The next step likely to have a profound impact on launching the new business is to choose the right structure. It may affect an aspect as simple as taxes, legal liability, and accessibility of funds or capital. When you are interested in Company Registration In Delhi you must have adequate information about some of the most popular business entities that users can choose from to achieve their aims.
The concept here is that there are various kinds of business structures that one can choose from based on one or the other factor and these structures have their strengths and weaknesses. Let’s take a closer look at the most common types to figure out which type will fit your business model the best.
1. Sole Proprietorship
The sole trader is the first type of business venture and is easy to establish as compared to the other forms of business. In this structure, there is no formal and official separation of the owner from the business organization. It is also suitable for those businesses which are small and owned by a single person.
Advantages:
- Easy to set up and run
- Complete control over the business
- Minimal regulatory requirements
Disadvantages:
- Unlimited personal liability
- Difficulty raising capital
- Business life is tied to the owner
This structure might be more appropriate for small, little-risk enterprises because of the lack of individual property safeguard however could well be less suitable for high-risk businesses.
2. Partnership
A ‘partnership’ means a relationship of two or more people in carrying out or conducting as fellows and co-owners business for gain. There are two common types of partnerships: the various classifications include; general partnerships as well as limited partnerships.
General Partnership: Liability, profit, and loss are divided in ratio in partnerships, thus making it a fifty-fifty business arrangement.
Limited Partnership: There are different forms of partners’ liability to the business and it may be limited according to the partner’s contribution.
Advantages:
- Shared responsibility
- Easier to raise capital than a sole proprietorship
- Flexibility in management
Disadvantages:
- Unlimited personal liability for general partners
- Potential conflicts between partners
- Shared profits
This research combinedly proved that role clarity with trust between the partners is necessary and crucial when entering into a partnership.
3. Limited Liability Partnership (LLP)
Unlike other business structures, an LLP is able to provide the set up of a partnership while at the same time constraining ones liability. In this case, each partner’s risk and responsibility are capped at the amount of their contribution in the business.
Advantages:
- Limited liability for partners
- Flexibility in management
- Better legal protection than a general partnership
Disadvantages:
- More regulatory requirements than a sole proprietorship or general partnership
- Requires a formal agreement between partners
This structure is appropriate in the application for producers of professional services such as lawyers, consultants, or certified auditors grouping in a law firm consultancy firm or an audit firm where different partners may have different levels of experience and capital contribution.
4. Private Limited Company (PLC)
Another common form of business comprises a private limited company also known as PLC and is particularly relevant to expanding businesses. In this structure, the business entity is separate from the owners, hence the owners’ assets are not put at risk if the business fails.
Advantages:
- Limited liability for shareholders
- Separate legal entity
- Easier to raise capital through the sale of shares
- Perpetual succession (the company can continue even if owners change)
Disadvantages:
- Higher regulatory and compliance requirements
- Cannot publicly trade shares
- More complex to set up and manage
A PLC is desirable for business that proposes immense expansion or Work in need or outside investor. It also gives a more professional outlook as compared to the sole trader or partnership business.
5. One Person Company (OPC)
The One Person Company is a new form of business venture in India which is purposely introduced for those young entrepreneur who does not have any partner but want to form a private limited company. Thus, structure allows one person to manage the business where he/she has limited liability, but owns the business.
Advantages:
- Limited liability
- Sole ownership and control
- Easier compliance than a private limited company
Disadvantages:
- Limited to only one shareholder
- Cannot raise equity funding
- Conversion to a PLC required once turnover exceeds a certain limit
The OPC structure is great for solo entrepreneurs looking for better legal protection without the need for partners.
Conclusion
Choosing the right type of business again depends on; the size of the business, type of the industry, vision and goals, and relativity to the amount of risk that can be taken. If you’re a one-person business then sole trader or OPC may be more suitable for you. In case you are going to start a business with other individuals, then you may be better off going in for an LLP or a private limited company since these options have more legal protections and allow for expansion.
It also ensures the business person avoids legal troubles and generally makes the right decision for his or her business. With the help of professionals, you can avoid numerous problems connected with company registration, as well as choose the right type of company for your business.
To learn how to register your business in Delhi and choose the right legal structure, turn to MC Maheshwari & Co. The firm’s professionals will help you avoid pitfalls and follow the best practices for starting your business.