Registration of Business

Business Registration:

It is always better to do business than job. If you have good idea and you are well prepared, go for business registration. Make your objective final and register your business. Objective of a business is required to finalize, in which field you want to do business and for which product you are planning.

Business objective e.g. 1. To give service of transportation to manufacturing industries, which includes raw materials and finished products. 2. To manufacture automotive components.

These are the objectives of any business or any company/industry. Any objective can be decided by any business as per their products or services. Company secretary will help to decide and make precise objective. After objective definition business is to be registered.

There are various types of businesses which are discussed below:

1. Sole proprietorship: 

Any single seller can start his business by registering proprietorship. There is no need of more documentation process than other kind of businesses. It is very simple form of a business. An owner is responsible for his profit and loss. He is an individual entrepreneur or individual trader. There is no any governance of law and compliance are less. Very few documents are required to register like bank account, PAN card, registered office proof and any government approved identity proof etc. 

Advantages of sole proprietorship:

- Only one person's profit, as it is sole proprietorship. 

- Single handed and controlling by owner. 

- Simple and easy form of a business. 

- Having privacy of a business. 

- Simple types of reporting and tax filing. 

Disadvantages of sole proprietorship: 

- If owner goes in loss then it is his responsibility to handle the situation and his own assets and saving may impact. 

- It is difficult to make funds available and raise capital. Initial investment should be given by owner only. 

- In case of owner's death business can end. 

2. Private Limited Company:

This is a type of business in which a company is to be registered under the companies act and it is under private ownership. This is well known business type. Limits owner liability to their shares and there are maximum 50 shareholders.  There is restrictions to shareholders for publicly trading. For registration of pvt ltd company minimum two directors required and maximum 15 directors can be registered for a single business. Directors get DIN (Director Identification Number) along with DSC (Digital Signature Certificate) during registration process. Company needs to make an audit for company, income tax return and compliance etc. There must be a board meeting. Private limited company has to submit compliance report periodically so more burden is there than partnership company.

Advantages of Private Limited Company: 

- Financial liability is limited to shareholder's shares so shareholders will not loose their assets in case of any financial problem of a company. 

- After death of owner private limited company does not go to die but it continues its existence as it is incorporated. 

- Shareholders can not sell their shares to outside company person. There is a restriction to sell shares. 

- Minimum two directors can form a private limited company. 

Disadvantages of Private Limited Company: 

- Shares can not be listed in stock exchange. 

- Number of shareholders is maximum fifty. 

- Board meeting and filing compliance is mandatory and comes periodically which leads overburden. 

- There is a restrictions on transfer ability of shares by its articles. 

3. Partnership Business:

Under the act of partnership business two or more partners can come together and form a business. Maximum number of partners are twenty. All partners contribute for making funds available for the business. Not any person from the business partners is responsible for the loss or profit. But loss and profit is also distributed equally as their input is also equal. They can withdraw their salary periodically as per business act.

Advantages of Partnership Business:

- Partnership business gives supporting hands to business as more expertise joins business. 

- It is easy form of a business. 

- Business privacy continues with our business partners. 

- If there are more partners then funds will be more. 

Disadvantages of Partnership Business: 

- Due to unlimited liability, if business comes in financial trouble an individual's personal assets will be put at risk. 

- There is no flexibility in taking decision as more partners are there. So everyone should be sticked with same and acceptable decision. 

- It may takes more time to take decision.

4. Limited Liability Partnership:

A private limited company and partnership company to be permitted to transform in Limited Liability Partnership. This type if business is set up by an act of parliament. Each member  gets permanent account number (PAN) legally. Minimum two partners are required to establish company and process is easy. No compulsory audit is required. It has less cost to register if compared with private limited company.

Advantages of Limited Liability Partnership: 

- There is no limit on minimum requirement of contribution. 

- Minimum limit on partners is two and there is no limit on maximum partners. 

- Initial registration cost is less. 

- It is not requirement of compulsory audit and it depends on annual turnover. 

Disadvantages of Limited Liability Partnership: 

- There is a penalty on not filing compliance. 

- Shares are not listed in stock. 

- Rates of income tax are higher. 

5. Public Limited Company: 

In this type of business minimum three directors and minimum seven shareholders are required to register. It is  hard to incorporate and takes more time. It is having more disclosures and compliance from the government. It can be listed in stock exchange and shareholders can trade.

Advantages of Public Limited Company: 

- Shareholders have limited liability. 

- Shares can be sold and transferred by shareholders, there is a freedom to do so. 

- There is a permission to deposit from public. 

- No limitation on maximum number of shareholders.

Disadvantages of Public Limited Company: 

- There is no flexibility as having number of rules and regulations. 

- As public is in company there is no privacy to take decision. 

- It is only suitable when there is a large scale of business to be registered. 

- More legal formalities are required. 

6. One person company: 

Its an improvement in sole proprietorship. As the name indicated one person, a single person becomes owner of the company under the company formation act. One person will be director and shareholder. He must be resident of same country, no foreigner can register a business. The liability of owner is limited. Owner needs to make an audit for company, income tax return and compliance etc. There is no board meeting.

Advantages of One Person Company:

- There is minimum compliance burden. 

- Not required minimum capital share. 

- Limited liability protection to director and shareholder. 

- Nominee can continue company in case of death of an owner. 

- Easy process of getting loan from bank. 

Disadvantages of One Person Company:

- Only one member is key person in all activities. 

- It is applicable only for small businesses. 

- High tax rate.