BY ROBIN GHOSH
( FORMER CHIEF ECONOMIST, BENGAL CHAMBER OF COMMERCE AND INDUSTRY)
KOLKATA, 8 AUGUST 2022
While setting up a startup, the most frequently asked question is which legal format should I choose: proprietorships, partnership or private limited company? This is a classic problem of choice. Each form of legal framework has plus and minus points.
Let us first take Proprietorship.It is simple and straight.You and your company is synonymous. You have full freedom to make any decisions relating to product, process, marketing and distribution of
The second popular legal framework is partnership.You have to have two partners and you can go upto 100 partners. Liability is unlimited.
Compliance burden is low. Profits to be shared among partners. The third legal framework is Limited Liability Partnership (LLP) .In this format, liability is limited. While in the simple partnership, you have to register with the Registrar of Firms but for LLP you have to register and report to the Registrar of Companies. Compliance is required but it is not so cumbersome.
The fourth legal model is Private Limited Company. It has limited liability . The ownership is on the basis of equity . Quite an exhaustive compliance and filing of returns.
A new legal framework has arrived. It is branded as One Person Company (OPC). It is a private limited company with a single shareholder. An innovative model with some restrictions.
If you are an entrepreneur and you are planning to start a project, the choice of the legal framework will depend on the functional needs of the project on the one hand , and the future vision of the company on the other.
The best way to solve the problem of choice regarding legal framework is to take help of a CA or Financial Expert and share with him emotional and profitability equations.