A sole proprietorship, also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole trader does not necessarily work alone and may employ other people.

The sole trader receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor, and all debts of the business are that of the proprietor; the business is not a separate legal entity. Sole proprietors may use a trade name or business name other than their or its legal name

Advantages and disadvantages

Registration of a business name for a sole proprietor is generally uncomplicated unless it involves the selection of a name that is fictitious, or assumed. In many countries, the business owner is required to register with the appropriate local authorities, who will determine that the name submitted is not duplicated by another business entity.

The owner may hire employees and enlist the services of independent consultants. Although an employee or consultant may be requested by the owner to complete a specific project, or participate in the company’s decision-making process, their contribution to the project or decision is considered a recommendation under the law.

This is transposed by the unlimited liability attached to a sole proprietary business. The owner carries the financial responsibility for all debts and/or losses suffered by the business, to the extent of using personal or other assets to discharge any outstanding liabilities. Thus the owner of a sole proprietorship may be forced to use his/her personal holdings, such as his/her car, to pay the debts. The owner is exclusively liable for all business activities conducted by the sole proprietorship and, accordingly, entitled to full control and all earnings associated with it.

To run a proprietorship business in India, the proprietor will have to obtain PAN and Aadhar. The proprietor must obtain GST registration, UDYAM registration and open a bank current account. In some states, the proprietor will also have to obtain Shops & Establishment Act registration.In addition to the basic requirements above, additional licence and permits may be required depending on the industry, state, and local regulations.

Compliances for Proprietorship

Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.

GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.

TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.

Partnership Firm Registration:

A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. In order to come into being, every partnership necessarily involves a partnership agreement, even if it has not been reduced to writing. In common law jurisdictions a written partnership agreement is not legally required, but partners may benefit from a partnership agreement that articulates the important terms of the relationship between them.

Advantages and disadvantages

Compliance For Partnership Firm

• Once the registration process of the firm is done, it is necessary for the partnership firm to obtain Permanent Account Number (PAN) and Tax Deduction Account Number from the Income Tax Department.
• A Partnership firm needs to file ITR irrespective of the revenue or loss. For partnership firm, the rate of income tax on the whole of the total income will be 30% surcharge on income tax.
• Partnership Firms having an annual turnover of over Rs. 100 lakhs are required to obtain a tax audit.
• GST registration is required for businesses whose annual turnover exceeds Rs 40 lakhs ( Rs 20 lakhs for North Eastern states). For some businesses like Export-Import, E-commerce, and Market Place Aggregator, GST registration is mandatory.
• After GST registration firms have to file monthly, quarterly and annual GST returns.

LLP (Limited Liability Partnership)

LLP form is selected by many entrepreneurs who want to start a business in India due to its low cost, flexibility, low risk, and beneficial regulatory structure. LLP allows you to form a partnership with two or more people and enjoy the feature of limited liability.

There should be at least 2 partners to start an LLP. Limited liability, perpetual existence, and well-regulated business structure are making entrepreneur select LLP. It’s also lighter on compliance and tax liability compared a private company.

However, the limited liability feature of LLP is not as comprehensive as that of a private limited. The limited liability offered by LLP cover liabilities created by the entity but not the liabilities created by fellow partners. i.e. the LLP is liable to make good the loss or liability created by if its partner in the course of the business by mistake, wrongful act or omission on his or her part.

Documents Required

• Copy of PAN
• Copy of Aadhar Card or Driver’s License or Passport or Voter’s ID
• Address Proof – Latest Bank Statement or Telephone or Mobile Bill (not older than 2 months)
• Passport Size photograph in JPEG format.
• Address Proof of place of business- (Electricity Bill/Tax Paid receipt) and No objection letter from owner of the premise

Process:

• Filing LLP name application
• Applying digital signature registration for the Designated Partners
• Preparing LLP incorporation documents
• Filing incorporation forms with MCA
• Obtaining certification of incorporation
• Applying PAN and TAN
• Preparing LLP agreement (The LLP agreement is the documents setting out the rights and liabilities, investments, roles and responsibilities of each partner.)
• Filing LLP agreement with MCA with in 30 working days.

