Sole Proprietorship

A sole proprietorship is the oldest and most common form of structure for a . A sole proprietorship is a business structure owned, operated and managed by a single individual.

Sole proprietorship firm is not a legal entity and does not have a distinct status than the owner.

A sole proprietorship is also known as a sole trader or simply a proprietorship. It is a business structure owned and run by a single individual and in which there is no legal distinction between the owner and the business. The identity of the is nothing but the individual himself. The owner receives all profits (after tax) and has unlimited responsibility for all losses and .

He/she is the sole authority to take decisions, enjoy all profits of the firm and is personally liable for all losses of the firm. The proprietorship form business carries unlimited business risk, as the business proprietor is individually responsible to settle all business liabilities. The proprietor's personal assets are at risk to compensate for the business liabilities.

How to set up a sole proprietorship firm :

In India, there are no specific laws for registration a sole proprietorship. A proprietor may use a name or business name other than his/her name. While selecting a name, it is advisable to select a unique name to avoid the potential infringement of an existing trademark.

Technically, no registration is required to start a business under sole proprietorship. However, to open a bank account in the name of the firm, a minimum of 2 registrations such as Shops & Establishments, Professional Tax, Service Tax, MSME, etc. under the local, state or central authority is mandatory to comply with the Know Your Customer (KYC) norms of the bank.

Even though registration is not essential, the owner has to obtain the necessary licenses specific to his/her line of business such as Shops & Establishments, Professional Tax, Service Tax, VAT, IEC, etc. A sole proprietorship can be registered under the MSME Act to avail the benefits and protection under that act. Its main features are :-

. Ease of formation is its most important feature because it is not required to go through elaborate legal formalities. No agreement is to be made and registration of the firm is also not essential. However, the owner may be required to obtain a license specific to the line of business from the local administration.

. The capital required by the organisation is supplied wholly by the owner himself and he depends largely on his own savings and profits of his business.

. Owner has a complete control over all the aspects of his business and it is he who takes all the decisions though he may engage the services of a few others to carry out the day-to-day activities.

. Owner alone enjoys the benefits or profits of the business and he alone bears the losses.

. The firm has no legal existence separate from its owner.

. The liability of the proprietor is unlimited i.e. it extends beyond the capital invested in the firm.

. Lack of continuity i.e. the existence of a sole proprietorship business is dependent on the life of the proprietor and illness, death etc. of the owner brings an end to the business. The continuity of business operation is therefore uncertain.

Advantages:

. Ease of formation

. Maximum incentive for work

. Secrecy of business

. Quick decisions and flexibility of operations

Hence, this form of organisation is suitable for the which involve moderate risk, small financial resources, capital requirement is small and risk involvement is not heavy like automobile repair shops, small bakery shops, tailoring, etc. It accounts for the largest number of business concerns in India.

One Person (OPC)

The concept of One Person Company (OPC) is a new form of business, introduced by The Act, 2013 [No.18 of 2013], thereby enabling Entrepreneur(s) carrying on the business in the Sole-Proprietor form of business to enter into a Corporate Framework. One Person Company is a hybrid of Sole-Proprietor and Company form of business, and has been provided with concessional/relaxed requirements under the Act.

One of the biggest advantages of a OPC is that there can be only one member in a OPC, while a minimum of two members are required for incorporating and maintaining a Private or a . Similar to a Company, a OPC is a separate legal entity from its members, offers limited liability protection to its shareholders, has continuity of business and is easy to incorporate. However unlike a Company or a Proprietorship, a OPC is required to nominate one person to take charge in case of death of disability of the sole member. OPC also have to comply with many of the statutory requirements similar to that of a Company; but are also exempt from a few procedural formalities, like conducting Annual General Meetings and Extraordinary General Meetings.

