In India, a start up or businessman can start his business in different legal structure. For example, a businessman can float a private limited company or public limited company. If he wants to do a business in partnership with others then he can go for limited liability partnership (LLP) or traditional partnership as well.\n
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In India, a start up or businessman can start his business in different legal structure. For example, a businessman can float a private limited company or public limited company. If he wants to do a business in partnership with others then he can go for limited liability partnership (LLP) or traditional partnership as well. Similarly he intends to be sole authority without having anyone stake then, he can opt for sole proprietorship or alternatively go for one person company (OPC).
Important Question for Every Entrepreneur: Now the most important question before every start up is which form of business or structure of entity is most suited to me.
The answer lies in certain crucial points like whether he need outside funding or not, what kind of tax will be levied upon him in case he opts for a particular structure. What are the restrictions may be imposed upon him as a businessman because every form has its unique feature coupled with own advantages and disadvantages.
Answers: Coming on to specific features, private company enjoys lot of exemptions and privileges as compared to public company. Only 2 directors and 2 shareholders are required in private company but in public at least 3 directors and 7 shareholders are required.
However in private transfer of shares may be restricted and further it may not raise funds from general public. On the other hand, public company shares can be easily transferred and it can raise funds through initial public offer.
In traditional partnership, partners may be personally liable but in LLP this concerns is not there. Partnership is easy and less expansive but you can attract funding from investors due to transparency issues. Similarly, sole proprietor also faces the transparency issues. Therefore every businessman should try to get answers of these peculiar conditions before venturing.
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