Business Startup
What is a Sole Proprietorship?
A sole proprietorship is a business structure in which a single individual owns and operates without the involvement of other individuals or partners. A sole proprietorship is the simplest form of business and is quite common among solo entrepreneurs and small businesses.
The owner has complete control and decision-making authority over the business. A sole proprietorship has no legal distinction between the owner and the business entity.
Advantages & Disadvantages
Advantages
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Minimal legal formalities and compliance requirements
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complete control as a sole owner
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No annual financial statements or public disclosure
Disadvantages
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No separate recognition
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Personal liability, limited funds
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Limited capital and cash flow
What is a Partnership Firm?
A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.
There are several types of partnership arrangements. In a general partnership, all partners share liabilities and profits equally. In other types of partnerships, profits may be shared in different percentages or some partners may have limited liability . Partnerships may also have a “silent partner,” in which one party is not involved in the day-to-day operations of the business.
Advantages & Disadvantages
Advantages
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Lower setup cost
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No income tax on the partner’s shared profits
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Partners share business risk
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Flexible partnership agreement
Disadvantages
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Time-consuming decision-making
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Unlimited partner liability
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Risk of instability
What Is a Limited Liability Partnership (LLP)?
A limited liability partnership (LLP) is a flexible legal and tax entity where every partner has a limited personal liability for the debts or claims of the partnership.
Partners of an LLP can benefit from economies of scale . by working together while also reducing their liability for the actions of other partners. As with any legal entity, it is important that you check the laws in your nation (and your state) before making decisions. In short, check with a lawyer first. The chances are good that they have firsthand experience with an LLP.
Advantages & Disadvantages
Advantages
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Lower Registration Fees
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Protection of Personal Liability
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Flexibility in Management Structure
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No Mandatary Audits
Disadvantages
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Profit can Not be Retained
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Administrative Burdens
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Limitations in capital Raising
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Public Disclosure
What Is a Private Limited Company?
A private limited company is a privately held business entity held by private stakeholders. The liability arrangement, in this case, is that of a limited partnership, wherein the liability of a shareholder extends only up to the number of shares held by them.
Private limited company definition as per Section 2 (68) of the Companies Act, 2013 is A Company having a minimum paid-up share capital as may be prescribed and which, by its articles
Advantages & Disadvantages
Advantages
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Limited liability to shareholders
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Raise capital by issuing shares
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Save tax on R&D expenses, depreciation, and other business expenses
Disadvantages
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High setup cost
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Complex compliance requirements
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Limited shareholder control