Pvt Ltd vs Proprietorship Firm: Which one is Best for Startups?

Pvt Ltd vs Proprietorship Firm

In a region where geographies are diversifying in the end we had an unlike the form of a business carried by the different types of entrepreneurs.

A sole proprietorship is one of the most significant and highest percentages of business formed and established in India after following private limited companies and other forms. 

Due to limited capital availability or maybe squeezed investment, it’s a big challenge for a startup to think about what type of business to form. 

On the first approach, a sole proprietorship is best suitable for startups who are looking to operate on a small scale and want to enjoy unlimited liability. However, the establishment of such a type of business is easy, simple, and follows no legal formalities required like private company registration. 

On the off chance, private limited company registration is opposite to sole proprietorship form of business. In this, legal compliance is necessary right from formation to the dilution of the firm, essential legal procedure is required at every step. 

But, entrepreneurs enjoy many benefits as compared to single ownership firms. So, what is best for startups to operate their business in 2020 or beyond. 

In this blog, we will figure it out…! 

Before moving further we highly recommend readers to look at the following statistics. 

  • Sole Proprietorship in India was reported at 62.5 % in 2014 and it is expected to rise to 80%  by 2020. 
  • According to the 2019 survey it was recorded that more than 3M people employed by sole proprietorship in India. 
  • Over 1.15 million number of registered active companies across India as of March 2019. 
  • It was said that 60% economic rise is extremely dependent on the private firm business carried in India since 2014. 

Sole Proprietorship and Its  Advantages

It is said that this form of organization is the oldest and functioning from times. A business is said to be sole proprietorship when it is solely operated, managed, and controlled by a single person. 

In other words, a business owned and managed by one man with or without the help of others. This form of business has the following advantages. 

  1. It is the simplest and easiest form of business
  2. There is no legal distinction between the owner and the business
  3. The owner is not answerable to anyone
  4. There are less legal compliances and regulation
  5. Relief from income tax payment and more. 

This style of business is most suitable in the following cases: 

  • A small amount of capital is required to form a business.
  • Where the risk involved was lesser.
  • Operating a business in a small size.
  • When the market for a product is limited.
  • When personal contact with customers is required.

Private Limited Company and Its Advantages

The private Limited Company is a company where the shares and liabilities of the company owned privately and limited to access, respectively. And it has to follow essential legal compliance to form, start, and dissolve accordingly required. This form of business has the following advantages. 

  1. The liability of shareholders is limited.
  2. No public trading of shared allowed.
  3. It has perpetual succession and an independent identity
  4. It has a separate and individual separate legal entity.
  5. Its procedures are governed by the Companies act 2013.

This style of business is most suitable in the following cases: 

  • I wish to attract more funding.
  • I want to limit the risk to personal assets.
  • Looking to improve business credibility.
  • I made the decision to go internationally.
  • Pursue multiple opportunities.

Conclusion

It is handsomely difficult to opt for one style of business for your startup whether private is best or proprietorship firm registration in  Jaipur is good. Well, to decide what type of business to form or suitable for a startup is easier to figure out with these entail guide. 

The information written here is true and correct to the best of our knowledge provided to our readers. Still confused, take our free legal expertise consultation today.

Pvt Ltd vs Proprietorship Firm: Which one is Best for Startups?

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