Business structure for startups

The business models chosen for new ventures must be suited to their requirements. There are many startup options, including Pvt. Ltd. companies, LLPs, OPCs, partnerships, and proprietorship firms. You can look over their table of comparisons and make an informed decision for your startup.

Business Structure to Begin Your Own Business in India

Companies in India are classified into different types according to various aspects, such as the necessity to register, the process to register, the amount of capital investment, and the responsibility of the business owners. Entrepreneurs in India can choose the structure they prefer to establish their businesses among the various choices available. They include private companies, public corporations, one-person businesses, section 8 partnerships, proprietorship companies, LLPs, trusts, societies, and others.

Business Type Based on the Business Activity

The list of proposed activities plays a significant role in deciding which type is most suitable to begin a business in India. For instance, companies involved in social welfare activities have different goals for selling goods or services to earn profits. Thus, they need to be registered in different categories. The following table lists the most appropriate kinds of businesses based on the type of business they are engaged in.

Cost of compliance for several business structures

The cost of compliance differs between one type of business and another based on their particular compliance requirements. The typical costs for compliance include the accounting process, GST TDS, accounting, advance payments of taxes, and payroll processing. They are almost identical for all business types. But there are some variations in the total cost, mainly due to taxes due to the annual submission of tax returns to the ROC. The table below outlines the application of annual filing for various business structures in India. You may choose to start a company that has a structure that needs minor compliances to be completed.

FDI is available for various types of companies.

Foreign direct investment is permissible for companies in India through two routes: the automatic route and the route of approval. Most sectors can receive 100 percent of FDI through the automatic route. Automatic route: If FDI is received through an automated route, there is no need to get the prior approval of the government before the time that the shares of the company are sold out to overseas investors. But once you have received the FDI, an official report on FC-GPR must be submitted to the RBI via AD Bank. AD Bank. Approval Route: Certain strategic sectors, as well as foreign direct investment (FDI) coming from a nation that shares land borders with India, are permitted only in the Approval Route, which requires prior approval from the Central Government before the FDI is accepted.

Are you unsure of how to start your own business?

Our startup consultants are available to answer your questions about the requirements, the step-by-step procedure, costs, and documents required to register a company. The cost of formation for a variety of business structures The cost of establishing a business depends upon the fee for professional services, the cost of government fees, as well as the stamp duty and tax associated with it. Many factors impact the determination of the government fee, including the initial authorised capital, the address where the registered office is located, and the number of promoters for the company. It is possible to visit our pages for different kinds of companies to learn more about their total cost of establishment. Our experts are one click away if you're still unsure of the best way to proceed. All you have to do is reach out to us, and we'll aid you from the beginning until the end.

Risk and the liability of a business structure

It is recommended to consider the potential risk or liability and then decide on the best type of business that we will be able to begin in India. A small retail store has a low risk of responsibility compared to businesses involved in international trade or dealing with dangerous chemicals. From the viewpoint of risk and liability, business structure can be divided into two classes. First, there is a situation where the owner's liability is limited to the amount to which it is subscribed. This category is where the owner's liability is inimitable. The concept of limited liability applies to entities where the business and their owners are regarded as distinct legal entities, and the owners have protection from the liability and losses that the company faces. The liability of owners in a limited liability company is limited to the share capital they have subscribed to. The table below categorises businesses according to the ownership liability of the owners.

Control and Management for Specific Business Types

Businesses, such as proprietorships and partnership companies, have no separation between management and ownership. The sole proprietor of a proprietorship is accountable for its management and control. In contrast, each partner of a partnership company, as stipulated by the partnership deed, handles the control and management of the company. But some structures, such as companies or LLPs, can distinguish between management and ownership. The table below categorizes each business based on the distinction between management and ownership. It is possible to consider the company's management as a factor that can be used to start a business in India.

The table below discusses the potential of Indian and foreign investment for various kinds of businesses within India.

Taxation of various forms for business

It is important to note that income tax is assessed in different ways on various types of businesses; we recommend that you seek a thorough consultation and review of the latest laws about paying taxes and filing tax returns. Below is a short review of the taxability of income from the typical company structure that is common in India. By considering this aspect, you can make an informed decision on the type of structure you would like to begin your business using.