Introduction
This article will provide you with the difference between business formations. If you want to start a new business and you are not able to pick one form then here is a glance of differences between various forms. There are few forms prevailing in India such as proprietorship, partnership, One Person Company, limited liability partnership and Pvt Ltd company. The difference between them on various bases is mentioned below:
Difference between business Formations
| TYPE OF COMPANY
BASIS | Proprietorship | Partnership | LLP | Private limited company | OPC |
| Registration
| Not Compulsory | Optional under partnership act 1932 | Registered under MCA | Registered under MCA | Can be registered under MCA and Companies Act 2013 |
| Legal status of entity
| Not considered as a separate legal entity | Not considered as a separate legal entity | Considered to have a separate legal entity | Considered to have a separate legal entity | Separate legal entity |
| Members liability
| Unlimited liability | Unlimited liability | Liability of its members is limited | Limited to the extent of share capital
| Limited to the extent of share capital |
| Minimum number of member
| Sole Proprietorship | At least 2 persons
| At least 2 persons | At least 2 persons | Minimum number of 1 person
|
| Maximum number of members
| Maximum 1 person
| Banking Sector – 10 Other Sector – 20 | No restriction | 200
| Maximum 2 person |
| Foreign ownership
| Not allowed | Not allowed | Allowed by permission from RBI | Allowed | Allowed if one is the director and other is the nominee. Both the director and the nominee cannot be foreign citizens |
| Transferability
| Not allowed | Not allowed | Can be transferred | Can be transferred | Allowed to 1 person only |
| Survival
| comes to end on death or retirement of the member | comes to end with the death of its anyone member | Existence independent on partners | Life of the company will go on forever | Existence is independent on directors or nominee |
| Taxation
| Taxed as an individual | Tax rate is 30% on the company’s profit | Tax rate is 30% on profits plus cess and surcharge | Tax rate is 30% on profits plus cess and surcharge | Tax rate is 30% on profits plus cess and surcharge |
| Annual filings
| Income tax returns with the registrar of the company | Income tax return is filed with the registrar of the company | Filed with the registrar of the company | Filed with the registrar of the company | Filed with the registrar of the company |
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