Hey everyone! 👋 I hope you are doing well in your lives, and are chasing your dreams. So, today, we are going to discuss the remaining Types of Business Structures in India. Unfortunately, if you haven't checked the Part 1 of this series, you can click here. However, if you have already read the Part 1 blog in which we have discussed about the Sole Proprietorship and the Partnership Firm in depth. Now, it's time to dive into the remaining ones. I think explaining all entities in one part would be hectic and time consuming, so in this series, we are going to cover one by one entity with full detail. Before we move on, let me make you remember that we basically have six business entities:
- Sole Proprietorship
- Partnership Firm
- Private Limited Company (Pvt. Ltd.)
- Limited Liability Partnership (LLP)
- Public Limited Company (Ltd.)
- One Person Company (OPC)
In the aftermentioned points, we have already discussed the first-two. Now, let's cover the remaining:
3. Private Limited Company (Pvt. Ltd.)
A Private Limited Company is governed under the Companies Act 2013, and it has many compliances (rules), like it has directors, shareholders which lays down a proper structure of the company.
In Pvt. Ltd. Company, there is a separate distinction between the owners and the entity, which simply means Limited Liability. Wait, what? What does this mean? No, worries, let me explain: Limited Liability means that you are not personally liable for the company's losses or debt liability. Let me make you understand more clearly with an example:
If your business failed to repay the debt liability, the creditor can't go on your personal assets, rather he can only cliam for the business assets and for the share of promoter in that company. Suppose, your company has borrowed a loan of ₹1 crore. Unfortunately, your company failed to repay it. The value of the net-assets of your company is ₹30 lakh only. But, your personal assets are worth at ₹2 crore. And you have a share in that company of worth ₹10 lakh. In this scenario, the creditor can only claim for the business assets and the promoter's share, not for the personal assets. On the other hand, in Unlimited Liability, the creditor can also claim for your personal assets, if the business assets are not enough to satisfy. Yeah! It's soo simple!
At this point, you perhaps know what does Limited Liability and Unlimited Liability mean. If not, no worries, you can mail me at ahtishamasiftantray@gmail.com for a free webinar. Now, It's time to dive deep:
● Registration Required For Privated Pimited Company:
Private Limited Company is proclaimed as a legal entity by the government after the registration approved by MCA (Ministry of Corporate Affairs) which means it's monitored accordingly to Indian Corporate Laws. Managing a Pvt. Ltd. Company is hectic because it requires many legal compliances, bro!
● Choosing a Name For You Pvt. Ltd. Company:
Only opt for the name approved by ROC (Registerar of Companies) which is a office managed under MCA. Don't be panic in the case where your name is not approved. Brand Name can be different from Company Name. What does this mean? To understand this, let's take a real example:
A company named as BBK Electronics owns brand names like Xiomi, One Plus, Realme, OPPO and Vivo. Yeah! You heard it right* All these brands are owned by one company. Let me tell you a fact that there are about 17 lakh + Companies registered with MCA. And that is the reason why Brand Name is different from Company Name because of less availability of names. Yeah! It's superb simple*
● Structure of Pvt. Ltd. Company:
Its structure comprises of minimum of 2 directors and 2 shareholders and maximum upto 15 directors and 200 shareholders. Yet, it can have more than 15 directors after having the approval from NCLT (National Comapny Law Tribunal).
Let me tell you have bonus fact, Pvt. Ltd. Company van buy shares of other company and can keep it.
● Taxation in Pvt. Ltd. Company:
The taxable income is taxed at 15%, 22%, 25% or 30% based on the turnover and nature of the business. There are some surcharges: 7% surcharge on the tax payable if the taxable incomes crosses ₹1 crore per annum, and 12% surcharge for crossing ₹10 crore. Additionally, 4% cess on the tax payable.
If you are confused what does taxable income, tax payable and cess mean? You can mail me at ahtishamasiftantray@gmail.com for a free explaining live webinar. Yeah, it's free my friend!
● Who Should Opt Pvt. Ltd. Company:
Businesses who have high turnover, rapd growth, funding any investments, high risk. You can mitigate risk by Limited Liability nature of Pvt. Ltd. Company.
So, yeah! That's it for today. And many many congratulations to the guys who read the full blog. See you next time!
Stay Tuned For Part 3 and Keep Chasing Your Dreams!
*ProudlyWrittenByAhtishamAsifTantray*
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