To set up a business, it is not an easy task, it involves several difficulties and challenges for an entrepreneur. When it comes to choosing a single right business structure, it affects the day to day business activities and depends on various factors how the profits and losses are distributed, legal compliance, costs and obligations involved which makes us decide the right business structure and on that basis the operation of the company takes place.
If we talk about the right business structure for your company, then the whole decision is not solely put forth as there are different types of business entity such as private limited company, sole proprietorship, one person company, partnership firm registration and limited liability partnership. The different factors which obstruct when one needs to decide the right business structure - flexibility and reliability, complexities, liabilities, capital investment-specific license and regulations one needs to have to operate.
Sole Proprietorship - If we talk about this business entity, then it is one of the easiest forms of business structure and is favorable for one person, who is solely manage the business, and it doesn’t involve high costs, as the company does not have any executives or members, hence less paperwork is involved. Only certain tax deductions one needs to bear solely, but as per other factors, this is the simplest business structure to settle up.
Private Limited Company - This is the ideal form of a business structure if one is looking to raise funds through external sources as the liability of the members is limited to their share in the capital. They have high turnovers and need a large pool of external funding. Hence, this form of business entity can be best in the incorporation of the company. In the case of private limited company registration, it states that the company comes under regulatory compliance.
Partnership - If we talk about partnership firms registration, it is considered to be a simple form of business entity when two or more people decide to own a business. Partnerships can be of two types - Limited Partnership and Limited Liability Partnership. In the case of Limited Partnership, only one general partner has unlimited liability, the rest of the partners have limited liability.
Hence, this decision depends on the funding structure and equity’s funding. This is one of the suitable and right business structure if one wants to go into business with family or friends, though it is expensive as compared to a sole proprietorship.
One Person Company - If we talk about the one person company business entity, then there is 100% control but have liability limited to their capital as there is only one person to carry the operations. This is ideal for those who want to have a company with limited liability, need to register for one person company registration, where the compliance and legal documentation cost is also low, but difficult to raise funds as only one person has control over the operations of the company.
In India, it is important to register a company under legal compliance to run the company with smooth functioning and efficient operations, to meet required business targets. The company registration process in India is mandatory with the right business structure, keeping in mind the factors and requirements of business structure.