Types Of Business-Comparison

The business models chosen for new ventures must be suited to their requirements. There are many startup options, including Pvt. Ltd. companies, LLPs, OPCs, partnerships, and proprietorship firms.

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Basic overview
Business Type
How to Start

Business structure for startups

The business models chosen for new ventures must be suited to their requirements. There are many startup options, including Pvt. Ltd. companies, LLPs, OPCs, partnerships, and proprietorship firms. You can look over their table of comparisons and make an informed decision for your startup.

Business Structure to Begin Your Own Business in India

Companies in India are classified into different types according to various aspects, such as the necessity to register, the process to register, the amount of capital investment, and the responsibility of the business owners. Entrepreneurs in India can choose the structure they prefer to establish their businesses among the various choices available. They include private companies, public corporations, one-person businesses, section 8 partnerships, proprietorship companies, LLPs, trusts, societies, and others.

Business Type Based on the Business Activity

The list of proposed activities plays a significant role in deciding which type is most suitable to begin a business in India. For instance, companies involved in social welfare activities have different goals for selling goods or services to earn profits. Thus, they need to be registered in different categories. The following table lists the most appropriate kinds of businesses based on the type of business they are engaged in.

Profit from the sale Financial Service Non-Profit
Private limited company Bank Section 8 Company
Public limited company NBFC Society
One-Person Company Asset Reconstruction Company Section 8 Company Society TRUST
Limited liability partnership Microfinance Institutions
Partner Firm Nidhi Company
Proprietorship Firm Payment Banks
Hindu Undivided Family

Cost of compliance for several business structures

The cost of compliance differs between one type of business and another based on their particular compliance requirements. The typical costs for compliance include the accounting process, GST TDS, accounting, advance payments of taxes, and payroll processing. They are almost identical for all business types. But there are some variations in the total cost, mainly due to taxes due to the annual submission of tax returns to the ROC. The table below outlines the application of annual filing for various business structures in India. You may choose to start a company that has a structure that needs minor compliances to be completed.

Business Type ITR Annual Return Audit
Private Limited

FDI is available for various types of companies.

Foreign direct investment is permissible for companies in India through two routes: the automatic route and the route of approval. Most sectors can receive 100 percent of FDI through the automatic route. Automatic route: If FDI is received through an automated route, there is no need to get the prior approval of the government before the time that the shares of the company are sold out to overseas investors. But once you have received the FDI, an official report on FC-GPR must be submitted to the RBI via AD Bank. AD Bank. Approval Route: Certain strategic sectors, as well as foreign direct investment (FDI) coming from a nation that shares land borders with India, are permitted only in the Approval Route, which requires prior approval from the Central Government before the FDI is accepted.

Are you unsure of how to start your own business?

Our startup consultants are available to answer your questions about the requirements, the step-by-step procedure, costs, and documents required to register a company. The cost of formation for a variety of business structures The cost of establishing a business depends upon the fee for professional services, the cost of government fees, as well as the stamp duty and tax associated with it. Many factors impact the determination of the government fee, including the initial authorised capital, the address where the registered office is located, and the number of promoters for the company. It is possible to visit our pages for different kinds of companies to learn more about their total cost of establishment. Our experts are one click away if you're still unsure of the best way to proceed. All you have to do is reach out to us, and we'll aid you from the beginning until the end.

Risk and the liability of a business structure

It is recommended to consider the potential risk or liability and then decide on the best type of business that we will be able to begin in India. A small retail store has a low risk of responsibility compared to businesses involved in international trade or dealing with dangerous chemicals. From the viewpoint of risk and liability, business structure can be divided into two classes. First, there is a situation where the owner's liability is limited to the amount to which it is subscribed. This category is where the owner's liability is inimitable. The concept of limited liability applies to entities where the business and their owners are regarded as distinct legal entities, and the owners have protection from the liability and losses that the company faces. The liability of owners in a limited liability company is limited to the share capital they have subscribed to. The table below categorises businesses according to the ownership liability of the owners.

