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
- Proprietorship
- Partnership
- LLP
- Private Limited Company
- Public Limited Company
- Co-Operative Society
- Joint Venture
- 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
- 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
- Pros
- 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
- Pros
- 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
- Pros
- 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
- Pros
- 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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