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

ProprietorshipPartnershipLLPPrivate limited companyOPC
Registration

 

Not CompulsoryOptional under partnership act 1932Registered under MCARegistered under MCACan be registered under MCA and Companies Act 2013
Legal status of entity

 

Not considered as a separate legal entityNot considered as a separate legal entityConsidered to have a separate legal entityConsidered to have a separate legal entitySeparate legal entity
Members liability

 

Unlimited liabilityUnlimited liabilityLiability of its members is limitedLimited to the extent of share capital

 

Limited to the extent of share capital
Minimum number of member

 

Sole ProprietorshipAt least 2 persons

 

At least 2 personsAt least 2 personsMinimum number of 1 person

 

Maximum number of members

 

Maximum 1 person

 

Banking Sector – 10

Other Sector – 20

No restriction200

 

Maximum 2 person
Foreign ownership

 

Not allowedNot allowedAllowed by permission from RBIAllowedAllowed if one is the director and other is the nominee. Both the director and the nominee cannot be foreign citizens
Transferability

 

Not allowedNot allowedCan be transferredCan be transferredAllowed to 1 person only
Survival

 

comes to end on death or retirement of the membercomes to end with the death of its anyone memberExistence independent on partnersLife of the company will go on foreverExistence is independent on directors or nominee
Taxation

 

Taxed as an individualTax rate is 30% on the company’s profitTax rate is 30% on profits plus cess and surchargeTax rate is 30% on profits plus cess and surchargeTax rate is 30% on profits plus cess and surcharge
Annual filings

 

Income tax returns with the registrar of the companyIncome tax return is filed with the registrar of the companyFiled with the registrar of the companyFiled with the registrar of the companyFiled with the registrar of the company