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Comparison Between Various Business Structures

Private Limited Company vs LLP vs OPC vs Partnership vs Sole Proprietorship.

What is a company?

A company is a body corporate or a joined business association enrolled under the companies act. It tends to be a restricted or a limitless organization, private or a public organization, organization restricted by ensure or an organization having an offer capital, or a local area interest organization.

An organization can be an “enterprise, association, affiliation, business entity, trust, fund, or coordinated gathering of people, whether incorporated or not, and (in an authority limit) any beneficiary, trustee or comparable authority, or selling specialist, for any of the previous”.

Types of Legal Entity

There are basically four types of companies, which are given below-:

  1. Private Limited Companies
  2. Limited Liability Companies
  3. Partnership Firm
  4. Sole Proprietorship
  5. One Person Company

Private Limited Company

A Private Limited Company is a lawful entity in its own right, permitting the entrepreneur to keep their resources separate from the actual business. This implies that the entrepreneurs aren’t dependent upon any close to home risk, as their work is embraced as a specialist for the organization, as opposed to as a person. On the off chance that your organization runs into challenges, your own resources will be ensured by what’s known as a corporate cover, with any obligation, misfortunes or legitimate cases staying the duty of the organization, not the directors. Investors are under no commitment to pay anything else than the estimation of the offers they have taken in the business.

Limited Liability Company

A limited liability company is one choice a business has when it is picking its lawful design, close by different choices like S companies and sole ownerships. The qualities of the restricted risk organization incorporate restricted obligation for the proprietors’ resources—their obligation is restricted to their interest in the business. Pay from a restricted risk organization goes through to proprietors.

Partnership Firm

The law identifying with partnership firm in India is recommended in the Indian Partnership Act of 1932. This Act sets out the rights and obligations of the accomplices among themselves and other legitimate relations among accomplices and third people, which are incidental to the development of an organization. Subsequently, the Act sets up the situation of an accomplice just as an association firm versus outsiders, in lawful and legally binding relations emerging out of and throughout the matter of an organization firm.

Sole Proprietorship

Sole Proprietorship in straightforward words is a limited business association. Moreover, a sole proprietor is a characteristic person (not a legitimate individual/substance) who completely possesses and deals with this kind of entity. Indeed, the business and the man are the equivalents, it doesn’t have a different lawful element. What’s more, sole ownership typically doesn’t need to be consolidated or enrolled. In this manner, it is the least complex type of business structure and the ideal decision to maintain an independent venture or medium scale business.

One Person Company

The One Person Company (OPC) as of late was dispatched as a decent refinement over the sole ownership. In OPC, a solitary advertiser acquires full authority over the organization in this way confining his/her obligation towards their commitments to the endeavour. Accordingly, the said individual will be the sole investor and chief (be that as it may, a chief chosen is available, however, has zero power until the genuine chief demonstrates unequipped for getting into the agreement). Likewise, there can be no chance for adding to representative investment opportunities or value financing. Also, if an OPC organization has a normal hattrick turnover of Rs. 2 crores and over or secures a settled-up asset of Rs. 50 lakh and over, it must be changed over to a private restricted organization or public restricted organization inside a half year.

Private Limited Company vs LLP vs OPC vs Partnership vs Sole Proprietorship

Choice of the business element is among the principal lawful choices taken by an Entrepreneur while beginning another business. With the presentation of the Limited Liability Partnership Act and the Companies Act, 2013, additional decisions of business elements are currently accessible. In this manner, it is significant for the Entrepreneur or Promoter to comprehend the upsides and downsides of every one of the business elements and pick the correct one. Among the decision of For-Profit elements accessible like Proprietorship, Partnership, Limited Liability Partnership, One Person Company, Private Limited Company, and Limited Company, a couple is ideal for most Entrepreneurs.

