How To Form A Business Establishment.
A business establishment can be incorporated in the form of a company, partnership firm, limited liability partnership, one person company, and proprietorship. Though it is not mandatory to register a company before starting a business in India however, the nature of the business establishment depends upon the requirement of the individual, such as tax exemption, funding requirements, liability assessment, membership, etc.
Formation of a Company
The incorporation of a company in India is primarily governed by the Companies Act 2013. A company formed under the companies act can be either
- A company limited by shares; or
- a company limited by guarantee; or
- an unlimited company
The companies can further be divided into public companies; private companies; one-person company. For a public limited company, the act prescribes in section 3 of the act that the minimum number of members should be 7 or more. Two or more persons are required for making a private limited company.
Other modes of registering the business in India:
- Proprietorship: A sole proprietorship firm is an entity that is owned by a single individual.
- Partnership Firm: The Partnership Act, 1932 defines partnership in Section 4 of the Act as – “An agreement between persons who have agreed to share profits of the business carried on by all or any one of them acting for all.”
- Limited Liability Partnership (LLP): A LLP is a partnership that allows the partners to have limited liabilities. An LLP has a legal entity separate from its partners and perpetual succession. The LLP Act, 2008 is separate legislation, and the provisions of the Indian Partnership Act, 1932 are not applicable.
- One Person Company (OPC): OPC provides an avenue for a person who wants to venture into a business under the guise of an organized business structure.
- Section 8 Company (Non-Profit Company): The Companies Act allows an association of persons to register under this Act a limited company for purpose of fulfilling objectives promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives.
Establishing a new business is always a challenging and exciting process in India. To build the business and gradually to upgrade is a continuous process and one must be familiar advantages and disadvantages of the available options before starting your business in India.
— Advocate Ravindra Vikram, Ph: +91-94100-22521
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