Tax

Corporate tax: It is a form of direct tax on profits of LLP. Income of a partnership firm is taxed at 30%. In addition to this there is a 2% education cess and 1% secondary and higher education cess applicable.

Tax on LLP Partner Remuneration: Any income from the LLP to its Partners is taxed as business income in the hands of the Partner. Individual tax rates are applicable in this case.

Good and Services Tax (GST): Any business dealing in purchase and sales of goods and services in India comes under purview of Indirect Taxation. You have to enrol for GST as and when you reaches the turnover thresholds.

Audit and Compliance

Statutory Audit is not mandatory for your LLP up to a certain turnover. However if the LLP turnover exceed INR 40 Lakh or the capital contribution from partners exceed INR 25 Lakh, they are required to annually get their accounts audited. Annual reporting of financial position and operations of the LLP to Registrar of LLPs and Income Tax department is mandatory. There is a per day penalty if you miss the due dates.

OPC (One Person Company)

One Person Company (OPC) is a simplest business form suited for solo founders. OPCs are private limited companies with single owner. But, OPC’s can have more than one directors. OPC registration process also requires you to nominate someone from your circle as a nominee. The nominee can take over the business, if the original shareholder becomes incapable to run the business.

OPCs gives you the flexibility of starting up without waiting for a cofounder and convert into to a private limited later stage. It has got all the features of a private limited company –limited liability, separate legal existence, perpetual succession, concept of shareholding etc.

Documents Required

• Copy of PAN
• Copy of Aadhar Card or Driver’s License or Passport or Voter’s ID
• Address Proof – Latest Bank Statement or Telephone or Mobile Bill (not older than 2 months)
• Passport Size photograph in JPEG format.
• Address Proof of place of business- (Electricity Bill/Tax Paid receipt) and No objection letter from owner of the premise

Process

• Filing OPC name application (The name approval is going to be the most time consuming process if you do not have an unique name to your business. Registrar of companies may reject the names which are similar to existing name phonetically or in spelling. You may get a rejection if there are resembling trademarks or the name applied is generic in nature.)
• Applying digital signature certificate for the director.
• Preparing Memorandum (main objects of company, capital – shareholding pattern are covered in MoA) and Article of associations (bye laws for the operation of the business are covered in AoA)
• Filing incorporation forms with MCA
• Obtaining certification of incorporation, PAN and TAN

Tax

Corporate tax: It is a form of direct tax on profits of an OPC. Corporate taxes on profits in India are 30%, but if the turnover of OPC does not exceed 5 crores tax rate is 29%. Profit making companies requires to pay advance corporate tax on a quarterly basis

Good and Services Tax (GST): Any business dealing in purchase and sales of goods and services in India comes under purview of Indirect Taxation. You have to enrol for GST as and when you reaches the turnover thresholds.

Audit and Compliance:

Statutory Audit and maintenance of books of accounts is mandatory if you are running an OPC. You have to appoint a statutory auditor once you incorporate your one person company. Annual reporting of financial position and operations of the company to Registrar of companies and Income Tax department is mandatory.

Section 8 Company Registration

A Section 8 Company is one that:

• Is formed to promote commerce, art, science, education, research, sports, charity, social welfare, religion, environmental protection, or any other object.
• It intends to use all of its profits, income, and other earnings to promote these objectives.
• Members receive no dividends or income.

These are limited companies registered under the Companies Act, and they will be treated as such without the phrase “limited” added to their name. They could have been registered as “private limited companies” or “public limited companies.”

A previous version is Section 25 Company (under the Companies Act of 1956). Section 8 Companies are a legal designation for “non-profit organisations (NPOs) or non-governmental organisations (NGOs).”

Eligibility Criteria

• Minimum Two People: Two people are required to become a shareholder /directors of the company. However, the number of shareholders may not exceed 200.
• No Minimum Capital: There is no minimum capital set; it is based on business requirements. The registration fee is based on the amount of capital.
• One Resident Director: At least one director must be an Indian.
• Unique Name: Section 8 The company name must be unique and not identical to any existing company name or trademark.
• Social or Welfare Object: Section 8 The company aims to promote the protection of :

1.  Commerce
2. Science
3. Sports
4. Research
5. Education
6. Social Welfare
7. Religion
8. Charity
9. Protection of Environment

• No Profit Distribution: Section 8 A company’s profits should be applied only to the promotion of the goods of the company for which it is made. Members should refuse to pay dividends.

