What are the types of business structures in

India?
Let’s try and understand the types of business structures available in India. Here is a list of
some of them:

1. One Person Company (OPC)

Recently introduced in the year 2013, an OPC is the best way to start a company if there exists
only one promoter or owner. It enables a sole-proprietor to carry on his work and still be part of
the corporate framework.

2. Limited Liability Partnership (LLP)

A separate legal entity, in an LLP the liabilities of partners are only limited only to their agreed
contribution.

3. Private Limited Company (PLC)

A company in the eyes of the law is regarded as a separate legal entity from its founders It has
shareholders (stakeholders) and directors (company officers). Each individual is regarded as an
employee of the company.

4. Public Limited Company (PLC)

A PLC is a voluntary association of members which is incorporated under company law. It has a
separate legal existence and the liabilities of its members are limited to shares they hold.
You can choose what business structure suits your business needs best and accordingly
register your business.
Here is a comparative list of the popular business structures in India.
 Company Ideal for Tax advantages Legal compliances
type

Limited Service-oriented Benefit on depreciation Business tax returns to be

Liability businesses or filed ROC returns to be
Partnership businesses that have filed
low investment
needs

One Person Sole owners looking Tax holiday for first 3 years Business returns to be
Company to limit their liability under Startup India Higher filed Limited ROC
benefits on depreciation No tax compliance
on dividend distribution

Private Businesses that have Tax holiday for first 3 years Business tax returns to be
Limited a high turnover under Startup India Higher filed ROC returns to be
Company benefits on depreciation filed An audit is
mandatory

Public Businesses with a Tax exemptions under Business tax returns to be

Limited high turnover filed. Mandatory Audits
Company

Other forms of business structures include Sole proprietorship, Hindu Undivided Family, and
Partnership firms. Please bear in mind, these structures do not come under the ambit of
company law.

Why is it important to choose the right business structure?

It is important to choose your business structure carefully as your Income Tax Returns will
depend on it. While registering your enterprise, remember that each business structure has
different levels of compliances that need to be met with. For example, a sole proprietor has to
file only an income tax return. However, a company has to file an income tax return as well as
annual returns with the registrar of companies.
A company’s books of accounts are to be mandatorily audited every year. Abiding by these
legal compliances requires spending money on auditors, accountants and tax filing experts.
Therefore, it is important to select the right business structure when thinking of company
registration. An entrepreneur must have a clear idea of the kind of the legal compliances he/she
is willing to deal with.
While some business structures are relatively investor-friendly than others, investors will always
prefer a recognized and legal business structure. For example, an investor may hesitate to give
money to a sole proprietor. On the other hand, if a good business idea is backed by a
recognized legal structure (like LLP, Company, etc) the investors will be more comfortable
making an investment.
How to choose a business structure while
applying for company registration in India?
Let’s take a look at some important questions every entrepreneur must ask himself before
he/she finally decides upon a business structure.
I. How many owners/partners will your business have?
If you are a single person who owns the entire initial investment required for the business, a
One Person Company would be ideal for you. On the other hand, if your business has two or
more owners and is actively seeking investment from other parties a Limited Liability
Partnership (LLP) or Private Limited Company would suit you best.
ii. Should your initial investment determine your choice of business structure?
The answer to that question is – Yes if you want to spend less initially, it would be wise to go in
for a Sole Proprietor, or a HUF or a Partnership. But, if you are sure that you will be able to
recover the setup and compliance costs, you can opt for a One Person Company, LLP or a
Private Limited Company
iii. Willingness to bear the entire liability of the business
Business structures like sole proprietor, HUF, and partnership firm have unlimited liability. This
means, in case of any default in loans, the entire money will be recovered from the members or
partners in profit sharing ratio. The risk to personal assets is high in these cases.
Whereas, Companies and LLPs have a limited liability clause. This means that the liability of its
members is restricted to the amount of contribution made by them or the value of shares each
member holds.
iv. Income Tax Rates Applicable to businesses
The income tax rates applicable to a sole proprietorship and a HUF are the normal slab rates. In
case of a sole proprietorship, the business income is clubbed with the individual’s other income.
But in the case of other entities like partnership and company a tax rate of 30% is applicable.
v. Plans of getting money from investors
As mentioned earlier, it is difficult to get investments when your business structure is
unregistered. Entities like LLP and Private Limited Company are trusted when it comes to
investment. Make sure you choose the right structure, seek the help of an expert so that you
register under proper guidance.

4. How to Register a Company in India?

Registering a company in India is now a simple 4-step process. Here is what you’ll need to
acquire:
i. A Digital Signature Certificate(DSC)
ii. A Director Identification Number (DIN)
iii. Registration on the MCA Portal or New user registration
iv. Certificate of Incorporation
With this, we have covered the basics of how to register a company. If you still need help
registering your company, don’t stress over it, and let our team of experts guide you.