Business

How to choose the best organisational structure for your business 

Starting a Business is overwhelming as an owner. There are many things to consider, such as deciding the business structure by choosing the correct organisational type (LLP/ Sole Proprietorship?), determining your business niche, and finding sufficient funding sources.

When you venture into a new business, you may need two experts early on: An accountant & a lawyer. An accountant helps with business tax returns and compliance filings. Hiring an accounting/tax expert for your business may be essential in almost every aspect of your business, from copyrights to trademark registration to formal business incorporation, lawsuits, and liability.

At Legalo, we help you connect with the best legal & financial experts to deliver efficient and cost-effective solutions to your business and personal needs.

This article looks at various business structures to evaluate which would best consider your business, as businesses’ tax benefits, legal liability, and capital access changes with organisation type.

  1. a) Private Limited Company
  2. b) Nonprofit
  3. c) Sole Proprietorship
  4. e)  Partnership Firms

Private Limited Company

One of the most popular and prefered forms of business registrations in India. Why is it so?  Reasons for the popularity of this business structure is the ability to raise equity funds, Limited liability security to shareholders, and separate legal entity status.

A Private limited company registration requires formal registration from its shareholders, and the liability of the members is limited to the number of shares owned by them.

Nonprofit Company:

A nonprofit organisation is a charitable, literary, or educational benefit. Nonprofit organisations need to pay taxes to central and state governments. It can be established as a registered corporation or as an unincorporated business form.

Sole Proprietorship

Sole Proprietorship is owned and run by a single owner. This is one of the simplest and most popular forms of business ownership. Individual freelancers/ self-employed or entities are often classified as sole proprietorships.

It’s significant to note that proprietorships are NOT registered entities. This means there is no difference between the proprietor and the business. Hence the firm does not give any protection from liability in the event of a company being sued.

Partnership Firm

There are two types of Partnership Firms: General and Limited Liability partnership. Partnership firms can have two or more Partners. In the case of General Partnership, it does not require formal registration of the business. Partners can operate on a verbal agreement or intended between them based on the initial investment percentage. 

General partnerships do not offer security from the liability emerging from the company. Owners are likely accountable for any business debts.

Limited liability partnerships require an incorporation certificate with the state and register the company formally. LLP restricts the liability of company debts on the owners up to their portion of ownership.

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