Corporate Law Services

Know Various Types Of Business Organizations

Private Limited

  • Separate legal existence: It is a juristic person established under the Companies Act. It has its own rights and the rights are different from the rights of its owners. It can sue and be sued in its own name.
  • Perpetual Succession: Since Company form of business have separate legal existence different from its owners, the death or insolvency of owners cannot bring an end to Company. Company exist in eyes of law and only law can bring an end to the organization.
  • Transferability of shares: The transfer of stake in private companies are subject to the approval by the Board of Directors.
  • Limited Liability: The liability of each member is only upto the amount of share capital held by him. He is not personally responsible for paying off the debts of the Company.
  • Ownership of the Property: Assets are held in the name of the Company and are continued to be owned by the Companies regardless of its shareholders and directors.
  • Separation of ownership from management: Shareholders are the owners of the Company but they do not directly participate in the administration and management of the Company. Companies are managed by Board of Directors appointed by the Shareholders.

Limited Liability Partnership (LLP)

  • Easy to form, run and administer: LLPs are easy to form as compared to Company form of business. The day to day compliances are also negligible.
  • Perpetual Succession: The life of the Limited Liability Partnership is not affected by death, retirement or insolvency of the partner. The LLP will get winded up only as per provisions of the act of 2008.
  • No compulsory audit: in the case of LLP, there is no mandatory audit required. The audit is required only in those cases where the turnover of the company exceeds Rs 40 lakhs and where the contribution exceeds Rs 25 lakhs.
  • Limited Liability: Liability- The partners of the LLP is having limited liability which means partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for other partner misconduct.
  • Management: All decisions are taken up by the Partners.
  • Owning Property: A LLP being an artificial judicial person, can acquire, own, enjoy and sell, property in its name.

Partnership

Association of two or more person to earn profit is called a Partnership form of business. Partnership form of business is regulated by Partnership Act, 1932. The relation among partners and the relation of partners with the environment outside firm is counsel by the Partnership Deed which may be registered or unregistered. Suitable to medium sized business in unorganized sector.

Advantages

  • Easy to start: Hassle free procedure to register the firm. The Registrar of Firms is responsible for registering partnership firms.
  • No annual filing: Partnership firms are free from fling of their financials to Ministry of Corporate Office and not required to make it public.
  • Shared Responsibility: Partners can share the responsibility of the running of the business. This will allow them to make the most of their abilities. Losses if any, also get divided in the ratio construed in the Partnership Deed.

Sole Proprietership

A sole proprietorship is a type of unregistered business entity that is owned, managed and controlled by one person. Sole proprietorships are one of the most common forms of business in India, used by most micro and small businesses operating in the unorganized sectors. Proprietorships are very easy to start and have very minimal regulatory compliance requirement for started and operating. There is no mechanism provided by the Government of India for the registration of a Proprietorship. Therefore, the existence of a proprietorship must be established through tax registrations and other business registrations that a business is required to have as per the rules and regulations.

Features

  • Ease of Formation: No regulatory compliance required to register a Proprietorship
  • One Man Ownership: In proprietorship, only one man is the owner of the enterprise.
  • Unlimited Liability: Unlimited liability means that in case the enterprise incurs losses, the private property of the proprietor can also be utilized for meeting the business obligations to outside parties.
  • No day to day regulatory compliance
  • Complete control over the business decisions
  • No sharing of profits.