The concept of OPC is set to systematize the segment of proprietors, enabling them to commence business with limited personal liability as compare to unlimited personal liability as in case of Sole Proprietorship. it opens various avenues for more favorable banking facilities, particularly loans, to such proprietors and will reduce the paper work as well. Proprietors always have unlimited liability. If such a proprietor does business through an OPC, then liability of the member is limited. It gives solution to Entrepreneurs under one roof, with the best suitable options available for business and will also provide confidence to all types of entrepreneurs (Small & Medium) to enter into the Corporate World.

THE ADVANTAGES OF REGISTRATION OF ONE PERSON COMPANY

A One Person Company (OPC) Private Limited has many advantages as compared to Proprietorship firm.

1. Limited Liability Protection To Directors and Shareholder

All unfortunate events in business are not always under an entrepreneur’s control; hence it is important to secure the personal assets of the owner, if the business lands up in crises. While doing business as a proprietorship firm, the personal assets of the proprietor can be at risk in the event of failure, but this is not the case for a One Person , as the shareholder liability is limited to his shareholding. This means any loss or debts which is purely of business nature will not impact, personal savings or wealth of an entrepreneur.

2. Legal Status And Social Recognition For Your Business

One Person Company is a Private Limited Structure, this is the most popular business structure in the world. Gives suppliers and customers a sense of confidence in business. Large prefer to deal with private limited companies instead of proprietorship firms. Pvt. Ltd. business structure enjoys corporate status in society which helps the entrepreneur to attract quality workforce and helps to retain them by giving corporate designations, like directorship. These designations cannot be used by proprietorship firms.

3. Complete Control Of The Company With The Single Owner

This leads to fast decision making and execution. Yet he/she can appoint as many as 15 directors in the OPC for administrative functions, without giving any share to them.

4. Helps for Testing of and enables Funding

The OPC business helps Startup Entrepreneurs to easily test the business model, a prototype and upon building a marketable product approach Angel investors, Venture capitalists for funding and easily convert into multi shareholder Private Limited company.

5. Easy to Get Loan from Banks

Banking and financial institutions prefer to lend money to the company rather than proprietary firms. In most of the situations Banks insist the entrepreneurs to convert their firm into a Private Limited company before sanctioning funds. So it is better to register your startup as a One Person private limited rather than proprietary firm.

6. Tax Flexibility and Savings

In an OPC, it is possible for a company to make a valid with its shareholder or directors. This means as a director you can receive remuneration, as a lessor you can receive rent, as a creditor you can lend money to your own company and earn interest. Directors’ remuneration, rent and interest are deductible expenses which reduces the profitability of the Company and ultimately brings down taxable income of your business.

7. Easy To Manage and Freedom Compliance

OPC is one of the easiest forms of corporate entities to manage. Very few ROC filing is to be filed with the Registrar of Companies (ROC). No need to conduct (AGM)

Terms and Restrictions of OPC

• A person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company. • Minor cannot shall become member or nominee of the One Person Company or can hold share with beneficial interest. • An OPC cannot be incorporated or converted into a company under Section 8 of the Act. (Company not for Profit). • An OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate. • An OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of of One Person Company, except threshold limit (paid up share capital) is increased beyond Rs.50 Lakhs or its average annual turnover during the relevant period exceeds Rs.2 Crores i.e., if the Paid-up capital of the Company crosses Rs.50 Lakhs or the average annual turnover during the relevant period exceeds Rs.2 Crores, then the OPC has to invariably file forms with the ROC for conversion in to a Private or Public Company, with in a period of Six Months on breaching the above threshold limits. • Prohibits any invitation to the public to subscribe for the securities of the Company. • Restricts the right to transfer its shares

Non-Banking Financial Company (NBFC)

The reserve bank of India regulates the functioning and operations of NBFC inside the Reserve Bank of India Act, 1934.

