Business Registration in India​

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Business Registration in India - An Overview

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Business is one of the most common and adopted source to earn income among people now a days. Businesses can be operated in multiple types like Proprietorship, HUF, Partnership Firms, Company, LLP, etc., in accordance with their suitability and economical aspects. Also, businesses are promptly emerging and growing day by day because of government new schemes getting introduced for upcoming entrepreneurs. Taxzona Consultancy not only provide one of the best Business Registration Services in Mumbai but also guides you timely for expansion of your business.

Here are briefing on the Type of Business Organisations available

1. Sole Proprietorship

A sole proprietorship is an easiest and simple way to commence a business in India. It is neither considered as a corporation nor a company where the business is owned by a single person who is ultimate owner and risk bearer for all profit and losses of the proposed entity. Sole Proprietorship is one of the most popular type of Business Registration Services in Mumbai and the simplest one as well.
Benefit of Sole Proprietorship
  • It is the most simple form of business that provides fewer Compliances and an easy pathway to start.
  • It is a small scale business where an individual requires less fund investment.
  • The person registering a business as a sole proprietorship is the only owner of the business. A person is an ultimate boss hence no reporting is required
  • Helps in opening the bank account in the name of the business
  • Provides flexibility in carrying out business activities
  • As a person is the sole owner of the business will be self- Accountable for all the profit earned and losses incurred.
  • Decision-making power related to business in the hand of Sole proprietor.
  • Eliminate the step of disputes between the Members and share of Income.
  • As per the Income Tax Act, the sole proprietor is needed to file his/her IT returns, showing the profits earned in the business in that IT return itself as an applicable slab rate. Therefore, no separate return is not required for the Sole Proprietorship firm.
  • Information Remains in Private Hand only
  • No audit requirement in each and every financial year under the eye of law. However, the audit will depend upon the nature of the business & the threshold turnover limits that have been specified for the conduct of the audit for that particular firm

Further, Sole proprietorship registration can be accomplished by getting the following registration, which helps in fulfilling basic needs like opening a bank account, a government identification etc

Document required for Sole Proprietorship registration
  • Pan Card of Proprietor
  • Aadhar Card of Proprietor
  • Details of Current Bank Account
  • Office Proof
  • Registration certificate of SME/Shop & Establishment/ GST, whichever is applicable

2. HUF Registration

HUF stands for Hindu Undivided family governed under Hindu law board and could be formed by a married couple or by members of a joint family. HUF could be formed by two members, at least one among whom should be a male member of the family. Senior most male member of the family would become ‘Karta’.
The basic requirement is to be fulfilled for HUF Registration
  1. One should be Hindu, Jains, Sikhs and Buddhists are considered as Hindus but not Muslims or Christians
  2. There should be a family i.e., group of persons – more than one
  3. They should be undivided i.e., living jointly and having commonness amongst them.

Here is the procedure involved in forming a HUF.

1. Form corpus: - Capital Asset/gift through will can be used to stablish Corpus

Gifts of over 50,000 a year received by HUF will be taxable. The best way is for the HUF to receive assets as part of a will.

2. Make a deed

You have to prepare a deed on stamp paper declaring the formation of the HUF with all required details of members and funds. Once the declaration deed is made, the Karta should apply for a permanent account number (PAN) for the HUF. This is mandatory because all financial transactions must carry PAN.

3. Open bank Account

After you are allotted a PAN, open a bank account in the name of the HUF.

