Difference between Proprietorship vs Partnership vs LLP vs Pvt Ltd Company

hi if you have been thinking about starting a business in India and are wondering what are the various options I have then this article is a must read basically have four options to choose from the four options are a proprietorship a partnership a limited liability partnership and a private limited company so what is a proprietorship a proprietorship is also known as a sole proprietorship soul meaning single or individual so in the sole proprietorship you are the only person running the business so a solvent ship is very easy to start all you need is some government registration in the name of the sole proprietorship let’s say for example you are running a food business and you want to name the businesses Rajesh foods okay in that case all you need is some government registration in the name of Rajesh force okay the government is stationed could be assumption establishment registration this registration could be a sales tax registration or it could be a service tax registration okay so the moment you take any registration in the name of your proprietorship your preparation is considered to be registered that's it okay the next option is a partnership in partnership you have more than one-person running the business so get two or more partners actually run the business a partnership again is very easy to start all you need is a partnership agreement once the partnership agreement is drafted the partnership is said to be ready okay a registration of a partnership is not mandatory okay so it may not be required okay now the two options that have just given you our a proprietorship and a partnership okay even though starting a proprietorship or a partnership are very easy they come with a very high risk the risk in legal terms is called unlimited liability so what do we what do you mean by unlimited liability let's say you're running a proprietorship or a partnership and the business some how gets into some legal trouble and you have been asked to compensate say 10lakhs to the opposite party so if your businesses account has 10 lakhs you're safe okay but if it does not have that much money then you will have to you know maybe sell your land property jewelry everything in order to arrange that money and compensate the affected party that's why they say the liability in your proprietorship and in a partnership are unlimited hence I would strongly advise you to stay away from a proprietorship or a partnership okay and that's the main reason why more and more startups today are looking at incorporating a limited liability partnership or a private limited company so let's quickly look at what these options are so just telling you that starting a proprietorship and a partnership are very easy but still they come with a very high risk the risk is unlimited liability and your personal assets and belongings are not safe in a proprietorship or a partnership okay now what are the options. Before we move forward we must also make sure to do Trademark Registration of our brand to secure anyone misusing the same. You have if you want to protect your personal assets in property the other two options that you have are a limited liability partnership and a private limited company now what is a limited liability partnership as the name suggests a limited liability partnership is just another partnership with liability limited okay what this means is let's say you have contributed rupees ten thousand to start your limited liability partnership and if your LLP gets into some legal trouble you will have to pay only ten thousand rupees so your liability is limited to the extent of your contribution to the llp not more than that so your personal assets and property are safe you know in an LLP okay and LLP is a very new concept in India just about 34 years old not many people know about it okay but the government fees is just our 2,000 rupees to start a limited liability partnership hence you must be strongly considering a limited liability partnership as one of the legal structures first start in your business okay now in a limited liability partnership the only I wouldn't call it a drawback the problem is that if you are if you want to go global you want to bring in investments in return for equity or steak or you want to make you make your business go public all that is not possible in LLP okay in such a case you need to go for a private limited company a private limited company has been inexistence in India for about for the last five decades or more okay it's Avery well structured the concept the concept of a private limited company is not new to India it's been in existence for about 50 50 years okay even in a private limited company the liability of the members is limited to the extent of the contribution okay again their personal assets and click here property are safe in private limited company a private limited company brings with it a lot of trust ok the moment you say that you come from a private hundred company that takes care of lot of the talking owlet’s say your business depends uncontracts that you sign with some of the big names some of these big guys will not even talk to you if you are not a private hundred company so that way a private limited company brings with it a lot of trust and credibility to your business ok if you are looking at investments in funding in return for equity or stake in your company then a private limited company is your best option ok so I just covered four basic options that you have to start your business let me quickly recap the first option was a proprietorship it's very easy to start all you need is some government registration in the name of the proprietorship that's it the next option is a partnership where two or more members joined together to start their business in order to start partnership all you need is partnership agreement and that's it partnership registration is not mandatory ok even though proprietorship and a partnership are very easy to start they come with a very high risk which is unlimited liability about which I have explained to you before ok to protect your personal assets and personal property the best options that you have are a limited liability partnership Anda private limited company both an LLP registration india and a private limited company are incorporated bodies they are incorporated under the Ministry of Corporate Affairs. Though we have registered our company and trademark, chances of getting objection could be high and proper trademark objection reply is important inorder to secure our intellectual property.

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