Any company registered under the Indian Companies Act of 1956, and doing business in the areas mentioned above, can preferably apply for nbfc registration to the Reserve bank of India (RBI). If the financial assets involved in its business exceed 50% of company's total capital asset, then the Certificate of NBFC Registration is mandatory. Such as company now must have a minimum amount of capital fund equaling Rs.2 Crore (as raised from April 1999). The aspirant company will have to submit the prescribed nbfc registration form to RBI, along with other requisite documents and enclosures (in duplicate), for a comprehensive and mature consideration by RBI. If the requirements as specified in the section 45-IA of the RBI Act of 1934, are well satisfied, then RBI will grant the applicant company, the needed certificate of NBFC registration.

NBFC’s like banks except for the above differences are engaged in the business of making loans and advances, acquisition and trading of shares/stocks/bonds/debentures/securities, leasing, hire- purchase, business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. Also a company which is in the principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non- banking financial company.

Nowadays, NBFCs are prominent in a wide range of activities like hire purchase finance, equipment lease finance, consumer finance where there is a high gap between the demand and supply of funds and established banking entitles are not accessible to the borrowers. The importance of NBFCs lies in delivering credit to unorganized sector and to the small borrowers.

Some of the important regulations relating to acceptance of deposits by the NBFCs are:- . They are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. . They cannot accept deposits repayable on demand. . They cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. . They cannot offer gifts/incentives or any other additional benefit to the depositors. . They should have minimum investment grade credit rating. . Their deposits are not insured. . The repayment of deposits by NBFCs is not guaranteed by RBI.

The types of NBFCs :

Non-Banking Financial Principal Business Entity In terms of the Section 45-l(f) read with Section 45-i(c) of the RBI Act, I. Non-Banking 1934, as amended in 1997, their principal business is that of receiving Financial Company deposits or that of a financial institution, such as lending, investment in securities, hire purchase finance or equipment leasing. (a) Equipment leasing Equipment leasing or financing of such activity. company (EL) (b) Hire purchase (HP) Hire purchase transactions or financing of such transactions. finance company (c) Investment company Acquisition of securities. These include Primary Dealers (PDs) who deal (1C) in underwriting and market making for government securities. Providing finance by making loans or advances, or otherwise for any (d) Loan company (LC) activity other than its own; excludes EL/HP/Housing Finance Companies (HFCs). Company which receives deposits under any scheme or arrangement by (e) Residuary non- whatever name called, in one lump-sum or in instalments by way of banking company contributions or subscriptions or by sale of units or certificates or other (RNBC) instruments, or in any manner. These companies do not belong to any of the categories as stated above. II. Mutual Benefit Financial Company Any company which is notified by the Central Government as a Nidhi (MBFC) i.e., Nidhi Company under section 620A of the Companies Act, 1956 (1 of 1956) Company A company which is working on the lines of a Nidhi company but has not yet been so declared by the Central Government, has minimum net III. Mutual Benefit owned fund(NOF) of Rs.10 lakh, has applied to the RBI for COR and Company (MBC), i.e., also to Department of Company Affairs (DCA) for being notified as potential Nidhi company Nidhi company and has not contravened directions/ regulations of RBI/DCA. IV. Miscellaneous non- Managing, conducting or supervising as a promoter, foreman or agent of banking company any transaction or arrangement by which the company enters into an (MNBC), Managing, agreement with a specified number of subscribers that every one of Conducting or them shall subscribe a certain sum in instalments over a definite period supervising as a and that every one of such subscribers shall in turn, as determined by promoter, foreman ori.e., tender or in such manner as may be provided for in the arrangement, be Chit Fund Company entitled to the prize amount

Nidhi Company (Mutual Benefit Society)

Nidhi Company is a company registered under Companies Act and notified as a Nidhi Company by Central Government under Section 620-A of Companies Act. It is a non-banking finance company doing the business of lending and borrowing with its members or shareholders.

