Form of Business -An Opportunity to Achieve Dreams

1. Form of Business Form of Business An Opportunity to Achieve Dreams

2. Background!! In today’s world, where everyone is trying to become his own Boss by doing his business and achieving his dreams. Thanks to the Government and its “Make in India” campaign, which has relaxed the norms of doing business in India and provides numerous opportunities to the new entrepreneur to start his own business? Government has eased the process to start one’s own business. In India, there are various form of business, which a person can opt according to his needs, requirements and financial capacity for achieving his dreams. Therefore, it is very important for a person to understand the form of business available to him.

3. Background!! The various forms of business can be classified as follows: • Sole Proprietorship; • Partnership; • Societies; • Limited Liability Partnership {LLP} • Company: • One Person Company; • Private Limited Company • Public Limited Company

4. Sole Proprietorship! This is the most simple and easiest form of doing business. The sole Proprietor (Single Person) is the owner of the business. There is no specified enactment to govern this form of business or running of sole proprietors business. Sole Proprietor is solely responsible for all the acts and contracts entered in the course of doing business and for Profit and Losses But there are some restrictions in sole proprietorship concept, as the bank does not feel safe and don’t prefer to provide loan to the owner and there is no concept of funding in case of sole proprietorship as there is no specific law in India which govern and control the sole proprietorship.

5. Features of Proprietorship • It is NOT a separate legal entity. • Proprietor has unlimited liability. • Proprietor is personally liable for all the debts and losses of the business. • Proprietor can sue or be sued in its own name.

6. Partnership!! Under partnership form of business, 2 or more person enter into an agreement to enter into a common business in order to share profits earned and shall be personally liable for loss incurred. It is governed by the Partnership Act, 1932 and registration of the firm is at the discretion of Partners and the same is optional as per the abovesaid Act. However, a registered firm can take legal action against the firm, partners or third party. It is easy and inexpensive form of business as compared to Company form of business. Partnership firm can be formed by drafting a Partnership Deed and business can be immediately started subject to relevant sector conditions and local laws etc.

7. Features of Partnership • There should be at least 2 persons to form the Partnership Firm; • Every partner act as an agent of another partner; • Business of Partnership firm can be carried on by all the partners or any one of them acting for all; • Every partner contributes his capital in the agreed ratio; • Liability of each partner is unlimited; • Partnership Firm can be registered firm or un-registered firm under the Partnership Act, 1932.

8. Societies!!! Society is an association person which is formed for promoting art, charity, research, religion, commerce or any other useful purpose. The Society Registration Act, 1860 was passed for the registration of society in order to give them the status of a corporation or a Legal person. The Societies are formed for the benefit of a particular group or community. This type of business earn profits for the benefit of the society. Therefore the members elect their representative, who shall have the contractual authority to do business for the welfare of society.

9. Features of Societies • Easy formation; • Limited Liability of members; • Perpetual existence; • Social services.

10. Limited Liability Partnership!!!! Now days, people are opting for Limited Liability Partnership for doing business due to its special and unique features. In actual it is a combination of both Partnership and Limited Company. Limited Liability Partnership (LLP) is a separate legal entity. In general law a LLP is regarded as a body corporate. It is managed by the LLP Agreement entered into between the LLP partners. Partners in LLP do not receive dividend, but enjoy direct access to the flow of income and expenses.

11. Features of Limited Liability Partnership • No requirement of minimum capital contribution • Minimum of two partners are required to form a LLP • No restrictions on the maximum number of partners. • Partner’s liability is limited to the extent of the agreed contribution in the LLP agreement. • Minimum annual compliances as compared to Company

12. Company!!!!! • This form of business is most preferred as they are incorporated as a separate legal entity. • Therefore, the members are different from the Company and are not liable for the acts of the Company. It has perpetual succession. • Member may come and member may go but the company goes forever, it continues to exist even if all its members die. • One Person Company • Private Limited Company • Public Limited Company

13. One Person Company One person company is an another type of Private Company having a sole member and a nominee of the Sole member. All the decisions are taken by the sole person and is solely liable for the acts. After his death, the powers are transferred in the hands of the Nominee. An One Person Company has to mention the word “OPC” in its name.

14. Features of One Person Company • Only a natural person who is resident in India and citizen of India can only be appointed as member of One Person Company. • Maximum turnover a One Person Company can make is 2 Crore. Also the maximum share capital Rs. 50,00,000/- • Only one shareholder is allowed in One Person Company. • It is a separate legal entity • Minimum number Director is 1.

15. Private Company Private Company shall have atleast 2 members and maximum 200. The members appoint their representative called as Director who shall look after the day to day management. Its shares can not be traded on any stock exchange i.e. BSE or NSE, nor issued to public via Public Issue. Companies Act, 2013 has granted a number of advantages and exemptions to private limited companies in order to facilitate doing business in India easily and effectively without much compliance and incurring much cost.

16. Features of Private Limited Company • Shareholders right to transfer shares is restricted • The number of shareholders is limited to 200 • An invitation to the public to subscribe to any shares or debentures is prohibited. • Minimum number of Director is limited 2.

17. Public Company Public Company shall have minimum 7 members and no limit for maximum number. The shares of a Public Company are freely transferable and the holders have easy exit option. Further shares of Public Limited Company can also be traded on stock exchanges like BSE & NSE after complying the suitable provisions of the law and its share can also be issued to public via Public Issue.

18. Features of Public Limited Company • The liability of its members is limited • Its shares are freely transferable • No limitation on maximum numbers of members. • Open invitation to public to subscribe to its shares is allowed. • A public company is required to have at least three directors.

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