Proprietorship Firm
A sole proprietorship is
a form of unregistered business entity best suited for the new entrants who do
not have much capital base to invest. It is owned, managed and persuaded by a
single person having no separate existence from the owner. This form of
business is used by most micro and small businesses working in the unorganised
sectors.
No procedure has been
prescribed for the registration of the firm under any act by the Government of
India. The only way the existence of the firm can be established is through
opening of bank accounts, application for PAN and various tax registrations in
the name of sole proprietor making him personally liable for all the
liabilities of the firm.
Features
Easy to start (Sole owner-sole profit)
Less compliances
Tax benefits
No perpetual existence
Lacks corporate and separate legal entity status
Therefore, proprietorship registration is best suited
only for those unorganised small businesses that will remain small and/or have
a limited period of existence.
General Partnership
A Partnership Firm is a
form of business constitution owned, managed and persuaded by group of people
having a common objective. It is relatively easy to start and is prevalent
amongst small and medium sized businesses in the unorganized sectors. Partnership
firms can be registered and un-registered upon the choice of partners but it is
advisable to register the same under Partnership Act, 1932 by having a
partnership deed due to added advantages
Features:
Association of two or
more people (Maximum 20 partners)
Sharing of profits
and losses in an agreed ratio.
Addition or Removal
of Partners
Taxed @ 30% plus cess
Unlimited Liability
No legal status and
restriction of capital due to limited members
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