It is a non-banking finance company doing the business of lending and borrowing with its members or shareholders.A minimum of seven members are required to form a mutual benfit/Nidhi company. It must have minimum paid–up capital of Rs 5 lakhs. There is no restriction on maximum number of members. The shares allotted to the members are freely transferable. These companies can raise funds from general public through open invitations by selling its shares or accepting fixed deposits. These companies are required to write either ‘Mutual Benefit’ or ‘Nidhi’ after their names.. In these Company one director is not responsible or liable for another Director's misconduct or negligence; this is an important difference from that of a partnership form of business organisation. The Liability of Directors are limited to the extent of amount remaining unpaid on shares subscribed by him.

Nidhi Companies can open SB Accounts for its members. There are certain restrictions like a Director can hold office for a continuous period of 10 years only and an Auditor for a period of 5 years.

Nidhi is a company formed with the exclusive object of cultivating the habit of thrift, savings and functioning for the mutual benefit of members by receiving deposits only from individuals enrolled as members and by lending only to individuals, also enrolled as members, and which functions as per Notification and Guidelines prescribed by the DCA. Thus if you want to deposit any amount in a nidhi Company or want to avail a loan from a Nidhi Company, first you have to become a member by subscribing to shares of the Company.

The word Nidhi shall not form part of the name of any company, firm or individual engaged in borrowing and lending money without incorporation by DCA and such contravention will attract penal action

Under the existing Law, Nidhi Companies are not allowed to raise deposits beyond Rs. 20 crores. Nidhi Companies, which have deposits beyond Rs. 20 crores on the date of Notification on November 1.1999, cannot accept further deposits. If the deposits exceed the limits as on November 1,1999, the company would cease to be a Nidhi Company. Further , a Nidhi Company cannot have more than three branches in a State where it is registered.

Features:

Can raise small deposits from general public. Shares are freely transferable. Better Brand Image. Limited Liability of Directors. Perpetual existence irrespective of changes in Directors. Taxation @ 30%. Minimum Capital Requirement is Rs 5,00,000. Company has its own entity distinct from its Directors.

Offshore Company

Offshore Company is then a company incorporated outside the country of its main business activities and/or the place of residence of its principals, namely directors, shareholders and beneficial owners. Again, this is usually done to attain certain legal, financial or tax benefits. As most other companies, an offshore company may enter into , purchase property, goods and services, open bank accounts, etc.

Many individuals and who use offshore companies and planning aspire to: - Reduce tax - Protect assets - Manage risk - Enhance assets - Maintain privacy - Reduce costs

An offshore is a term that generally refers to a company incorporated under special legislation in one of the world's offshore financial centres. Offshore corporate legislation normally targets non-residents and permits them to form, own and operate companies that have broad powers, are easy to administer and, above all, are subject to minimal or even zero taxation.

Thus, for every business looking for ways to lessen their taxation burden, the best & safest option is to setup an offshore company. A similar kind of tax shelter is provided by the offshore banking. However, irrespective of whether you choose to setup an offshore company or bank offshore, take care to receive professional aid so that the legal procedures of the respective jurisdiction can be carried out smoothly.

In general, the reasons for using offshore companies for business are: - Free remittance of profits - Access to top-rated jurisdictions - Security of property rights - Accessing low cost areas - Access to tax treaties - Banking privacy - Availability of offshore experts - Access to foreign insurance - Customs and duty exemptions - Exchange convertibility - Enhanced privacy - Government cooperation - Fair treatment - Territorial taxation - Sanctity of contracts - Foreign investment inducements - Fewer restrictions - Tested legal systems - Higher yields and returns - Sophisticated banking facilities - The search for political stability - Reduced taxation

Benefits: Minimise taxes

Double tax treaty planning in relation to dividends, interest and royalty payments. Registering an offshore company can legally minimise the tax obligations of a business and this is often the primary reason for incorporating a business offshore. Non-resident companies are often tax exempt or enjoy low levels of taxation depending upon the country. However, corporate taxation matters can become very complicated and it is very important to be guided by an experienced professional. Ensuring that there is no conflict with the tax obligations in the country or jurisdictions where the business operates is essential.

