India is a country that has undergone significant economic growth in the last decade, with many opportunities opening up for both local and foreign investors. To start a business in India, it is essential to choose the right corporate structure that suits your needs. The choice of corporate structure depends on various factors such as size of the business, ownership, liability, and taxation. In this article, we will explore some of the most popular options of corporate structures in India and their taxation implications.

Partnership –

A partnership is a business structure where two or more individuals share ownership of the business. Partnerships are governed by a partnership agreement that outlines the responsibilities, profit sharing, and liabilities of each partner. Partnerships can be either general or limited. In a general partnership, each partner has unlimited liability, whereas in a limited partnership, there is at least one general partner with unlimited liability and one or more limited partners with limited liability. Partnerships are taxed as a separate entity at rate of 30%, with the profits being taxed at the individual tax rate of each partner.

Limited Liability Partnership (LLP) –

An LLP is a hybrid structure that combines the benefits of a partnership and a corporation. In an LLP, each partner has limited liability for the debts and obligations of the business. LLPs are governed by the LLP Act, 2008 and are required to register with the Registrar of Companies (ROC). LLPs are taxed as a separate entity, with the profits being taxed at a flat rate of 30%.

Private Limited Company (Pvt Ltd) –

A Pvt Ltd company is a popular structure for small to medium-sized businesses. It is a separate legal entity from its owners and shareholders and offers limited liability protection. Pvt Ltd companies are governed by the Companies Act, 2013 and are required to register with the ROC. Pvt Ltd companies can have up to 200 shareholders and are not allowed to raise funds from the public. Pvt Ltd companies are taxed at a range of 15% – 30% on their profits.

Public Limited Company (Ltd) –

A Ltd company is a larger version of a Pvt Ltd company and can raise funds from the public through the sale of shares. A Ltd company is required to have a minimum of seven shareholders and must register with the ROC. Public companies are subject to more stringent regulations than Pvt Ltd companies Ltd companies are taxed same as Pvt Companies.

One Person Company (OPC) –

An OPC is a new corporate structure introduced by the Companies Act, 2013. It is similar to a Pvt Ltd company, but with only one member or shareholder. The shareholder has limited liability and is responsible for the debts and obligations of the company. OPCs are suitable for small businesses with a single owner. OPCs are taxed same as Pvt Companies.

In conclusion, choosing the right corporate structure is crucial when starting a business in India, as it can affect the legal and financial liabilities of the business. In addition to this, it is important to consider the taxation implications of each structure, as this can have a significant impact on the profitability of the business. Therefore, it is advisable to seek professional advice before deciding on a particular corporate structure.