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In India, businesses can be established under various legal structures. Each form has its own set of rules, regulations, and tax implications. Here are the primary forms of businesses in India:
Sole Proprietorship:
This is the simplest and most common form of business in India. A sole proprietorship is owned, managed, and controlled by a single individual who assumes all the responsibilities and risks associated with the business. The business is not a separate legal entity from its owner.
Also read: Pros and cons of sole proprietorship in India | How to get a proprietorship registered in India?
Partnership:
A partnership is formed when two or more individuals come together to carry on a business. It is governed by the Indian Partnership Act, 1932. Partners share the profits, losses, and liabilities of the business according to their agreed-upon partnership ratio. A partnership agreement typically outlines the rights, duties, and responsibilities of each partner.
Also read: Pros and cons of partnership in India | How to get a partnership firm registered in India?
Limited Liability Partnership (LLP):
An LLP is a hybrid of a partnership and a private limited company. It offers limited liability to its partners while still retaining the flexibility of a partnership. LLPs are governed by the Limited Liability Partnership Act, 2008, and require registration with the Ministry of Corporate Affairs (MCA).
Also read: Pros and cons of Limited Liability Partnership (LLP) in India
Private Limited Company:
A private limited company is a separate legal entity, and its ownership is divided into shares. It can have a minimum of two and a maximum of 200 shareholders. The liability of shareholders is limited to the value of their shares. Private limited companies are governed by the Companies Act, 2013, and require registration with the MCA.
Also read: Pros and cons of private limited company in India | How to get a private limited company registered in India?
Public Limited Company:
A public limited company is similar to a private limited company but has the ability to raise capital from the public by issuing shares or debentures. It must have a minimum of seven shareholders, and there is no upper limit. Public limited companies are also governed by the Companies Act, 2013, and require registration with the MCA.
Also read: Pros and cons of public limited company in India
One Person Company (OPC):
Introduced under the Companies Act, 2013, an OPC is a separate legal entity that allows a single person to own, manage, and control a company with limited liability. The OPC combines the advantages of a sole proprietorship and a private limited company.
Also read: Pros and cons of one person company (OPC) in India
Co-operative Societies:
A co-operative society is a voluntary association of individuals who come together to promote their economic interests. It is governed by the respective State Co-operative Societies Acts. Co-operative societies can engage in various businesses such as agriculture, housing, or credit.
Also read: Pros and cons of co-operative society in India
Section 8 Company (Non-Profit Organization):
A Section 8 Company is a not-for-profit organization registered under the Companies Act, 2013. It is established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, or environmental protection. Profits are not distributed to its members but are used to promote the objectives of the organization.
Also read: Pros and cons of section 8 company (Non Profit Organization)
These are the primary forms of businesses in India. Each type has its advantages and disadvantages, and the choice depends on factors such as the nature of the business, capital requirements, taxation, and the level of control and liability the business owner is willing to assume.