Starting Up
Right Entity for the Right Business and Initial Compliances
The Right Entity
One of the key decisions to be made while starting a business is to choose the right business vehicle for it. This decision depends on multiple factors ranging from whether the business requires capital infusion through equity investors, what are the number of founders, what is the compliance cost, etc. among many other considerations. It lays down the foundation for the organisation with respect to the formation of the legal entity through which to run the business and the future of the compliances related to such entity.
Why SKR?
SKR draws on its rich experience of 40 years of client service to enable the entrepreneur to select the right business vehicle for their business enterprise. We understand the needs of business and would be delighted to be a partner in scripting your success story!
We are strategically poised to help you to incorporate the entity which as per the extant laws in India, can be a private limited company, a DIPP registered start up, LLP, Partnership Firm, Sole Proprietary concern, etc
Key Parameters
The table below lays down various parameters and their pros and cons under different types of business vehicles
Parameter | Sole Proprietor | Partnership Firm | LLP | Private Limited |
|---|---|---|---|---|
Ease of creation | Easiest | Easy | Comparably more formalities | Higher number of formalities |
Future registration as a start-up GOI | Not Possible | Not Possible | Possible | Possible |
Members’ Liability | Unlimited Liability | Unlimited Liability | Limited Liability | Limited Liability |
Co-Founders | Not Possible | Limited number of partners & no distinction between ownership & management | Limited number of partners & no distinction between ownership & management | Can have multiple shareholders. Clear distinctions between ownership & management |
Funding | Only own funds or Loans | Funds contributed by partners and loans | Funds contributed by partners and loans | Equity funding can be raised and loans |
ESOPs | Not Possible | Not Possible | Not Possible | Can be given to acquire good talent |
Accountability | No Accountability to outsiders | Accountable only to partners | Accountable only to partners | Accountable to Investors |
Wrapping Up | Easy | Easy | Comparably more formalities | Higher number of formalities |
Maintaining Records | Minimal | More than sole proprietory concern | More than partnership firm | Multiple documents to be maintained to comply with various laws |
Compliance Cost | Minimal | More than sole proprietory concern | More than partnership firm | Highest |
