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How to Start Business In India and what all are the business structures available

Posted by CA Pankaj Kumar Vats
In: Business
On 8 Apr 2023

For doing any business in India, there are certain arrangements/constitutions that are available.
In simple words, it can be said if any business needed to be started, it can be stared in the following forms

  1. Proprietorship
  2. Partnership
  3. LLP
  4. Private Limited Company
  5. Public Limited Company
  6. Co-Operative Society
  7. Joint Venture
  8. HUF

For each Constitution, there are different pros and cons

One should very carefully decide about which constitution of business, he or she should adopt

Adoption of right business constitution is very crucial for the future business growth and business requirements.

Choosing the right business constitution, also known as the legal structure or entity type, is a critical decision that can have a significant impact on the future growth and requirements of a business. The business constitution determines how the business will be organized, managed, and taxed, and also affects the liability of the owners, the ability to raise capital, and the overall legal and financial obligations of the business.

There are few business, which are suitable in to some specific business

Let us understand the business constitutions one by one

  1. Proprietorship
    • Pros

      Simplest

      Cost Effective

      No specific regulatory requirement, other than those, under which it took registration separately

    • Cons

      Scalability issue

      Only One Person Organization

      Do not attracts the Corporates

      Do not attracts the Overseas Clients

    • Recommended for

      Small Business

      In case the Business Model is B2C

  2. Partnership
    • Pros

      Easy to Formulate

      Cost Effective

      No specific regulatory requirement, other than those, under which it took registration separately

    • Cons

      Do not attracts the Corporates

      Do not attracts the Overseas Clients

      Higher Income Tax Rate @ 30%

    • Recommended for

      Small Business

      In case the Business Model is B2C

      In case more than one person stake involved

  3. LLP- Limited Liability Partnership
    • Pros

      Easy to Formulate

      Enhanced version of Normal Partnership Firm

      Transparency – Availability of Data at Ministry of Corporate Affairs Portal (www.mca.gov.in)

    • Cons

      Higher Income Tax Rate @ 30%

      Specific regulatory requirement are there

      More compliance are needed to be done

    • Recommended for

      In case the Business Model is B2B

      In case more than one person stake involved

      In case there needed to be shown online presence at ministry portals, for authenticity

  4. Private Limited Company / Public Limited Company
    • Pros

      Easy to Formulate

      No scalability issue

      Transparency – Availability of Data at Ministry of Corporate Affairs Portal (www.mca.gov.in)

      Multiple Tax Rates starting from 18%

    • Cons

      Specific regulatory requirement are there

      More compliance are needed to be done

    • Recommended for

      In case the Business Model is B2B

      In case more than one person stake involved

      In case there needed to be shown online presence at ministry portals, for authenticity

  5. Co-operative Society, HUF and Joint Venture are very specific to the specific requirements and it depends lots of facts.

In summary, selecting the right business constitution is crucial for the future growth and requirements of a business. It is important to carefully consider factors such as liability, taxes, management and ownership, capital and financing, and legal and regulatory requirements when choosing the most appropriate business constitution for your specific situation. It is recommended to seek legal and financial advice to ensure that the chosen business constitution aligns with the long-term goals and needs of your business.

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