A sole proprietorship is a type of enterprise that is owned and run by one natural person and in which there is no legal distinction between the owner and the business entity. The owner is in direct control of all elements and is legally accountable for all the liabilities of such business and this may include debts, loans, loss, etc. Some of its beneficial features are:-
It is one of the easiest form of business entity to start with minimal formalities. However, after starting up a Proprietorship, it is relatively harder to open a bank account or obtain a payment gateway in the name of the business - since more
They can invest their own capital into the business, or may be able to access business loans and/or overdrafts.
Proprietorship with less than Rs. 3 lakhs of income is not required to pay any income tax, as proprietorship's are taxed as the individual owing the business. However, unlike a company or LLP, a proprietorship cannot enjoy some of the tax deductions, which could potentially increase the tax liability.
A partnership is a formal arrangement in which two or more parties cooperate to manage and operate a business. Various partnership arrangements are possible in which all partners might share liabilities and profits equally or some partners may have limited liability. Not every partner is necessarily involved in the management and day-to-day operations of the venture, such as in the case of a "silent partner. Some of its beneficial features are:-
A Partnership is easy to form as no such legal formalities are involved. Even its registration is optional. However, if the firm is not registered, it will be deprived of certain legal benefits.
It is a written agreement which will determine the ownership of the firm, profit sharing ratio, rights and responsibilities of each of the Partner. A partnership deed can be registered with the Registrar.
Partnerships bring the benefit of "economy of scale" with the sharing of both responsibility and funding requirements.
Minimizing Your Weaknesses
This may come as a shock, but you are not awesome and amazing at everything you do. Entrepreneurs know the key to success is not trying to be amazing at every aspect of business, but figuring out what your biggest strengths are — and how those strengths can help contribute to the business — then find other people (with different strengths) to fill in the gaps.
Limited Liability Partnership (LLP) was introduced in India by way of the Limited Liability Partnership Act, 2008. It is a partnership in which some or all partners have limited liabilities. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. . With an easy incorporation process and simple compliance formalities, LLP is preferred by Professionals, Micro and Small businesses that are family owned or closely-held. Some of its beneficial features are:-
Separate Legal Entity
The LLP and partners are distinct from each other.
Less restrictions and compliances are applicable on LLP as compared to company.
Can Sue And Be Sued
A LLP as a legal person can sue in its name and be sued by others. The partners are not liable to be sued for dues against the company.
Audit Not Required
A LLP does not require audit if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution. Therefore, LLPs are ideal for startups and small businesses that are just starting their operations and want to have minimal regulatory compliance related formalities.