Benefits of Section 8 Company

Being an NGO or a Non-Profit Organization does not mean that the company cannot profit or income. Cannot distribute profit among promoters. All proceeds must be applied to promote the commodity. The company can earn income, but the promoters do not benefit.

Nevertheless, some exemptions and benefits have been provided for NGOs and NPO u/s 8 of the Companies Act 2013. There are many tax exemptions for such companies. Donors contributing to the Section 8 company can claim tax exemption against these donations.

• Tax Exemption: Section 8 companies are eligible for tax exemption under Section 12A and 80G of the Income Tax Act, 1961. This exemption is available to donors as well, who can claim tax deductions for donations made to the company.
• Separate Legal Entity: A Section 8 Company is a separate legal entity from its members, which means the company can own property, sue and be sued in its own name.
• Perpetual Succession: A Section 8 Company has a perpetual existence, which means it continues to exist even if its members change or if there is a change in the management.
• Limited Liability: The liability of the members is limited to the amount of their share capital in the company.
• Credibility: A Section 8 Company enjoys greater credibility and trust among the public and potential donors because of its non-profit nature.

Public Limited Company registration

A public limited Company is a business organisation that trades on a public stock exchange and has its shares available to the general public. Hence, the Public Limited Companies have to comply with multiple regulations of the government and start a Public Limited Company To register a Public Limited Company in India there should be a minimum of seven members and there is no limit on the maximum number of members/shareholders for starting a Public Limited Company.

Benefits of registering a Public Limited Company

Limited liabilities for the shareholders of the company: The shareholders of a Public Limited Company are given limited liability protection. In a situation of unexpected liability, the same would be limited only to the company and the not affect the shareholders in any way.

Perpetual Succession: A public limited company is considered as a corporate body that has perpetual succession. Means in case of death, retirement, insanity, and insolvency of one or more members/ shareholder/ directors, the company still continue its existence.

Multiple avenues of funding: A public limited company raises funds from individuals as well as from financial institutions. The funds may be also raised in equity shareholding, preference shareholding, or debentures.

Borrowing Capacity: A public company can enjoy unlimited sources for borrowing funds. It can issue equity, debentures and can accept the deposits from the general public by selling its shares. Moreover, most of the financial institutions find public companies more prominent than other unregistered companies.

Better opportunities for growth and expansion of the company: Fewer risks lead to better opportunities so that the company can grow and expand by investing in new projects from the funds raised by selling its shares in the market.

Annual Compliances for a Public Limited Company

Listed Company

Annual General Meeting: Annual General Meeting has to be held following Section 121(1) of the Companies Act, 2013. Form MGT-15 has to be filed once the AGM has been conducted

Financial Statements: The Financial Statements of the Company have to file as per Section 137 of the Companies Act,2013, read with Rule 12(2) of the Companies (Accounts) Rule,2014. The Financial statement consists of the balance sheets, cash flows statements, Director’s statement, Director’s report, Auditor’s report, and the combined financial state, meaning which is prepared in XRBL (Extensible business reporting system). This is filed via Form AOC 4

Annual Return: This has to be filed following Section 92 of the Companies Act.2013 read with the Rule 11(1) of the Companies (Management and Administration) Rules,2014. The Annual return contains the information about the directors and shareholders and is required to be filed in Form MGT7 with the relevant ROC.

Financial and Director’s Report: Adoption to the financial and director’s report is to be done in consonance with Section 173 of the Companies Act read with the Secretarial standard 1. The filing is done via form MGT 14.

Income Tax Returns: This is to be filed with the Tax department in form ITR 6 on or before September 30th of the financial year

Secretarial Audit Report: Submission of the Secretarial report is a requirement under Section 204 of the Companies Act,2013 read with Rule 9 of the Companies Rules,2014. The secretarial report has to be submitted only when the Company’s total paid-up capital is equal to or crosses Rs. 50 crores or the annual turnover is equal to or exceeds INR 50 crores or the annual turnover is exceeding Rs.250 crores. This filing did via Form MR 3

Unlisted Company

Board Meetings: An unlisted Public Limited Company is required to hold at least 4 board meetings in compliance with Section 173 of the Companies Act,2013.

