Road map for Startups

Many individuals, even after having a right business plan, are not well versed with the steps that they need to undertake to set up their own business, thus leading to those dreams not becoming a reality for them. It is very necessary to understand the right type of entity that should be formed to undertake the requisite business activities. Following are the different types of entities through which a person/ persons can undertake their Start-up Dream:

 

  • PROPRIETORSHIP

 

Advantages:

  1. No need to obtain a separate PAN card which is different from its owner;
  2. Easy to set-up;
  3. Lower regulatory compliances;
  4. Certain exemption available for maintenance of books of Accounts under Income Tax Act.

 

Disadvantages:

  1. Lower reliance placed by Government and other entities at the time of awarding tenders;
  2. Additional funds can be infused only by way of loan which will attract interest cost;
  3. Expansion beyond a certain point becomes restricted.

 

  • TRADITIONAL PARTNERSHIP

 

Advantages:

  1. Easy to set-up;
  2. Lower regulatory compliances;
  3. Certain exemption available for maintenance of books of Accounts under Income Tax Act;
  4. Partners can infuse in capital for meeting the fund requirements of the Firm;
  5. Since more people are involved, the work gets distributed and expansion becomes easy.

 

Disadvantages:

  1. Lower reliance placed by Government and other entities at the time of awarding tenders;
  2. Liability of Partners is unlimited and all the partners shall have to contribute towards the losses for the wrong done by even one partner;
  3. Expansion beyond a certain point becomes restricted.

 

  • LIMITED LIABILITY PARTNERSHIP FIRMS

 

Advantages:

  1. The Liability of all the Partners is limited;
  2. The Government and other entities place far more reliance on LLP’s as compared to Proprietorship of Traditional Partnership firms;
  3. Partners can infuse in capital for meeting the fund requirements of the Firm;
  4. Since more people are involved, the work gets distributed and expansion becomes easy.

 

Disadvantages:

  1. Expansion beyond a certain point becomes restricted;
  2. More compliance burden in comparison to proprietorship and partnership concerns.
  3. PE investors don’t majorly invest in LLP model of businesses.

 

  • PRIVATE COMPANIES

 

Advantages:

  1. The liability of all the shareholders is limited;
  2. Since the financial needs to be Audited by a Statutory Auditor, the Government and other entities place far more reliance on such Companies;
  3. Additional capital can be infused by way of issuance of shares to shareholders or to PE investors;
  4. Tax rate is less in comparison to Partnership firms i.e. for turnover upto Rs. 50 crores, the Companies are liable to be taxed at 25% whereas Partnership firms are to be taxed at 30% tax rate.
  5. High scope of expansion.

 

Disadvantages:

  1. High compliance burden and cost;
  2. Restriction on certain transactions with Directors and other related parties;
  3. Delay in decision making since the major decisions can be taken by the Directors in the Board Meeting.

 

Basis the above mentioned details, it is very important for an Entrepreneur to choose a right type of entity to carry out its activities basis the long term goals and future growth prospects of its business.

 

We, at Business Suvidha, will guide you about the right type of entity and will help your Start-up dream come true. In case you wish to form any of the above mentioned entity, please mail us at info@businesssuvidha.com or call us at +91-9654438893/ 9953109399.

Contact-us

  • F-8, DDA shopping Complex, Ist Floor, A-Block, Meera Bagh, New Delhi, 110087

  • +91-9953109399 / +91-9654438893

  • info@businesssuvidha.com