Business Structures in India – A guide to Startup

India is the World’s Startup hub and is seeing positive progress over the past years due to government policies and support for startups. Due to the prevailing situation, there is a need to educate people with the idea of legal structures in India to start a business. A great idea and financial resources are not enough to make a business successful but the legal structure is also the key to the growth prospects. The business structures to start a business are Proprietorship, partnership, Limited Liability Partnership, One Person Company, Private Limited and Limited Company.

Sole Proprietorship

It is the oldest business structure in existence. This legal constitution of Business is owned and controlled by a single person. This business is suited for businesses that are small in size and limited investment. The liability of a proprietor is limited to the extent of money or capital contributed by him. As it is run by a single owner, therefore all the profit and loss is shared by that single person only. All the assets and property related to the business are owned by the owner himself.

1. Proprietorship means a single owner.
2. The amount of profit is owned by the owner as well as the loss.
3. The liability of the proprietor is limited.
4. It doesn’t have any legal formalities as compared to Partnership or Company.
5. The capital invested in the business is complete of the owner.
6. Its advantages are ease of formation and less legal formalities.
7. One of its major disadvantages is that the owner is liable for all the business debts.
8. In the eyes of law, the proprietor and the business are the same.

Partnership

An agreement between two or more people coming together to start a business with mutual understanding and legal agreement is a Partnership. individually, these people are called partners.