Keep Some Points in your mind,
When it comes to select the right business entity for your company, there are many options. There is no one best choice for the type of business entity you legally choose, the best choice for your particular company depends upon your goals.
Choose Your Type to Start:
Before you choose to incorporate your business, it is important to consider the various advantages and disadvantages that each business structure provides. The chart may help you to decide which entity makes the most sense to help you meet your business goals.
|Particulars||Sole Proprietorship||Partnership||Limited Liability Partnership||One Person Company||Private Limited Company||Public Limited company|
|Acts Involved||No Specified Act||Indian Partnership||Limited Liability Partnership Act, 2008||Companies Act, 2013||Companies Act, 2013||Companies Act, 2013|
|Separate Legal Entity||No||No||Yes||Yes||Yes||Yes|
|Number of Members||1||2-20||2-Unlimited||1||2-200||7-Unlimited|
|Number of Directors||1-1||2-20||2-15||2-15||1-15||3-15 (Which can be extended further)|
|Statutory Audit||Not Compulsory||Not Compulsory||Depends||Compulsory||Compulsory||Compulsory|
|Foreign Direct Investment||No||No||Yes, but needs govt. approval||No||Yes, but govt. approval needed in some cases||Yes, but not allowed in Gambling, Betting Chit funds and sectors not opened for Pvt. Ltd. govt. approval|
|Annual Filings||Filed with the ROC||Filed with the ROC||Filed with the ROC||Income Tax Returns with the ROC||Income Tax Returns with the ROC||Income Tax Returns with the ROC|
|Rate of Tax||Low||High||High||Moderate||Moderate||Moderate|
|0-34.61% (Includes Surcharge & Eductaion cess)||29.87-34.61% (Includes Surcharge & Eductaion cess)||29.87-34.61% (Includes Surcharge & Eductaion cess)||29.87-34.61% (Includes Surcharge & Eductaion cess)||29.87-34.61% (Includes Surcharge & Eductaion cess)||29.87-34.61% (Includes Surcharge & Eductaion cess)|
|Name Approval with MCA||No||No||Yes||Yes||Yes||Yes|
|Borrowing||Personal Sources and Banks||-||Banks & personal Sources||Banks & personal Sources||-||-|
|Owners Remuneration||Owner's Salary not allowed||Allowed as per Agreement||Partner's remuneration allowed. Certain restrictions||Partner's remuneration allowed Certain restrictions||Allowed as per Agreement (Can't exceed 11% of Profits)||Allowed as per agreement|
|Board Meetings||No need||Not Allowed||No need||Not Allowed||To be held periodically||To be held periodically|
|Time taken for incorporation||6-12 Days||15-20 Days||15-30 Days||15-30 Days||15-30 Days||30-45 Days|
|Registration Cost||₹ 999/-||₹ 2,499/-||₹ 9,999/-||₹ 9,999/-||₹ 9,999/-||₹ 34,999/-|
When choosing a business entity, you should consider:
Here are 6 types of startup business model:
Bootstrapping your startup means growing your business with little or no venture capital or outside investment. It means relying on your own savings and revenue to operate and expand.
Funds can also be raised through-
|Advantages||Full decision-making freedom and control over the company||Taking external support to grow|
|Money would be spent more wisely||High profile investors (HNI’s-high net worth individuals)gives extra creditability to a venture|
|Full focus on the business and the product||Faster growth|
|Reinvesting profits earned||Huge skills & experience pool available|
|Founders own little money but in hand||need to repay money invested (except equity)|
|Disadvantages||Not possible in all types of business formed||Misunderstanding between founder & investors|
|Competitors with better funding will have better chances in the market||Loss of control over the company|
|Slow growth||Various restrictions about payments, equity involvements in decision making|
|Founders own smaller shareholding|
|Less financial discipline|
Business-to-Business (B2B) is a form of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business-to-business refers to business that is conducted between companies, rather than between a company and individual consumer.eg Alibaba, Amazon Business
Advantages of B2B business model
Disadvantages of B2B business model
Business-to-Consumer (B2C) to the process of selling products and services directly between a business and consumers who are the end-users of its products or services. Most companies that sell directly to consumers can be referred to as B2C companies.eg. e-commerce portals such as Amazon, Flipkart, and Snapdeal.
Advantages of B2C business model
Disadvantages of B2C startup business model
Consumer-to-Consumer (C2C) when consumers sell directly to consumers and the best and the oldest example for C2C transactions would be the classifieds section of any newspaper or auctioning a product or selling it via OLX
Advantages of C2C business model
Disadvantages of C2C startup business model
Subscription Based are based on the idea of selling a product or service to receive monthly or yearly recurring subscription revenue. They focus on customer retention over customer acquisition. In essence, subscription business models focus on the way revenue is made so that a single customer pays multiple payments for prolonged access to a good or service. The best and biggest example for this is service like Netflix and Hotstar who build a contract with different companies like HBO and offer their shows to end consumers in return for subscription fees.
Advantages of the subscription-based model
Disadvantages of the subscription-based model
On-Demand Business model fulfills consumer demand on the basis of immediate access to goods and services. It is a business model driven mostly by technology companies. They’ve created efficient digital platforms that make more efficient use of existing unutilized assets and infrastructure at scale.eg. Airbnb, Ola, and Trivago. They provide all the information about tickets and hotel rooms instantly. Hence, people are able to book a room or flight without even physically looking at them.
Advantages of On-Demand Business model
Disadvantages of On-Demand Business model
Freemium business model allows users to utilize basic features of a software, game or service free, then charges for "upgrades" to the basic package. It is a popular tactic for companies just starting out as they try to lure users to their software or service. It is a clever strategy of drawing the customers to their service with a free product along with making certain features exclusively available to premium users.eg Dream 11. It provides players to not only compete against each other but also gain profit or money when they invest money into their app.
Advantages of the freemium business model
Disadvantages of the freemium business model