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

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