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Business Entity Options

by orbinside
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Career and Investment Planning

Entrepreneur Journey 

We come across lot of things like Business Model, Investor Entities, Business Entities, Business Entity Structure, Business Industry or Sector and so-on during entrepreneur journey. everything has its own priorities since everything is important.

Business requires planning to lay the foundation of ever evolving and sustainable business considering the best available options and opportunities. Business requires flexible enough to pivot whenever needed.

Businesses are formed or incorporated and commenced as following entities in India as explained below: 

  • Sole Proprietor or One Person Company
  • HUF – Hindu Undivided Family 
  • Partnership firm or Limited Liability Partnership
  • Private Limited Company
  • Public Limited Company

 

Sole Proprietor 

Sole Proprietor is an old form of business operating structure, managed or operated by an Individual. It has management issues from taxation or other government agencies perspective. The government has started incorporating One Person Company to protect individual owners from taxation or other government agencies. It helps the government differentiate between what belongs to individual and business entity, providing protection to the owner. It requires less compliance, and every responsibility belongs to Individual. 

HUF – Hindu Undivided Family 

HUF – Hindu Undivided Family is generally formed to operate family-owned business, managed by the head of the family as the Karta. It provides dual benefit of business structure and individual income tax benefit. The HUF benefit has been given only to Hindus covering only Hindu, Sikh, and Jain religion persons. It requires less compliance, and every responsibility belongs to Karta as the manager of HUF. 

Partnership firm 

Partnership firm is business entity with a formal partnership between two or more individuals to conduct business by executing partnership deed. The government started incorporating Limited Liability Partnership to manage its incorporation and dissolution. It requires more audit and compliance in comparison with entities described above. 

Private Limited Company 

Private Limited Company is business entity owned by the limited number of non-government organizations or shareholders having limited liability in the entity and receives yearly dividends from the profits made. It requires more audits and other compliances in comparison with entities described above. 

 

Public Limited Company

Public Limited Company is business entity where shares are offered to the public with limited liability. Shareholders receive yearly dividends from the profits made under Public Limited Company. It requires the highest degree of audit and other compliances in comparison with entities described above due to the public involvement. Companies are incorporated as Private Limited Company before forming public limited company.

 

We have explained business entity options for an entrepreneur in this article. We will be explaining in detail about these business entities and their incorporation procedure in upcoming articles of the Career and Investment Planning Series. 

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