TYPES OF BUSINESS ENTITIES IN INDIA
Becoming an entrepreneur is THE go-to career line these days but how to know which type of business entity will suit you best?
To choose which type of entity is suitable, first you need to know how many types of entities there in India are.
In this blog we tried to give you details about the types of Business Entities in India and a small intro on each type of entity.
INTRODUCTION:
India has been identified as one of the fastest developing principal economies in the World. The stalwarts of the global economy i.e., USA, the UK and even China is turning their head towards investing heavily in the Indian market because of its untapped economic potential.
The Indian service industry has become the most active contributor to its economy and is going through a segment of fantastic economic liberation while encouraging overseas direct investment through granting greater accessibility to its massive and numerous markets.
EVERY PROBLEM IS AN OPPORTUNITY IN DISGUISE:
The Coronavirus has forced many people to take drastic measures. Either they are getting laid off or they are quitting themselves to start something more sustainable and secure and over which, they have more control. In comes the opportunity to become an entrepreneur.
Owning your own business brings with it complete control and makes you responsible for your own decisions. Some people thrive whereas some don’t but if you won’t try, how would you know?
WHAT THIS ARTICLE WILL TEACH YOU?
This article will enlighten you about the various types of entities that operate within our country. You can choose to open your own company based on the unique features that set them all apart from each other. Have a look –
Types of Business Entities You Can Open in India:
1- Sole Proprietorship
2- One Person Company
3- Partnership firm
4- Limited Liability Partnership
5- Private Limited Company
6- Joint-Venture Company
7- Public Limited Company
8- Nidhi Company
9- Non-Government Organization / Non-Profit Organization
1. Sole Proprietor
Sole ownership in India is a type of business element where a solitary individual handles the whole business association. The individual is the sole beneficiary, all things considered, and carrier, everything being equal, to the business.
The responsibility of the proprietor is limitless. A Sole Proprietorship business is appropriate where the market is restricted, confined, and where clients offer significance to individual consideration.
2. One person company
This type of company was newly introduced in 2013. Making this type of company is only allowed to the citizens of India whether resident in India or otherwise (amended with effect from 01.04.2021).
An OPC will have a single owner only.
It was to motivate an individual to start his/her own company having complete control over its operations and existence. Although, the liability of the Owner is limited in an OPC.
3. Partnership Firm
A partnership is “the business relation between two or more people who have agreed to share the profits of the business carried on by them or any of them acting for all”.
A Partnership Firm is another type of Business Entity. Owners of the Business separately known as partners. As per Rule 10 of the Companies (Miscellaneous) Rules 2014, there can be a maximum of 50 partners in this type of Entity. Registration of a partnership firm is not compulsory.
4. Limited Liability Partnership (LLP)
When you want the flexibility of a partnership firm mixed with the limited liability clause of a public company or an OPC, you get an LLP. Simply speaking, it’s a hybrid form of business entity.
5. Private limited company
A Private Limited Company in India is a small entity and independent company on incorporation.
It can have a minimum of two and a maximum of fifteen Directors. A private limited company can’t trade its share publicly. There can be a minimum of two and a maximum of two hundred shareholders in this type of company.
It is usually the most commonly opted type of entity found in India.
6. Joint-Venture Company
A Joint Venture, as the name itself says, is a new business formed through a partnership between two entities. It is generally registered by foreign and Indian investors where they share profit, losses, management, expenses and responsibilities
The merit of joint ventures is that the foreign company can make use of goodwill, contact network, distribution, marketing channels, technology and therefore the at hand financial resources of the Indian partner.
A joint venture likewise offers the financial backers to together deal with the dangers implied with the new business and breaking point their individual openness by sharing the liabilities.
7. Public limited company
Whenever you open a business news channel, the Companies you see on the bottom of the screen (called a scrip), are all Public Companies. Although, many of them remain unlisted too.
A Public limited business in India has a minimum of 3 directors, minimum of 7 shareholders, and might have unlimited shareholders. It may either be listed in a stock exchange or remain unlisted.
Once the company is listed as a Public limited company in stock exchange, its shareholders can freely trade the shares.
You can choose this type of business if you plan to go big with your idea and wish to involve the public in it too.
8. Nidhi Company
A company incorporated with the object of cultivating the habit of thrift and savings amongst its members is called a Nidhi Company. They receive deposits and lend their funds only to their own members. All Nidhi companies must apply ‘Nidhi Limited’ after their name.
Falls under the category of financial sector but does not require approval of the RBI.
9. Non-Government Organization/ Non-Profit Organization
Non-Government Organization (NGO) or Non-profit Company is a resident-based affiliation that works free of public authority, generally to fill some friendly need. These associations are not expected to acquire benefits and work to advance a reason or advance projects for the improvement of society.
Conclusion: Which type of business entity should you choose in India?
Frankly speaking, it depends; on your risk appetite, your capital contribution, your intentions behind starting your own business. If you want to exercise total control over every aspect of your venture, then it will be best to start with an OPC or a Sole Proprietorship.
But if you require a team of dedicated professional all working towards the same goal then you can open up a Private company.
Behind your intention, lies the type of business entity you should opt for.
Are you still confused? Get complete clarity!
For more details you can contact us
email: dcsadvisors@gmail.com
Mobile: 9019421726
Author:
TEAM DCS ADVISORS LLP
Disclaimer:
The Views expressed are solely of the Authour and the contents of this article is to share the Knowledge on subject matter. Expert advice should be sought for your specific circumstances.
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