You’ve probably seen Limited, Private Limited or LLP written at the end of the company or been worked in a Company on that employment ID of Private Limited. These suffixes after the name are the duly Registered Companies in India and their details are very well verifiable at the public database of the Ministry of Corporate Affairs.
A lot of the efforts you’ve been made to find out the best options before coming into company formation.
So, which is a better, Proprietorship firm? Partnership? Pvt Ltd? OPC? Nidhi? What type of license like Fssai? ISO? Startup? What is the cost? Let’s sit down and talk about it.
As the economy’s picked up over the past few years, so has the Company.
Here are a few biggest benefits of registering a company instead of a Proprietorship Firm or Partnership Firm:
The directors and shareholders of the company have no personal liability towards of any unfortunate event happens like, business loss, failure in the business.
Hence Registered Company protects the personal assets of the directors, shareholders in the unfortunate event which is not in control with anybody.
Legal Entity status or Recognition:
A registered company like a Private Limited Company or Limited Company, LLP, Nidhi company, exists separate from its directors or Members, Registered company status enables you to take more seriously than other unorganized business-like firms.
Operations of a Registered company give more confidence to the suppliers, Bankers who will prefer to dealing with Registered companies.
Easy to attract to a talented workforce and achieve strategic goals through employees by designating a wide range of positions like Executive directors, operation directors etc.
The existence of the company remains forever:
One of the popular sayings is that Directors or promoters may come and go, but the existence of the Company remains forever. it has separate legal existence from the eyes of the law.
Once a company is registered it remains alive, until it’s closed down as per the Companies Act, 2013.
The death of the promoters, directors does not affect the continuity of the company.
Big Project cost and risk factors:
For businesses that need high capital outflow, usage of hi-tech systems, wherein financial stake is high, Banks and financial institutes prefer the Registered company and insist to have a legally registered company.
Directors and management of the company can easily transfer their stake from one to another, This will saves time, the money for the business owners, and saves a big amount of stamp duty.
In the company form of business, a separate agreement can be executed between the company and its Directors, promoters, employees, etc.
It’s also possible, the promoter becomes an employee of the company and draws salary.
The person at the same time become, Shareholder, director, employee, a creditor of the company example:
As a director, he can draw salary from the company
As a shareholder, he can draw dividends from the company
As a landlord/lesser, receive rent from a company
As a creditor, he can lend and receive interest from Company
As a supplier, he supplies the goods or services from his family business to the company.
As a company, it has better avenues for borrowing of funds to the business. It can issue Debenture certificates, private placement, issue of preference share capital etc. accept deposits from the public, even it borrow money from banks, as they prefer to lend to Companies rather than Firms and proprietorships.
Sole proprietorship or Firm pay income tax. Companies pay corporate tax on there taxable Profit, the taxable profit arrived after offsetting all types of allowances, expenses, which reduces the net taxable income drastically and the result is a minimal or lower tax on the company Net profit.
Raising money from the Public:
Limited companies can raise large amounts of capital from the public by issue of shares and deposits. Private companies raise capital from issue of debentures, private placement etc.
The amount of money you spend, to manage the company compliance is depending upon the company Turnover and invested capital, the license you required, but keeping company with good compliance, certainly, get goodwill out of the market. Think of the per-year cost of compliance cost ranges from INR 8,000-50,000 depending upon the turnover, paid-up capital of the company.
Types of Companies:
Pvt Ltd company registration or private limited company registration
The most preferred Company in the industry is Private Limited, which enables businesses to start quickly with the minimal procedure, minimum of 2 people can start this as promoters cum Directors can start a private company within 3 days of time. It enjoys all those company benefits with seamless business across the industry. The maximum number of promoters or shareholders allowed under Pvt is 200 only.
One person company registration or OPC
as the name suggests, it’s one person Shareholder company, where the business owner control is with one person only, all the benefits that exists from Company can be utilized under OPC, the restriction under OPC is the maximum turnover limited to 2 Crore only
Ltd or Limited company
Under the limited company, where there is no limit in the number of shareholders to join, where businesses looking large-scale operations, and a big chunk of cash resource from public, LTD company is ideal. The minimum director criteria is 3 directors and 7 promoters to format the public company, which has wider capital access.
The Limited Liability Partnership Firm (LLP), is an advancement of traditional Firm and few characteristics of Company, the LLP Registration cost and Maintenance is quite cheap compared to other types of Registration.
The LLP’s type of business is ideal, where the business is purely on service-oriented and risk-sharing is quite high. The main disadvantage under LLP’s is the public perception of capital pooling from Banks and financial institutes. We recommend LLP for small service providers, consultants, freelancers, professional service providers who intend to avail themselves the various benefits.