Appointment of a Cost Auditor: The auditor is required to be appointed as per Section 148(3) along with Rule 6(2) and Rule 6(3A) of the Companies Rules,2014. For this form, CRA 2 is to be filed. It is pertinent to mention that the original appointment of the auditor should be done within 30 days of the Board meeting or 180 days of the financial year, whichever is earlier. When a casual vacancy arises the same is to be filed within 30 days.

Return of Deposits: Returns of deposits have to be filed with the ROC under whose jurisdiction the company falls via Form DPT 3 in compliance with rule 16 of the Companies (Acceptance of Deposit) Rules,2014.

Appointment of CFO or CS or CEO: Section 203 read with Rule 8 and Rule 8A of the Companies Rules,2014 requires the appointment of the CFO or CS or CEO within 30 days of the AGM or 6 months in case of the casual vacancy. Form MGT 14 or Form DIR 12 are filed.

Annual General Meeting: AGM for the declaration of the dividend has to be conducted in compliance with Section 96 of the Companies Act, 2013.

CSR Committee: CSR Committee has to hold four meetings with a gap of not less than 120 days between the two meetings held for discussion and approval of the CSR activities. This is done under the Companies Act,2013 read with Companies Rule,2014 and Secretarial Standard.

Director’s Disclosure: Directors are required to disclose any financial interest in the Company via Form MBP 1 in compliance with Section 184(1) of the Companies Act,2013 read with Rule 9(1) of the Companies (Meetings of Board and its Powers) Rules,2014.

Private Limited Companies (Pvt Ltd) is a popular type of corporate legal entity and most sought-after business form in India. A private limited can be formed with two directors and two shareholders. Directors and shareholders can be same people and a private limited can have other corporates as shareholders.

Private limited company got features such as
1) Limited liability – ie your liability is limited to the extent of the unpaid capital
2) Separate legal existence – a private limited is a separate legal person
3) Perpetual succession – ownership passes to the successors of shareholders automatically
4) Transferability of shares – ownership can be transferred in a matter of minutes
5) Private limited companies are the preferred entities for venture capitalists and, if you plan to raise capital from investors you should choose a private limited

Documents required

• Copy of PAN
• Copy of Aadhar Card or Driver’s License or Passport or Voter’s ID
• Address Proof – Latest Bank Statement or Telephone or Mobile Bill (not older than 2 months)
• Passport Size photograph in JPEG format.
• Address Proof of place of business- (Electricity Bill/Tax Paid receipt) and No objection letter from owner of the premise

Process

• Filing company name application (The name approval is going to be the most time consuming process if you do not have an unique name to your business. Registrar of companies may reject the names which are similar to existing name phonetically or in spelling. You may get a rejection if there are resembling trademarks or the name applied is generic in nature.)
• Applying digital signature certificate for the director’s and shareholder’s
• Preparing Memorandum (main objects of company, capital – shareholding pattern are covered in MoA) and Article of associations (bye laws for the operation of the business are covered in AoA)
• Filing incorporation forms with MCA
• Obtaining certification of incorporation, PAN and TAN

Tax

• Corporate tax
  It is the Income tax on profits of a private limited. Corporate taxes on profits in India are 30%, but if the turnover of a company does not exceed 5 crores, tax rate is 29%. Profit making companies requires to pay advance corporate tax on a quarterly basis.
• Dividend Distribution Tax
  A company is subjected to dividend distribution tax (DDT) as well when it pays dividend to its shareholders. Under the Income Tax Act, DDT is charged at the rate of 16%.
• Good and Services Tax (GST)
  Any business dealing in purchase and sales of goods and services in India comes under purview of Indirect Taxation. You have to enroll for GST as and when you reaches the turnover thresholds.
• Audit and Compliance
  Statutory Audit and maintenance of books of accounts is mandatory if you are running a private limited company. You have to appoint a statutory auditor once you incorporate your private limited company. Annual reporting of financial position and operations of the company to Registrar of companies and Income Tax department is mandatory.