Benefits of HUF Registration
  • Every member of the family can deposit their income in the common corpus.
  • Gifts collected up to a worth of Rs 50,000 will be tax free.
  • Corpus can be used for investment in tax free money instruments.
  • The Income Tax Act and Wealth Tax Act recognise the HUF as an independent assessable or taxable entity that provide tax deduction benefit as Individual and taxed as normal slab.
Key Point for Formation of HUF
  • Under the Income Tax Act, an HUF is a separate entity for the purpose of income tax return.
  • The same tax slabs are applicable to HUF as to individual assesses.
  • You cannot transfer your own assets/money into HUF.
  • You can transfer the money received on sale of ancestral property /assets into your HUF.
  • The income from property of HUF can be further invested in instruments such as shares, mutual funds, etc. and will be assessed under HUF.
  • Any gifts received by the members of HUF (birthday, marriage, etc.) can be treated as assets of HUF.
  • Apart from basic exemption of Rs. 2.50 lakh, section 80C deduction up to Rs. 1.50 lakh is also available.

3. Partnership Firm Registration

A partnership firm is the most important form of a business organization and it is formed when a group of people join together with a profit-sharing motive in the pursuit of any kind of business. All partnership firms are governed in India under the Indian Partnership Act, 1932. A partnership firm is easy to form with fewer compliances as compared to companies. The partnership is the second most popular type of Business Registration Services in Mumbai.

The registration of a partnership firm is optional and not compulsory under the Indian Partnership Act. It is at the discretion of the partners and voluntary. The firm’s registration can be done at the time of its formation or incorporation or during the continuance of the partnership business.

However, it is always advisable to register the partnership firm as a registered firm that enjoys certain special rights and benefits as compared to the unregistered firms. The benefits that a partnership firm enjoy are:

S.No.

Registered Partnership

Unregistered Partnership

1.

A partner can sue against any partner or the partnership firm for enforcing his rights arising from a contract against the partner or the firm

Partners cannot sue against the firm or other partners to enforce his right.

2.

The firm can file a suit against any third party for enforcing a right from a contract

The firm cannot file a suit against any third party to enforce a right. However, any third party can file a suit against the unregistered firm.

3.

The firm can claim set-off or other proceedings to enforce a right arising from a contract

The firm cannot claim set off in any proceedings against it.

Advantages
  • Share of profit and loss in an agreed ratio
  • A quick decision is possible because the owner and management are the same people. Immediate action is possible.
  • There is less legal compliance as compared to LLP registered under ROC.
  • It is easy to incorporate. Only a partnership deed has to be prepared for formation.
Disadvantages
  • Partnership restricts no. of partners up to 20 which also restrict the scope for raising capital up to partners.
  • Unlimited Liability
  • No perpetual succession
  • Difficult to raise funds
Essentials required in regards to Formation of Partnership Firm
  • Drafting of Partnership Deed
  • Minimum two members as partners
  • Maximum of equal to or less than twenty partners
  • Selection of appropriate name
  • Principal Place of business
  • PAN card and Bank account of the firm
Procedure for Registering a Partnership Firm

1. Application to Registrar of Firm – The application shall be submitted with fess and affixing signature of all partners with all details i.e.

  • Name & Address of Partnership Firm
  • Name, Address and date of joining of partners
  • Duration of Firm

2. Selection of Name with fulfilling certain conditions

  • The name should not be identical and similar to existing partnerships
  • The name should not contain words that show sanction or approval of the government

3. Registration Certificate

  • If the registrar is fully satisfied with the application and documents submitted will issue a certificate of registration 

FAQ's

It’s a simple single person firm. Remember it’s not a company, it’s a best way to start a business in India with the less costing and less compliance. its need only just one person for the legal registration.

Sole Proprietorship Firm have following advantages 

  • Less Costing
  • Less Compliance
  • Less Income Tax

In the Sole Proprietorship Firm have following disadvantages

  • Unlimited Liability
  • Can’t include the partners
  • Can’t raise the funds
  • Not a Legal Existence

A partnership firm is where two or more persons come together to form a business and divide the profits in an agreed ratio.

Partnershipship Firm have following advantages :-

  1. Easy to incorporate
  2. Less Compliance
  3. Quick Decision
  4. Sharing of Profit & Loss

Partnerships Firm have following disadvantages 

  1. Unlimited Liability
  2. No perpetual succession
  3. Limited Resource
  4. Difficult to raise funds