How to choose a business structure while applying for company registration in India?
Founders often find it difficult to choose the right business structure out of the many available. Each such structure has its own distinctive set of characteristics. Therefore, the best option is to speak to your legal consultant or consult business professional services.
1. Company: Companies are enrolled under the Companies Act as a body corporate. There are chiefly 3 types of companies:
- Private Company
- One Person Company (OPC)
- Public Company
2. Sole Proprietorship: One of the easiest of all business structures is a sole proprietorship. Given the name, it is a single-owner business structure. But do note that it is an informal structure and does not exist as a legal entity.
3. Partnership: When a group of people puts in efforts to drive a profit-based business then they are expected to register a partnership business. Partnership business has two kinds of possible registration;
- Limited Liability Partnership (LLP)
- General Partnership Firm
Factors based on which you can choose the best business structure
Consider Growth Plan
Your business will have a growth plan in place relying on how you plan to scale it. Now mix in the size and structure of the business with your growth plan to determine the right kind of business structure. For instance, those who want to simply work on their own can go with sole proprietorship but if want to add someone as a partner in the future can go forward with general partnership now itself than registering a sole proprietorship firm.
Understand your investment requirements
There are many funding choices available to the founders where internal funding and bank borrowings are the most common ones. You need to know the fact that lending agencies and banks prefer structured entities like LLP and Private Limited Company to give funding. Whereas in other structures, owners can add partners to get in more capital to manage the fund flow to a certain extent from such internal sources.
Take Risk Assessment
The type of business structure and the activities it begins defines the risk associated with the business. I have often seen owners going choosing the structure that conserves their assets.
Consider Taxation Involved
Taxation takes the center stage once the business starts giving rise to revenue. Any income that a business generates is taxed and the business structure specifies the amount of taxability. Minimizing the tax amount will put behind a larger chunk of revenue when planned well.
Consider the Maintenance Cost
Start with comparing the maintenance cost related to a particular business structure. For example, establishing a sole proprietorship is simplest of all with the nominal cost associated with registration.
Determine Control over business
The larger the number of people involved, the lesser you will be in control. To put up the business structure to it, a sole proprietorship will have the most management over the business whereas the ownership is divided into other business structures.
Follow the key points mentioned above to decide the right business structure for your business. There are times when you get confused with deciding the right business structure in India especially if the structure is not permanent. DBPL can assist you with all the information regarding how your business should register and as what structure. DBPL helps setting up business in India by foreign companies, opening business in India, and with the company registration process in India. They will assist and support you with the best options for the company registration process in India. DBPL is your answer for a smooth and effortless way of establishing your business in India.