Confidentiality

Non-resident companies, in some countries, are not required to publish financial information or the details of directors and shareholders. Most offshore financial jurisdictions will not reveal any of this information to any third party unless criminal or terrorist activities are suspected.

Reduced administration

The legal obligations of any directors or officers of an offshore company are often much less. The need for , other staff or a physical office can also be overcome with cost-effective virtual office services – saving time and money.

Asset protection

For those with interests, an offshore company can be valuable as a vehicle for holding assets such as intellectual property or real estate investments.

Lower set up and maintenance costs

Even with increasing anti money-laundering measures being applied and enforced to block funding for terrorism and prevent the proceeds of criminal activities from being hidden, the process of setting up an offshore company can be relatively fast and simple. This can translate into lower costs in both the establishment and maintenance of an offshore company.

Lower capital requirement

Registering an offshore company will require minimal capital, usually less than what is required for an onshore registration. In certain jurisdictions there is in fact no capital needed for registration.

Setting up an offshore company does not have to be complicated and can provide many benefits for individuals or companies involved in business across international borders.

Infinity has strong relationships with long-established and experienced international advisers giving us the ability to set up offshore registration for businesses in a variety of secure jurisdictions. To discuss the benefits of setting up an offshore company in, more detail, contact us today.

Foreign company registration

According to RBI , a company could be treated as a foreign controlled company if a) 40 per cent or more of its shares are owned in any one country outside India, b) It is a subsidiary to a parent company in any country registered abroad, c) 25 per cent or more of its shares are owned by a foreign-controlled Indian Joint Stock Company, which was not a managing agent, and d) It is a company managed by a foreign-controlled managing agency company.

A foreign company of which more than 50% paid up capital is held by Indian citizen or bodies corporate would attract more provisions.

A foreign company planning to set up in India has the two options

I Whether as an Indian company or II A foreign company.

1. AS AN INDIAN COMPANY A foreign company can commence operations in India by incorporating a company under the Companies Act, 1956 through: 1. Joint Ventures; or 2. Wholly Owned Subsidiaries

Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy.

1. a) Joint Venture With An Indian Partner Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners. Joint Venture may entail the following advantages for a foreign investor: 1. Established distribution/ marketing set up of the Indian partner 2. Available financial resource of the Indian partners 3. Established contacts of the Indian partners which help smoothen the process of setting up of operations.

1. b) Wholly Owned Subsidiary Company Foreign companies can also set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. 2. AS A FOREIGN COMPANY Foreign Companies can set up their operations in India through: • Liaison Office/Representative Office • Project Office • Branch Office

Such offices can undertake any permitted activities. Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up a place of business in India.

2. a) Liaison Office/ Representative Office

Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).

2. b) Project Office

There are number of foreign companies who have to execute short/long term projects in India. These companies have now been allowed by Reserve Bank of India to set up their office and carry on activities only related to projects being executed by them. There is no specific permission required; they only have to meet specific guidelines defined by RBI. After completion of project, office can remit surplus funds to the company.

Our specialized team can undertake all the activities related to formation of a project office, liaison with concerned agencies and other related services needed during the life cycle of the project.

2. c) Branch Office

Foreign companies engaged in and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

i. Export/Import of goods ii. Rendering professional or consultancy services iii. Carrying out research work, in which the parent company is engaged. iv. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. v. Representing the parent company in India and acting as buying/selling agents in India. vi. Rendering services in Information Technology and development of software in India. vii. Rendering technical support to the products supplied by the parent/ group companies. viii. Foreign airline/shipping company. A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

Private Limited Company (Pvt. Ltd)

A lot of aspiring entrepreneurs often hit a stumbling block when it comes to registering their company as a private limited enterprise. Many questions such as the legalities involved, the proper documentation, fees etc. As a prerequisite for setting up a private limited company, you are required to have a minimum paid-up capital of Rs 1 lakh.

