There are Five major business entities that a business can register in India. You might want to look at our previous tale on what they are – Business Entities In India
We are listing down here the key advantages and disadvantages of these business entities.
Sole Proprietorship
| Advantages | Disadvantages |
| Ease of formation | Limited capital |
| Incentives to owner to do well | Limited managerial ability |
| Quick decisions and flexibility | Limited life |
| Secrecy of business | Unlimited liability |
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Partnership
| Advantages | Disadvantages |
| Ease of formation | Absence of ultimate authority |
| Greater capital and credit resources | Liability for actions of other partners |
| Better judgement and more managerial activities | Limited life |
| Annual filing is not required | Unlimited liability |
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Limited Liability Partnership
| Advantages | Disadvantages |
| Flexibility of partnership (no limit on owners) | Many states do not recognize LLP’s as a legal business |
| Low compliance costs | Less business credibility |
| Limited Liability | Raising capital is not easy |
| No minimum contribution requirement | Transfer of ownership is difficult |
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Private Limited Company
| Advantages | Disadvantages |
| Continuity of existence | Shares not freely transferable |
| Limited liability | Not allowed to invite public to subscribe to shares |
| Independent legal existence and less legal restrictions | Many registration and compliance formalities |
| More borrowing capacity | Need at least 2 members |
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One Person Company
| Advantages | Disadvantages |
| Single Shareholder | Only a natural person who is an Indian citizen and resident in India shall be eligible to act as a member and nominee of an OPC. |
| Minimum compliance and regulatory requirements | A person can be member in only one OPC |
| More opportunities and Limited Liability | Suitable only for small businesses |
| Separate legal entity | Same tax liability as private ltd. company |
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Public Limited Company
| Advantages | Disadvantages |
| Continuity of existence | More regulatory and compliance requirements |
| Larger amount of capital | Higher levels of transparency |
| Unity of direction and limited liability | Vulnerability to takeovers |
| Efficient management | Requires high capital investment |
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