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  • Writer's pictureDr. P.K. Shrivastava

STARTING A START-UP COMPANY? REGISTER FOR A RIGHT ENTITY

Author: Dr PK Shrivastava, Dairy Consultancy, Bangalore India, www.dairyconsultancy.in; email- dairyconsultancyindia@gmail.com.


Taking support of the referred articles, I have compiled the facts, for the benefits of MSME and start-up Dairy Business Entrepreneurs.


INTRODUCTION


Selection of business entity is among the first legal decision taken by an Entrepreneur, while starting a new business. We generally come across this question raised by our clients as under which type of company, we can register our “Dairy Business”? The budding entrepreneurs we suggest to opt for a “Proprietorship company”. The basic details are tabulated here for easy understanding of the “Dairy Entrepreneurs”.


With the introduction of the Limited Liability Partnership Act 2008, the Companies Act, 2013, one person company Act 2013, private limited companies Act 2013, more choices of business entities are available now for entrepreneurs. Therefore, it is important for the Entrepreneur or Promoter to understand the pros and cons of each of the business entity and choose the right one. Among the choice of “For-Profit” entities available like Proprietorship, Partnership, Limited Liability Partnership (LLP), One Person Company, Private Limited Company and Limited Company, a few are ideal for most of the Entrepreneurs. In this article, we have made it more comprehensive (in a tabular form) and easy to compare these types of entities viz. Proprietorship vs Partnership vs LLP vs Private Limited Company vs One Person Company.



We generally, propose the dairy business entrepreneurs for “MSME” or “start-ups” to register under “Proprietorship firm”, as such we are highlighting the restrictions and allowed provisions for the same:


RESTRICTIONS FOR PROPRIETORSHIP FIRMS UNDER THE ACT:


Proprietorship can’t use the name Pvt. Ltd. Co.; similarly, it can’t use the names which gives impression of more than one person holding the company like; service providers, & sons, & family, groups, & company, etc. It can’t use “Corp.” or “Inc.” or “Ltd.” as suffix


ALLOWED UNDER THE ACT FOR PROPRIETORSHIP FIRM:


(1) Proprietorship can be converted into a Pvt. Ltd. Co., partnership or LLP company. For a Proprietorship firm to be a Limited Liability Partnership, it has to get converted to an LLP by adding at least one more member as a partner.


(2) Although a proprietorship is not technically a business entity, owners can hire employees.


(3) There is no limit on the number of employees that a proprietor company can employ. As the employer, a proprietor is responsible for filing taxes and proper administration for these hires.


(4) It is mandatory for a Proprietorship firm to have GST registration or MSME registration, provided its aggregate turnover exceeds 20 lakhs (except for some states where it is 10 lakhs). Read details about the aggregate turnover.


(5) A proprietor is not entitled to tax deductions on salary paid to himself because these payments are not business expenses. When a proprietor pays himself a salary, he merely is transferring funds from a business account he owns to a personal account he owns.


(6) A proprietor can raise capital by taking loans to support the business. However, a Sole Proprietorship is not an independent business entity; it is a business activity operated under the name and personal responsibility of the owner.

Source: https://ebizfiling.com/blog/


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References:

(1) https://www.indiafilings.com/learn/partnership-vs-llp-vs-private-limited-company/

(2) https://ebizfiling.com/blog/

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