S.NO. COMPONENTS PRIVATE LIMITED COMPANY LIMITED LIABILITY COMPANY ONE PERSON COMPANY SOLE PROPRIETORSHIP PARTNERSHIP FIRM
1. Registration Private Limited Company will be registered under Ministry of Corporate Affairs under the Companies Act, 2013. It will be registered with the Ministry of Corporate Affairs under the LLP Act 2008. One Person Company will be registered under Ministry of Corporate Affairs under the Companies Act, 2013. There is no formal registration in Sole Proprietorship. Company can be registered or unregistered. Registration of a Partnership is discretionary. Whenever enrolled, Partnership is enlisted under the Partnership Act, 1932.
2. Name of Entity The decision of name given by the Promoter should be endorsed by the Registrar of the Company. Just names that are not indistinguishable/like a current organization or LLP name and names that are not hostile or unlawful would be permitted. The name of the substance will end with the words “Private Limited Company”. The decision of name given by the Promoter should be endorsed by the Registrar of the Company. Just names that are not indistinguishable/like a current organization or LLP name and names that are not hostile or unlawful would be permitted. The name of the entity will end with the words “Restricted Liability Partnership” or “LLP”. The decision of name given by the Promoter should be affirmed by the Registrar of the Company. Just names that are not indistinguishable/like a current organization or LLP name and names that are not hostile or unlawful would be permitted. The name of the substance will end with the words “OPC” or “One Person Company” The Promoter’s decision of name can be utilized for the Proprietorship. No endorsement is vital for utilizing name; in any case, it is a great idea to stay away from reserved names. The Promoters decision of name can be utilized for the Partnership. No endorsement is important for utilizing name; be that as it may, it is a great idea to maintain a strategic distance from reserved names.
3. Legal Status of Entity. Private Limited Company is a different legitimate entity registered under the Companies Act, 2013. The Directors and Shareholders of a Private Limited Company are not actually subject for the liabilities of the Company. LLP is a different legitimate entity enrolled under the LLP Act, 2008. The accomplices of a LLP are not by and by at risk for the liabilities of the LLP. One Person Company is a different lawful entity under the Companies Act, 2013. The Director and Nominee Director of a One Person Company are not actually at risk for the liabilities of the Company. Proprietorship isn’t perceived as a different lawful element and the advertiser is actually at risk for the liabilities of the Proprietorship. Partnership isn’t perceived as a different lawful substance and the advertisers are actually at risk for the liabilities of the organization.
4. Member(s) Liability. Investors have limited liability and are subject just to the extent of their share capital. Accomplices have restricted obligation and is at risk just to the degree of their commitment to the LLP. Director and Nominee Director have limited liability and are subject just to the extent of his/her offer capital. Proprietor has limitless Liability and is answerable for all the liabilities of the Proprietorship. Partners have limitless risk and are liable for all the liabilities of the Partnership.
5. Minimum No of Members. At least two people are needed to begin a Private Limited Company. At least two people are needed to begin an LLP. At least two people are needed to begin a One Person Company, via. Chief and Nominee Director. Can have just a single individual as member. At least two people are needed to begin a Partnership.
6. Maximum No of Members. A Private Limited Company can just have a limit of 200 investors or individuals. An LLP can have limitless number of Partners. A One Person Company can have just two individuals, via. Chief and Nominee Director. Can have just a single individual as member. The most extreme number of accomplices can be just 20.
7. Foreign Ownership. Foreigners are permitted to put resources into a Private Limited Company under the Automatic Approval course in many areas. Outsiders are permitted to put resources into an LLP just with earlier endorsement of Reserve Bank of India and Foreign Investment Promotion Board (FIPB) endorsement. Chief and Nominee Director can’t be Foreigners. Foreigners are not permitted to begin a Proprietorship. Foreigners are not permitted to begin a Partnership.

 

Hence, this was a common difference between the different legal entities.

About the Guest Post Contributor

Ishita Ramani is a young women entrepreneur and currently the operations director at ebizfiling india private limited. In her entire career so far, she had led a team of 50+ professionals like CA, CS, MBAs, and retired bankers. Parts from her individual experience on almost every facet of Indian statutory compliance, she has been instrumental in setting up operational at ebizfiling.com!

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