Business Structures

Have A Business Idea And Want To Become An Entrepreneur, So What’s Next You Would Need To Do ?

While starting out any business venture, the extreme essentiality is to choose a type of business structures business structure or form that is aptly suitable to your missions and visions. This article is aimed at briefing about different kind of entity structures, while giving enough understanding about each structure so as one could be able to make an educated decision before turning any idea into reality for a higher probability of a successful stint.

Different Types Of Business Structures

Before organizing any business idea, a plan is necessary and the management, control, and scalability of the business idea greatly depends upon choosing a right business structure. The business structure may be registered or unregistered and through this article series we shall give you a food for your thought for the selection of suitable business structure.

Below is the tabular representation of the various business structures available to select in India

Business Structure/Form - Choose the right Structure for your Business
Business Structure/Form - Choose the Best Structure for your Business

Business Structures / Forms

The business structure we choose plays a crucial role in influencing everything from operations to taxes, including the risk linked/associated to
your personal assets. Therefore, it would be important to choose a business structure that gives an optimum measure of risk and rewards.

The business structures, in India, has been majorly divided into two parts:

1. Registered Business

Considering the goals and an organized path of doing business, it is always advisable to register the business with the statutory authorities before giving your business a kickstart, however setting up the goals is always going to be a preliminary step.

For instance, you would want to reap the benefits of obtaining government grants/ government funding under the startup India initiative of the Department for promotion of industry and internal trade, then you could only avail such benefits through a private limited company or a limited liability partnership since, the business structure as specified herein has been classified as a mandatory requirement.

Below is the quick review of the forms of Registered businesses:

One Person Company

One Person Company is a company limited by share capital and is registered under the Companies Act, 2013 and means a company which has only one person as a member.

Private Limited Company

Private limited company is a company limited by share capital, registered under the Companies Act, 2013 and/ or any erstwhile companies Act with a minimum number of members as Two (2), and which by its articles-

  • restricts the right to transfer its shares.
  • except in case of one person company, limits the number of its members to a maximum of two hundred.
  • prohibits any invitation to the public to subscribe for any securities of the company;

Public Limited Company

A public limited company is a company limited by share capital, registered under the Companies Act 2013 and/ or any erstwhile companies Act with a minimum number of members as Seven (7) and not restricted and more flexible clauses unlike the private company.

Limited Liability Partnership

A Limited Liability Partnership is a partnership of two or more legal entities and carries a feature of a limited liability. Such partnerships are registered under the Limited Liability Partnership Act, 2008.

Registered Partnership

A registered partnership is a partnership of two or more legal entities with an unlimited liability and is governed by the written deed. Such partnerships are registered under the Indian Partnership Act, 1932, as amended from time to time.

Unregistered businesses are usually associated with the unorganized sector in any country, and it is not always advisable to not get the business registered due to its features of unlimited liability and risk associated with respect to its continuity.

Below is the quick review of the forms of Unregistered businesses:

Unregistered Partnership

An Unregistered partnership is a partnership of two or more legal entities with an unlimited liability and can be governed by the written deed or an oral deed.

Sole Proprietorship

A sole proprietorship is a type of business structure/form where there is no distinction between the owner and the business. Such form of business is owned and run by an individual and is most prevalent form of business in the unorganized sector of India.

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