The choice could be effortless if you are looking to get your company funded, then you should go with the private limited company structure. By and large, venture capitalists (VCs) and investors are inclined to fund private limited companies.
The other two company types are – LLP (limited liability partnership) and OPC (one-person company) works smoothly for someone who is looking to run his/her business sans external funding and aspire to have firm control over all the business operations.
Let’s comprehend each legal structure’s nuances to help you choose the proper structure for your company.
LLP (limited liability partnership).
Someone who is running the business with partners can go for the LLP (limited liability partnership) registration. The LLP (limited liability partnership) works efficiently for the start-ups and small businesses that are being operated by partners and those who intend to have nominal regulatory compliance.
When you register a limited liability partnership, it permits the partners to be safeguarded from any gloomy issue that arises because of the partners. The LLP (limited liability partnership) restricts the liability of the partners to the proportion to their contribution to the company. The LLP (limited liability partnership) incorporation is also not expensive and easy to get.
The LLP (limited liability partnership) becomes the intelligent choice for the freelancers who aspire to offer their bootstrapping business an accurate company structure from the legal point of view. The LLP (limited liability partnership) would work as long as the partners do not need external funding, and when the moment arrives, the LLP (limited liability partnership) can be turned into the PLC (private limited company).
Private limited company (PLC)
The private limited company (PLC) structure is generally used for the incorporation of the company. It is dominant in the market as this structure keeps the liability of the members limited to their share in the capital. The private limited company (PLC) is suitable for someone who is looking to infuse capital from external sources and offer ESOPs to its employees.
The private limited company (PLC) should be registered with RoC (Registrar of companies). Upon completion of the registration process, and incorporation certificate will be allocated. The MCA (ministry of corporate affairs) has launched a fast-tracked registration process that allows company registration through a single form. The registration process can be done online with all the required documents and submitting them in e-format.
Registering the private limited company (PLC) means the company becomes regulatory compliant. It makes the company alluring to VCs and private equity funds. Even the bank loans will be easier to obtain for the private limited company (PLC). From the point of view of the directors in the private limited company (PLC), their personal property will not be used to repay the company’s debts.
One-person company (OPC)
The One-person company (OPC) is suitable for someone who runs or operates the business by his/her own self and aspires to have efficient control over all the operations of the business and work in a corporate framework. The entrepreneur who intends to set up a company with limited liability must register for the One-person company (OPC).
The One-person company (OPC) can be registered with a minimal capital of just Rs. one lac. But if the paid-up capital goes beyond Rs. Fifty lacs then the One-person company (OPC) is obliged to be converted to the (PLC) private limited company. The same goes with the One-person company’s average turnover for three consecutive years if it goes beyond the mark of Rs. Two crores.
As in the case with online registration of private limited company in India, the One-person company (OPC) registration can also be done via an online process, and it has been made fast and smooth by the MCA (ministry of corporate affairs).
As it has been made clear by the steps mentioned above and guides, the proper company structure becomes a crucial part of the business while initiating. It all relies on the nature of your business, the industry in which your business operates, tax benefits, legal compliances, government fees, and so forth; all these should be considered before making the right decision. The right and suitable business structure would enable your business to operate smoothly and efficiently and quickly meet your needed business targets. Every business should register itself as a part of compulsory legal compliance in India as it provides numerous benefits to the business. Remember the aforementioned things before initiating your business.