Following is the features of Private limited company:

• restricts the right to transfer its shares, if any; • limits the number of its members to fifty; • For calculating the number of members, joint holders of shares are counted as single member and the members who are employees of the company including those who continue to be members after their ceased are excluded. • prohibits any invitation to the public to subscribe for any shares in, or debentures of the company; and prohibits any invitation or acceptance of deposits from persons other than its members, • directors or their relatives. • It can be registered with a minimum number of 2 members and cannot have more than 50 members (excluding employee and ex-employee members). It cannot invite the public to subscribe to its share capital and has to obtain capital by private • arrangement. • It cannot allow free transfer of its shares. • It's shares are not quoted on a recognised stock exchange. It cannot invite or accept deposits from persons other than its members, directors or their • relatives. Only two signatories to the memorandum of association are sufficient to form a private • company. • Any number of employees of a private company can become its members and their number is not counted for the purpose of maximum number of members even when the employees have left the company on retirement or otherwise. • It can commence business immediately on incorporation. • It shall have at least two Directors.

The process of legally declaring a corporate entity as separate from its owners. Incorporation has many advantages for a business and its owners, including:

1) Protects the owner's assets against the company's liabilities 2) Allows for easy transfer of ownership to another party 3) Achieves a lower tax rate than on personal income 4) Receives more lenient tax srestrictions on loss carry forwards 5) Can raise capital through the sale of stock

Limited Liability Partnership (LLP)

Limited Liability Partnership has been introduced in India by way of Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business organization that is simple to maintain while at the same time providing limited liability to the owners. A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization and one partner is not responsible or liable for another partner's misconduct or negligence. Therefore, all partners have a form of limited liability for each individual's protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents. LLP is one of the easiest form of business to incorporate and manage.

Why should I choose an LLP instead of a Partnership?

First, a little about a Partnership. Even though a Partnership is easy to start, it comes with a very high risk which is unlimited liability.

Let’s say, your partnership gets into some legal trouble and you have to compensate the affected party with Rs.10 lakhs. If you have Rs. 10 lakhs in your Partnership’s bank account, you are safe. You can settle the matter by giving that money. But in case, your Partnership’s bank account does not have that much, then you will have to sell your property, jewellery and other assets to arrange for Rs.10 lakhs and compensate the opposite party. In short, your personal assets are NOT safe in a Partnership.

LLP stands for Limited Liability Partnership. As the name suggests, the liability of the partners is limited to the amount they contribute to the LLP. So if you have contributed Rs.50,000 to the LLP, then you need to pay only Rs.50,000 to compensate someone. Your personal assets are safe in an LLP.

We strongly recommend you to consider an LLP for your business. Ask our experts to explain the difference so that you could take a well thought out decision.

Advantage of forming a LLP:

 Renowned form of business: Though the concept of Limited Liability Partnership has been recently introduced in India but it is very known concept in other countries of the world especially in service sector.

 Easy to Form: It is very easy to form LLP, as the process is very simple as compared to Companies and does not involve much formality.

 Body Corporate: Just like a Company, LLP is also body corporate , which means it has its own existence as compared to partnership. LLP and its Partners are distinct entity in the eyes of law. LLP will know by its own name and not the name of its partners.

 Liability: A LLP exists as a separate legal entity from your personal life. Both LLP and person, who own it, are separate entities and both functions separately. Liability for repayment of debts and lawsuits incurred by the LLP lies on it and not the owner. Any business with potential for lawsuits should consider incorporation; it will offer an added layer of protection.

 Perpetual Succession: An incorporated LLP has perpetual succession. Notwithstanding any changes in the partners of the LLP, the LLP will be a same entity with the same privileges, immunities, estates and possessions. The LLP shall continue to exist till its wound up in accordance with the provisions of the relevant law.

