A General Partnership is a business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in the Partnership Deed. This form of business registration is best suited for those business looking to manage business within their limited reach and without much legal burdens.
Read also: 7 TO KNOW FACTS ABOUT BANGALORE COMPANY REGISTRATION
It’s hard to digest all if it is at one stretch. So, an introduction about a business or start up formation options is vital for deciding the right form of company registration in India. . The Companies Act, 2013 and Limited Liability Partnership Act, 2008 have brought more business formation choices for entrepreneurs. The key factors that influence the legal form of a business are nature of your business, customer’s profile (corporate, small businesses or individuals ), expected business turnover, scalability of your business idea and future funding prospectus.
Every entrepreneur/promoter should take the pain to know about the pros and cons of these legal forms before going for partnership firm registration in Bangalore
Formation | Partnership | Private Limited Company | Limited Liability Partnership | One Person Company (OPC) | Sole Proprietorship |
---|---|---|---|---|---|
Do I need a Registration? | Yes. Register with Registration of Firms | Yes, Ministry of Corporate Affairs registers Private limited company under the Companies Act, 2013 | Ministry of Corporate Affairs registers an LLP business under the Limited Liability Partnership Act, 2008. | Yes, Ministry of Corporate Affairs registers One Person Companies under the Companies Act, 2013 | No legal requirement to do-so. |
What type of business names can I keep? | Firm can use any name that he likes, but avoiding names already trademarked is advisable. | Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies | Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies. | Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies | Promoter can use any name that he likes, but avoiding names already trademarked is advisable. |
How risky is it for me? | Partners will stand liable for the liabilities of the business. | Private Limited Company is a separate legal person in the eyes of law, registered under Companies Act 2013. So, the shareholders are not responsible for business liabilities. | “LLP” is a separate legal person in the eyes of law, registered under LLP Act 2008. So, the partners are not responsible for business’ liabilities. | OPC is a separate legal person in the eyes of law. So, the share holder is not responsible for business liabilities. | Promoter will stand liable for the liabilities of the business. Because the business is not considered as a separate legal person/entity. |
To what extent is each member of the business liable? | Unlimited liability. | Liability is limited to his/her share capital contribution. | Liable to the extent of their contribution (in money, in kind or in services extended) to the LLP. | Liability is limited to his/her share capital contribution. | Unlimited liability. |
Tell me the minimum membership limit. | 2 People | 2 People | 2 People | 1 People | 1 People |
Is foreign ownership allowed? | No | Yes | Yes | NA | NA |
How much will I get taxed? | Profits get taxed at 30% plus cess and surcharge is applicable if profit exceeds 1 Cr. | Profits get taxed at 25% plus cess and surcharge is applicable if profit exceeds 1 Cr. | Profits get taxed at 30% plus cess and surcharge is applicable if profit exceeds 1 Cr. | Profits get taxed at 25% plus cess and surcharge is applicable if profit exceeds 1 Cr. | Individual income tax slab of proprietor is the basis of taxation. |
What are my annual tax filing norms? | Only Income Tax must be filed for the income of firm and partners. | Every financial year Private Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately. | Every financial year Annual Statement of Accounts & Solvency and Annual Return with the Registrar.Plus, Income Tax must be filed separately. | Every financial year OPC must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately. | Only Income Tax must be filed on the basis on proprietor’s income. |
Is Annual Audit Required? | Only income tax audit is applicable if the turnover exceeds limit of 2 Cr | Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs | Statutory audit is to be conducted if partners contribution exceeds 25 lakhs or turnover exceeds 40 lakhs. Income tax audit is applicable if turnover exceeds 2 Crs | Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs | Only income tax audit is applicable if the turnover exceeds limit of 2 Cr |
Can I convert my business into any other legal form?? | Yes, Partnership can be converted into a Private Limited Company or LLP. | Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company. | Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company. | OPC could be converted into any legal form. But, it depends on the number of promoters, business operations, funding requirements and other factors. Limited Liability Partnership or Private Company is preferred by promoters when seeking expansion of their OPC | NO |
Compulsory Conversion to Private Limited Company Applicable? | NO | NO | NO | NO | Yes. If turnover exceeds 2 cr |