Business

Key Differences between Indian Business Entities

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

AdvantagesDisadvantages
Ease of formationLimited capital
Incentives to owner to do well Limited managerial ability
Quick decisions and flexibilityLimited life
Secrecy of businessUnlimited liability

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Partnership

AdvantagesDisadvantages
Ease of formationAbsence of ultimate authority
Greater capital and credit resources Liability for actions of other partners
Better judgement and more managerial activitiesLimited life
Annual filing is not requiredUnlimited liability

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Limited Liability Partnership

AdvantagesDisadvantages
Flexibility of partnership (no limit on owners)Many states do not recognize LLP’s as a legal business
Low compliance costsLess business credibility
Limited LiabilityRaising capital is not easy
No minimum contribution requirementTransfer of ownership is difficult

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Private Limited Company

AdvantagesDisadvantages
Continuity of existenceShares not freely transferable
Limited liabilityNot allowed to invite public to subscribe to shares
Independent legal existence and less legal restrictionsMany registration and compliance formalities
More borrowing capacityNeed at least 2 members

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One Person Company

AdvantagesDisadvantages
Single ShareholderOnly 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 requirementsA person can be member in only one OPC
More opportunities and Limited LiabilitySuitable only for small businesses
Separate legal entity Same tax liability as private ltd. company

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Public Limited Company

AdvantagesDisadvantages
Continuity of existenceMore regulatory and compliance requirements
Larger amount of capitalHigher levels of transparency
Unity of direction and limited liabilityVulnerability to takeovers
Efficient managementRequires high capital investment

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