 Flexible to Manage: LLP Act 2008 gives LLP the at most freedom to manage its own affairs. Partner can decide the way they want to run and manage the LLP, in form of LLP Agreement. The LLP Act does not regulated the LLP to large extent rather than allows partners the liberty to manage it as per their will and fancies..

 Easy Transferable Ownership: It is easy to become a Partner or leave the LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement.

 Separate Property: A LLP as legal entity is capable of owning its funds and other properties. The LLP is the real person in which all the property is vested and by which it is controlled, managed and disposed off. The property of LLP is not the property of its partners. Therefore partners cannot make any claim on the property in case of any dispute among themselves.

 Taxation: Another main benefit of incorporation is the taxation of a LLP. LLP are taxed at a lower rate as compared to Company. Moreover, LLP are also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax while you distribute profit to your partners.

 Raising Money: Financing a small business like sole proprietorship or partnership can be difficult at times. A LLP being a regulated entity like company can attract finance from PE Investors, financial institutions etc.

 Capacity to sue: As a juristic , a LLP can sue in its name and be sued by others. The partners are not liable to be sued for dues against the LLP.

 No Mandatory Audit Requirement: Under LLP, only in case of business, where the annual turnover/contribution exceeds Rs 40 Lacs/Rs 25 Lacs are required to get their account audited annually by a chartered accountant. This provides great relief to small businessmen.

 Partners are not agent of other Partners: In LLP, Partners unlike partnership are not agents of the partners and therefore they are not liable for the individual act of other partners in LLP, which protects the interest of individual partners.

 Compliances: As compared to a private company, the number of compliances are on lesser side in case of LLP.

A :

A public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. Its main features are The company has a separate legal existence apart from its members who compose it.

In terms of section 3(1)(iv) of the Companies Act, 1956, means a company which is not a private company and has a minimum paid-up capital of five lakh rupees or such higher paid-up capital as may be prescribed. A private company which is subsidiary of a public company is also a public company.

A Public Limited Company is a Company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 7.

A limited company grants limited liability to its owners and . Being a public company allows a firm to sell shares to investors this is beneficial in raising capital. following are the main features:

• At least 7 persons are required to form a public limited company.but there is no limit as regards the maximum numbers.

1. Its formation, working and its winding up, in fact, all its activities are strictly governed by laws, rules and regulations. The Indian Companies Act, 1956 contains the provisions regarding the legal formalities for setting up of a public limited company. Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories.

• A prospectus or a statement in lieu thereof has to be filed with the Registrar of Companies before allotment of shares.

• It has to obtain Certificate of Commencement of Business from the Registrar of Companies before it can commence business on incorporation.

• It has to hold a statutory meeting of members and file a Statutory Report with the Registrar of Companies.

The company collects its capital by the sale of its shares and those who buy the shares are called the members. The amount so collected is called the share capital.

• The shares of a company are freely transferable and that too without the prior consent of other shareholders or without subsequent notice to the company. Any member of the public who is willing to pay the price may acquire its shares or debentures.

• It can have any number of members and it is easy for it to raise capital through public subscriptions.

• It can obtain loans from financial institutions and banks.

• The liability of a member of a company is limited to the face value of the shares he owns. Once he has paid the whole of the face value, he has no obligation to contribute anything to pay off the creditors of the company

• It shall have at least three Directors

As a company is an independent legal person, its existence is not affected by the death, retirement or insolvency of any of its shareholders

A limited company has following advantages:

Members' (the directors and shareholders) financial liability is limited to the amount of money they have paid for shares.

The management structure is clearly defined, which makes it easy to appoint, retire or remove directors.

If extra capital is needed, it can be raised by selling more shares privately. It is simple to admit more members.

The death, bankruptcy or withdrawal of capital by one member does not affect the company's ability to trade.

The disposal of the whole or part of the business is easily arranged. High status.