of the states except Punjab, Kerala, and MP.
Advantages :- Easily raise the funds from banks, angel investor and VC Firms. Its is one of the most Popular legal entity in India, India’s 50% Startups or big companies started from Private Limited Company in India.
Recommendation :- If you have the vision to raise the funds & growing startup and need trustworthiness among the clients with the limited liability in the business then must go with the private limited. Remember it is one of the most popular legal entity concepts in India. Even outside India, It’s similar to USA Corporation, so you are able to do the business anywhere in the world.
Reason to avoid :- It is a company so setup costing is high and annual compliance is more as compare to the other entities such as LLP, Partnership firms etc. so sometimes untested ideas or business avoid this legal entity.
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b) Limited Liability Partnership (LLP)
Requirements :- Need Minimum two Person for the Registration(Even you can also include your any family member on the paperwork if you have no partners)
Costing :- Nearby Rs. 9,000/- to 10000/- with the Government Charges and stamp & notarization etc.
Advantages :- Doing the Business with the limited liability and having features of a private limited company in less costing. if you need a legal entity which can give you both advantage of the partnership firm and private limited company then LLP is the best.
Recommendation :- If your budget is less and want to enjoy the Limited Liability with the partners in the business and some features of private limited then LLP is the Best for your startup.
Reason to avoid :- If you want to raise the funds in future or next 1-2 years then must choose private limited company instead of LLP else go for it.
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c) One Person Company
Requirements :- Need 1 Person for the Registration or on the name of any family member.
Costing :- Nearby 10000 INR with the Government Charges in most of the states except Punjab, Kerala, and MP.
Advantage :- It’s similar to the private limited company but no Control of another person in the Business or Company with Limited Liability Feature.
Recommendation :- if you need company legal status as single founder then go with the One Person Company.
Reason to Avoid :- We invest nearby 10000 INR but in future we cannot include a partner in the business so why not go with the private limited company just spending extra more 2000-3000 INR because it’s a one-time investment for your startup
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d) Sole Proprietorship Firm
Requirements :- Need 1 Person for the Registration or on the name of any family member.
Costing :-
Its Cost near around 1500-3000/- INR For the same. if you opt basic proprietorship firm registration then its cost to you 1500/- INR & if you opt with the gst registration then it will be cost 2500/- INR.
Advantage :- Easy to Start and Close with less costing and less compliance to testing your ideas as the single founder.
Recommendation :- if you are testing your idea in the business, you can start with the Sole Proprietorship Firm then on later stage you can convert or Incorporate a new private limited company or another legal entity.
Reason to Avoid:- It’s a simple firm and no limited liability and cannot raise the funds for your new startup.
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e) Partnership Firm Registration without Registrar of Firms
Requirements :- Need Minimum 2 Person for the Registration(Even you can also include your any family member on the paperwork)
Costing :- Nearby Rs. 2,000/- to 4000/- with the Government Charges, Stamp & notarization.
Advantages :- Less Costing and Less Compliance for testing your Ideas.
Recommendation :- If your budget is less and want just test your ideas then you can register a partnership the firm without the registrar of a firm which is the optional thing.
Reason to avoid :- In Less Costing it’s not registered with the Registrar of Firms so you can not file the case against any partner or any third party in the business, another thing it’s a simple firm and taxation is the same as LLP so if a budget does not issue then choose LLP.
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f) Partnership Firm Registration with the Registrar of Firms
Requirements :- Need Min 2 Person for the Registration as you or else you can include your any family member on the paper.
Costing :- Nearby 7000 INR to 8000 INR with the Government Charges & Stamp, Notarization and most important expensive Registrar of Firms.
Advantages :- It’s a best for the Old Family Business where the business structure is very complex on own terms.
Recommendation :- We never recommend for the Partnership Firm with the Registrar of Firms. The reason is Costing is nearby same as LLP then why not choose LLP which is the mixture of the Partnership Firm and Private Limited Company.
Reason to avoid :- When LLP Gives you more advantages in same costing or taxation then why avoid the LLP instead of Partnership Firm with the Registrar of Firms.
