First Step to the New Start Up

Are you planning to set up a new start up ? Plans are ready, idea is very clear, budgets & estimates are drawn, but wait, did you know from where to start ?

Most of the start ups are facing hurdles like finance, registrations issues, etc. due to the reason of incorrect legal status chosen at the time of setting up new venture. In the initial phase we just trying to minimize our costs by choosing proprietorship type which has no registration process, another reason is that it will start our business from the day first by just registering with Udyam Aadhar. Due to short of knowledge no one can predict the issues they need to face in the future & also can’t able to choose the correct status for their business. Some can take help of experts like CAs, Advocates, etc. but more or less all can give suggestions which can save taxes or minimize the legal issues, but no one can help to have long term view considering the growth of the business and nourishments like funds, human resources, ventures & agreements that the business will need to grow in the future.

Considering this we are trying to summaries all the types of business in the comparative manner which can makes the decision easy for the new entrepreneurs.

 Proprietorship          FirmHUFPartnership                   FirmLimited Liability Part. (LLP)Private Ltd. CompanyPublic Ltd. Company
  REGISTRATION PROCESS  
FormationNot neededNotarised DeedRegistered or unregisteredThrough ROCThrough ROCThrough ROC
Regulatory BodiesROFROCROCROC, SEBI, etc.
NameNo Guidelines  No GuidelinesNo GuidelinesName should end with LLPName should end with Pvt. Ltd.Name should end with Ltd.
Capital RequirementNot Specified  Not SpecifiedNot SpecifiedNot SpecifiedMinimum 1 LakhMinimum 5 Lakhs
Legal Entity StatusNot a Separate Legal EntityNot a Separate Legal EntityNot a Separate Legal EntitySeparate Legal EntitySeparate Legal EntitySeparate Legal Entity
LiabilityUnlimited, can extends to the Personal Assets of the Proprietor’sUnlimited, can extends to the Personal Assets of the HUFUnlimited, can extends to the Personal Assets of the PartnersLimited to the extent of Capital ContributionLimited to the extent of Capital ContributionLimited to the extent of Capital Contribution
 Proprietorship          FirmHUFPartnership                   FirmLimited Liability Part. (LLP)Private Ltd. CompanyPublic Ltd. Company
Minimum No. of membersOnly 1  2  2227
Maximum No. of membersOnly 1  Unlimited20Unlimited200Unlimited
Minimum No. of Directors  —223
Independent DirectorsNot Required  Not RequiredNot RequiredNot RequiredNot Required1/3
Foreign National as MemberNot Required  Not RequiredCan not become PartnerCan become PartnerCan become ShareholderCan become Shareholder
Public offering of Shares (IPO)Not Possible  Not PossibleNot PossibleNot PossibleNot PossiblePossible
 Proprietorship          FirmHUFPartnership                   FirmLimited Liability Part. (LLP)Private Ltd. CompanyPublic Ltd. Company
  COMPLIANCES  
Govt. CompliancesNO YEARLY COMPLIANCES          NO YEARLY COMPLIANCESCompliances of ROF only, that also only at the time of formation, addition of partner, retirement of partner & dissolution of firm. NO YEARLY COMPLIANCESCompliances of ROC on Formation & Liquidation in addition to that ANNUAL FILING IS COMPULSORYCompliances of ROC on Formation & Liquidation in addition to that ANNUAL FILING IS COMPULSORYCompliances of ROC on Formation & Liquidation in addition to that Quarterly Minutes of Meeting Filing & ANNUAL FILING IS COMPULSORY
No Statutory Audit only Tax Audit  No Statutory Audit only Tax AuditNo Statutory Audit only Tax AuditNo Statutory Audit only Tax AuditStatutory Audit (Irrespective of Turnover) and Tax AuditStatutory Audit (Irrespective of Turnover) and Tax Audit
     If Listed then Quarterly filing & SEBI Compliances
Cost of Compliances (Approximately)0  0010,00075,0001,50,000

 
Proprietorship          FirmHUFPartnership                   FirmLimited Liability Part. (LLP)Private Ltd. CompanyPublic Ltd. Company
Winding Up / DissolutionAt Will  At WillAt WillLegal FormalitiesLegal FormalitiesLegal Formalities
Audit, Remuneration & Nomination CommitteeNot Applicable      Not ApplicableNot ApplicableNot ApplicableNot ApplicableThreshold Limits – Capital 10Cr OR Turnover 100Cr OR Loans & Deposits 50Cr
  COST BENEFIT ANALYSIS   
Bankers’ ViewCreditworthiness depends on goodwill and credit worthiness of the proprietor  Creditworthiness depends on goodwill and credit worthiness of the HUF MembersCreditworthiness depends on goodwill and credit worthiness of the partnersPerception is higher compared to that of a partnership but lesser than a companyHigh creditworthiness, due to stringent compliances and disclosures requiredHigh creditworthiness, due to stringent compliances and disclosures required
Loan to Directors / PartnersPossible  PossiblePossiblePossibleNot PossibleNot Possible
Equity DilutionNo  NoNoNoNoYes
Sharing of Profit100%  All HUF MembersIn PSRIn PSRBy DividendBy Dividend
DDT ApplicableNo  NoNoNoYesYes
Income Tax RateSlab Rates  Slab Rates30%30%25% Upto 400 Cr25% Upto 400 Cr

Conclusion – Facts & Figures mentioned above may changed as per the amendments made by the regulating authorities. For any questions related to this or if anyone required help in setup new start ups then contact to us.

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