Registering your company under the right business structure is an important decision. Find out the pros and cons of the different business structures.
- What are the types of business structures in India?
- Why is it important to choose the right business structure?
- How to choose a business structure while applying for company registration in India?
- How to Register a Company in India?
Picking the right company structure for your business is as important as any other business-related activity. The right business structure will allow your enterprise to operate efficiently and meet your required business targets. In India, every business must register themselves as part of the mandatory legal compliance. Before we learn how to register a company, let’s try and understand the types of business structures in India.
What are the types of business structures in India?
Let’s try and understand the types of business structures available in India. Here is a list of some of them:
- One Person Company (OPC)
Recently introduced in the year 2013, an OPC is the best way to start a company if there exists only one promoter or owner. It enables a sole-proprietor to carry on his work and still be part of the corporate framework.
- Limited Liability Partnership (LLP)
A separate legal entity, in an LLP the liabilities of partners are only limited only to their agreed contribution.
- Private Limited Company (PLC)
A company in the eyes of the law is regarded as a separate legal entity from its founders It has shareholders (stakeholders) and directors (company officers). Each individual is regarded as an employee of the company.
- Public Limited Company (PLC)
A PLC is a voluntary association of members which is incorporated under company law. It has a separate legal existence and the liability of its members are limited to shares they hold.
You can choose what business structure suits your business needs best and accordingly register your business.
Here is a comparative list of the popular business structures in India.
|Company type||Ideal for||Tax advantages||Legal compliances|
|Limited Liability Partnership||Service-oriented businesses or businesses that have low investment needs||Benefit on depreciation||Business tax returns to be filed ROC returns to be filed|
|One Person Company||Sole owners looking to limit their liability||Tax holiday for first 3 years under Startup India Higher benefits on depreciation No tax on dividend distribution||Business returns to be filed Limited ROC compliance|
|Private Limited Company||Businesses that have a high turnover||Tax holiday for first 3 years under Startup India Higher benefits on depreciation||Business tax returns to be filed ROC returns to be filed An audit is mandatory|
|Public Limited Company||Businesses with a high turnover||Tax exemptions under||Business tax returns to be filed. Mandatory Audits|
Other forms of business structures include Sole proprietorship, Hindu Undivided Family, and Partnership firms. Please bear in mind, these structures do not come under the ambit of company law.