Private Limited Company
Start-ups and growing companies pick this popular business structure because it allows outside funding to be raised easily, limits the liabilities of its shareholders and enables them to offer employee stock options to attract top talent. As these entities must hold board meetings and file annual returns with the Ministry of Corporate Affairs (MCA), they tend to be viewed with more credibility than an LLP or General Partnership.
Features of Private Limited Company
For Businesses Raising Funding
Fast-growing businesses that will require funding from venture capitalists (VCs) need to register as private limited companies. This is because only private limited companies can make them shareholders and offer them a seat on the board of directors. LLPs would require investors to be partners and OPCs cannot accommodate additional shareholders. If raising funding is important, this is your best shot!
Limited Liability
Businesses often need to borrow money. In structures such as General Partnership, partners are personally liable for all the debt raised. If it cannot be repaid by the business, the partners would have to sell their personal possessions to do so. In a private limited company, only the amount invested in starting the business would be lost; the directors’ personal property would be safe.
Start-up Cost
Start-up Cost A private limited company costs around Rs. 8000 to start at the very least, excluding professional fees. However, this will be higher in some states; in Kerala, Punjab and Madhya Pradesh, in particular, the fees are much higher. You also need some paid-up capital, which can be as little as Rs. 5000 to begin with. No minimum share capital required and the Government has waived off the Government fee for incorporation of companies.
Requires Greater Compliance
In exchange for the convenience of easily accommodating funding, the private limited company set-up needs to meet the demands of the Ministry of Corporate Affairs (MCA). These range from a statutory audit, annual filings with the Registrar of Companies (RoC), annual submission of IT returns, as well as quarterly board meetings, the filing of minutes of these meetings, and more. If your business isn’t yet geared to meet these requirements, you may want to wait a while before you jump into registering a private limited company. The annual compliance costs are around Rs. 13,000.
There are different kinds of business forms and businesses and services in India. Irrespective of type of business organization, each one of them requires some Government registrations. For example: GST registration, VAT registration, If you are in the Import-Export business then you must opt for IEC registrations and the likes.
Few Tax Advantages
The private limited company is assumed to have many tax advantages, but this is not actually the case. There are some industry-specific advantages, but taxes are to be paid at a flat rate of 30% on profits, the Dividend Distribution Tax (DDT) applies, as does Minimum Alternate Tax (MAT). If you’re looking for the structure with the lowest tax burden, the LLP does offer some better benefits. Surcharges above income of 1cr also apply and HEC also applies
FAQs
The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A limited liability company (LLC) is a business structure allowed by state statute.
What are the 4 types of business? ›
Typically, there are four main types of businesses: Sole Proprietorships, Partnerships, Limited Liability Companies (LLC), and Corporations. Before creating a business, entrepreneurs should carefully consider which type of business structure is best suited to their enterprise.
What are the 7 types of business with examples? ›
The 7 types of business are as follows:
- Sole proprietorship.
- Partnership.
- Limited Liability Partnership.
- Limited Partnership.
- Co-operative.
- Corporation.
- Non-profit organisation.
Business types range from limited liability companies to sole proprietorships, corporations, and partnerships. Some businesses run as small operations in a single industry while others are large operations that spread across many industries around the world.
What are the six type of business? ›
Six major types of business structures
- Sole proprietorship.
- General partnerships.
- Limited liability partnership.
- Limited partnership.
- Limited liability company.
- Business corporations.
There are three common types of businesses—sole proprietorship, partnership, and corporation—and each comes with its own set of advantages and disadvantages. Here's a rundown of what you need to know about each one.
What is the most common business type? ›
Sole Proprietorship
Simplicity of organization-this is the most common form of business organization in the United States because it is the easiest and least expensive to establish.
What are the 4 main types of business organizations and explain each? ›
The 4 Major Business Organization Forms
- Sole Proprietorship. A sole proprietorship is the most simple and common type of business organization. ...
- Partnership. A partnership is a business organization owned by two or more individuals. ...
- Corporation. ...
- Limited Liability Company (LLC)
A business category is a high-level business area that helps to organize business terms. Business categories provided with IBM Industry Models are defined in Information Governance Catalog (IGC) as categories with properties that describe in business language the meaning of the business category.
What are the key classification of businesses? ›
Businesses are classified broadly into industry and commerce. The industry business classification is further divided into primary sector, secondary sector, and tertiary sector. The primary sector is involved in the extraction and exchange of natural resources to make profits.
Businesses are classified broadly into industry and commerce. The industry business classification is further divided into primary sector, secondary sector, and tertiary sector. The primary sector is involved in the extraction and exchange of natural resources to make profits.
How do I define my business? ›
How to describe your business
- List your brand values. First, come up with a list of the values that are important for your business. ...
- Describe what value you provide to customers. ...
- Describe your goals. ...
- Describe your customers. ...
- Determine your audience. ...
- Decide on a structure. ...
- Compose your description.
Research the industry and the competition
An effective business description starts with research into the industry you are entering and the top competitors in that market. Make use of credible sources such as news outlets, trade magazines and published studies, or speak with industry veterans.
What are the 5 basic types of business? ›
The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A limited liability company (LLC) is a business structure allowed by state statute. Legal and tax considerations enter into selecting a business structure.
What are the four types of enterprise? ›
4 types of enterprise
- Sole proprietorship. A sole proprietorship is a business owned and operated by a single individual. ...
- Partnership. A partnership is a business run by two or more individuals or entities who share ownership. ...
- Corporation. ...
- Limited liability company (LLC)
Here is how the 4 elements of a successful business should look like:
- Product. A product should be simple, concise and honest. ...
- Market. To be successful, a business needs to know their market and cater towards it. ...
- Money. Money is always an issue when starting any new business. ...
- People.
The four main business objectives are economic, social, human, and organic. Each can help a business ensure their prolonged health and growth. For example, human objectives refer to employees' well-being, while economic objectives refer to the company's financial health.
What are the four most common types of small businesses? ›
The common types are sole proprietorship, partnership, corporation, and limited liability company. Each structure has its own pros and cons. A sole proprietorship is the simplest, but the owner is personally liable for the business's debts.