Unlimited Liability of Owners Limited Liability of Owners
Proprietorship Company
Partnership OPC

Control and Management for Specific Business Types

Businesses, such as proprietorships and partnership companies, have no separation between management and ownership. The sole proprietor of a proprietorship is accountable for its management and control. In contrast, each partner of a partnership company, as stipulated by the partnership deed, handles the control and management of the company. But some structures, such as companies or LLPs, can distinguish between management and ownership. The table below categorizes each business based on the distinction between management and ownership. It is possible to consider the company's management as a factor that can be used to start a business in India.

S.No Business Type Ownership Management Control
1. Proprietorship One person called the proprietor is the owner of the proprietorship business. The owner invests the entire capital and has access to all earnings. There is no distinction between ownership and management of a sole proprietorship company. The proprietor is the one who controls and oversees the business on his own.
2. Partnership The partners collectively control the company in a partnership according to their capital share ratio. All partners control and manage the business according to the partnership agreement.
3. LLP In an LLP, the partners jointly are the owners according to their capital share ratio. The LLP's supervision and management are the designated partners' responsibility.
4. OPC Only one person in the OPC is referred to as the OPC's shareholder. He is also the sole OPC owner. The control and management of OPC are the duties of the directors.
5. Private Limited Shareholders have a private limited company proportionate to the proportion of their capital subscribed. A company's board of directors is accountable for the control and management of the company.

The table below discusses the potential of Indian and foreign investment for various kinds of businesses within India.

100% Indian Investment Permitted 100% foreign investment is permitted. Investments are permitted to be made by NRIs or OCIs.
Private limited company Private limited company Company
LLP Partnership
Partnership firm Proprietorship
Proprietorship FDI in partnerships and proprietorships is permitted only on a non-repatriation basis.
Section 8 Company

Taxation of various forms for business

It is important to note that income tax is assessed in different ways on various types of businesses; we recommend that you seek a thorough consultation and review of the latest laws about paying taxes and filing tax returns. Below is a short review of the taxability of income from the typical company structure that is common in India. By considering this aspect, you can make an informed decision on the type of structure you would like to begin your business using.

S.No Business Type Rate of Income Tax
1. Proprietorship The proprietorship isn't considered a distinct entity under the law; therefore, the proprietorship business's income is reported in the ITR filed by the proprietor. This means that no separate ITR is required for the proprietorship company. Individual slab-based taxation of 5%–30 percent applies to proprietorships dependent on the earnings they earn. The deduction provided under Section 80C of the U.S. tax code can also be applied to the owner's earnings. The individual tax rate slabs for proprietorships have been described below. Under the New Income Tax Regime, U.S. 115 BBAC No The total revenue Tax Rate 1. As high as Rs. 2,50,000 NIL 2. Rs. 2,50,001 to Rs. 5,00,000 5% 3. Rs. 500001 up to Rs. 7,50,000 10% 4. Rs. 750,000 to 10,00,000 15% 5. Rs. 10,001 to 12,50,000 20% 6. Rs. 12,500,001 to Rs. 15,00,000 25% 7 More than the amount of Rs. 15,00,001 30% In an old income tax regime No All Income Tax Rate 1. up to Rs. 2,50,000 Nil 2. Rs. 2,500,001 to Rs. 5,00,000 5% 3. Rs. 5,00,001 to 10,00,000 20% 4. More than the amount of Rs. 10,00,001 30%
2. Partnership and LLP According to the Income Tax Act, all of the provisions that apply to a partnership firm apply to an LLP. The income tax rate for the According to the Income Tax Act, all of the provisions that apply to a partnership firm apply to an LLP. The income tax rate for the partnership firm and the LLP is 30% flat on the total income earned. The tax rate for income earned by companies can range from 15% to 30%, depending on the particular category. There are two kinds of businesses, as described below. Newly Incorporated Company: For businesses formed on or after October 1, 2019 and that are not eligible for any concession, deduction, exemption, or concession under the Income Tax Act, the tax rates are listed in the table below.
3. Company Specifications Manufacturing Company Other Company Tax Rate 15% 22% Surcharge 10% on tax 10% on tax Cess 4% on tax and cess 4% on tax and cess Ratio Effective 17.16% 25.168% If the company does not belong to the category mentioned above, the tax rate for income is 25% if your turnover falls below Rs. 400 crore and 30% when the total turnover exceeds Rs. 400 crore. The surcharge and education cess at the rate applicable are added over and above the income tax rate, which is the base rate.

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