Llp registration in Bangalore, Karnataka can be done within 5 working days.
Nidhi companies or NBFC
To run the financial institution within in a group of members, the Nidhi business is ideal.
Members of this group, make deposits, borrow money for their mutual benefits. As per section 406 of the companies Act, 2013, Nidhi Company is not required to comply with the RBI.
NGO or Registered NGO
It’s purely for social welfare, education, healthcare, you can start with the main objective of public service, social reforms as per their deed signed between the settlors and management.
If you have a Registered NGO, with 80G and 12A registration, then you can list for the Corporate social responsibility(CSR) fund pooling eligibility from the corporate world.
Sole proprietorship business not required any license, as this is linked to a person individual PAN number for all his business transactions. It’s suitable for businesses where exposure is very less like income is below Rs.50,000 per month. The cost for running is very less, if you’re starting a small business for family income and working yourself only then, consider of proprietorship is best option, as its suits for Boutique, a coaching center, small food hub, freelancers. The immediate advantages are easy formation, minimum compliance; you start it and then take GST if required. the disadvantage under this is, less access to capital; people perceive proprietorship as a tiny business.
Firm Registration is also, an unincorporated entity like proprietorship business, where here the owners are more than 2 number, it can be formed by just entering an agreement between the 2 or more people or it can be registered through respective State Act, wherein, the firm registration in Bangalore has been decentralized based on the zone and the visibility of a business is zero, this is suitable for business where they have limited resources and minimal risk exposure in the business. Under the partnership, partners have to share the risk of the business. Partnership firm registration cost ranges from INR 10K to 12K, the registration of firm gives separate PAN card.
Types of License Required:
Fssai or Fssai Registration or Fssai License
The Fssai registration is a must, where the objective of the business is to do hotel/ food industry, retail of food items, selling in the online market like Zomato, Swiggy. The Fssai License cost is based on the business turnover, the basic cost for License cost starts from Rs.2500 for the business turnover up to Rs.11 Lac.
Dipp Registration or Startup India Certificate
The Government, to promote the business and industry, the startup India scheme has been rolled out. The registration is voluntary. This gives a host of benefits under startup-like tax benefits for 3 years, easier compliance, IPR benefits, bank loan subsidy, etc.
Shop and establishment registration or Shops and Establishment
in Karnataka, every business shall make shops and establishment registration, The registration is online by login into ekarmika enables for access of registration with few documents. The Government fee to get registration is based on the total number of employees. For Zero employees the cost is Rs.300 only.
Trade license registration
In Karnataka, if you have a business carrying any business which has been listed under X of the Karnataka Municipal Corporation Act, are mandatorily required to obtain Trade License from BBMP. Business are commonly covered under Trade license are: Food processing units, Hotels, Marriage halls, nursing homes etc., Trade license cost is based on the location, total measurement area of the business.
ESI PF Registration
If you have employees for 20 and above, then PF and ESI registration is compulsory. The PF can register voluntary basis even the employee count is less than 5 numbers for the benefit of retirement benefits. There is no Government fee for the registration of PF and ESI
PT registration or professional tax registration
It is levied by State Government, PT is must be registered the person who is engaged in the business or services. The yearly PT renewal cost is Rs.2500, and the employees salary if exceeds Rs.15,000 per month, has to pay Rs.200 as PT.
ISO 9001 certification or ISO certification
It’s a certificate about the quality management system followed by a Company. it’s a voluntary Certificate and it brings attention the customer about the quality management, continual improvement, process approach. The cost of the ISO certification starts from Rs.3000.
Minimum Requirement for Formation Companies:
Minimum paid-up capital of the private company
Capital can start from INR 1 to no limit based on your business requirement
List of Directors as per Company structure and there a shareholding pattern
Legal papers like director KYC documents
Documents and procedure:
After you choose a form of business you want to start, then below are the Registration steps.
Time for Registration
Registration online, Once we received all those documents, we need to file with the company registrar (MCA) and get the Registration online within 5 working days.
Mca registered company
Ministry of Corporate Affairs is the custodian and issues the Certificate of Registration within 3 working days from submission of complete records
Registered Company Wins
When it comes to goodwill in the general public, other stakeholders, registered companies obviously wins out.
If you’re ready to make a planned business with careful investment, check out our Company Registration team today.
We, Team IN Filings, provide end to end services on
If you have any questions before starting the best business type of company, please reach us to answer
Call us at : +91 7019827351
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