Based on your business plan, investment requirements, size of capital, and goals/objectives, you need to choose your business structure. A company is a legal entity under section 3 of the companies act of 1956.
The different types of business structures are-
a. Sole proprietorship - This type of business structure is ideal for you if you’re willing to manage and control the entire business by yourself. Some advantages of sole proprietorship are-
1. No government registration or regulatory paperwork is required.
2. Business doesn’t have to comply with any regulations and norms.
3. Income tax
is payable on your income.
4. The profits are completely yours.
The documents required to register a sole proprietorship company are-
1. PAN card.
2. AADHAR card.
3. Bank Account.
4. Proof of office (utility bills or rental agreement).
b. One person company (OPC)- This is a type of company introduced by the Indian Government wherein one member can form a company instead of a minimum of two directors. The incorporated company helps reduce the business owner to reduce liabilities, increase credibility, and avail of tax benefits.
Benefits of OPC-
1. The directors have limited liability.
The OPC has lesser compliance to regulatory requirements and norms.
3. Legal recognition.
4. Easy to control and manage.
How to register an OPC-
1. Digital Signature Certificate (DSC)
2. Director Identification Number (DIN)
3. Apply for Name Approval
4. FIle all Ministry of Corporate Affairs forms.
5. Collect your incorporation certificate.
Documents required for registration-
1. Memorandum of Association (MoA).
2. Articles of Association (AoA).
3. Proof of registered office.
4. Affidavit and consent of director.
5. A declaration the business follows all regulations.
c. Partnership firm- This is a type of business structure wherein two or more partners sign a partnership deed or agreement that contains details about allocation of responsibilities, duties, and profit-sharing.
A partnership deed contains-
1. Name and address of the partners as well as the firm.
2. The date of commencement.
3. How much capital each person has invested in the firm.
4. Profit-sharing ratio as well as how much salary each partner will receive.
5. Rights, duties, and responsibilities of the partners.
Benefits of partnership firm-
1. Easy to form and liquidate.
2. Adequate risk sharing
3. The partners do not necessarily have to submit the returns to the MCA.
d. Limited Liability Company- This type of company separates personal and business liabilities, which in turn limits the liabilities of an owner or owners. The tax liabilities are shared too. Key advantages of a Limited Liability Company are-
1. LLCs have comparatively lesser paperwork than other business structures.
2. LLCs are easy to form and are flexible.
3. LLCs have flexible profit sharing.
How to register an LLC-
1. Fill the form and apply for a DPIN (Designated Partner Identification Number) online.
2. Obtain your Digital Signature Certificate (DSC) and register the same with the MCA.
3. Get your LLC name approved by the MCA, fill the incorporation form, and acquire the LLC agreement.
e. Private Limited Company- A type of company that consists of a minimum of two and a maximum of two-hundred members. A private limited company cannot list shares on the stock market and raise capital from the public.
Benefits of Private Limited Company-
1. Each owner’s liability is limited to the extent of his/her stake in the company.
2. Transfer of shares is easy.
3. Each Private Limited Company has more tax benefits and lesser applied tax compared to other structures.
4. The company can raise funds by issuing debentures through public platforms.
How to register a Private Limited Company-
1. Acquire a Director’s Identification Number. A DIN requires you to have PAN, Aadhar card, bank statements, utility bills, etc.
2. File a name registration application, draft an AoA and MoA, and file the applications through the SPICE E-form on the MCA’s website.
3. Acquire the PAN and TAN applications.