#Tax  #Finance 

Business Entities

  • Sole Proprietorship
  • Partnership Firm
  • Private Limited (Pvt. Ltd.)
  • Limited Liability Partnership (LLP)
  • One Person Company (OPC)

How to start a Business? Sole Proprietorship vs LLP vs Private Ltd. | Business Basics #1

1.1 Sole Proprietorship

  • Open current a/c and start doing business
  • Sole Proprietorship is one man entity
  • All the liability is on the owner himself, Likewise he takes all the profit and losses himself.
  • A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned
  • Sole proprietors report their income and expenses on their personal tax returns and pay income and self-employment taxes on their profits
  • Registration
    • No registration
    • 1 govt certificate required for opening GST, Current a/c
    • Current Account
      • Not req if very small business or no online transaction
      • Req if you want to online transaction
  • Name
    • Can use any name
  • Liability
    • Unlimited liability
  • Members
    • Max One Person
  • Taxation
    • As individual
    • No Separate PAN
  • Suitable For
    • Less capital, lower tax slab
    • Unorganised structure
    • Retail trading, Services, Freelancing, Coaching Classes, Clinic
    • Re-seller
  • Compliance
    • Low

Proprietorship Firm Full Details | Proprietorship Business Registration | Business Basics #2

  • Document
    1. PAN
    2. Any one Certificate
      • Udyog (MSME) registration
      • SHOP & EST ACT or Factoryregistration
      • GST Certificate
    3. Address proof
  • When to take GST
    • Services > 20L
    • Sale of Goods > 40L
  • Balance-Sheet & P&L
    • Mandatory: Actual if Turnover > 2Cr
    • Better to maintain - to claim deduction
  • Compliance
    • SHOP & EST ACT or Factory Act
    • Professional Tax
    • Labour Welfare Fund
    • ESI: After 10 Employees
    • EPF: After 20 Employees
    • Bonus
    • Gratuity
  • Taxation
    • ITR-3 or ITR-4
    • For Business
      • ITR-4 (44AD)
      • Turnover < 2Cr
      • 8% Profit
    • For Profession
      • ITR-4 (44ADA)
      • Turnover < 50L
      • 50% Profit
    • TDS
      • Turnover > 1Cr
  • Depreciation
    • Not allowed in 44AD
  • Cons
    • No Loan
    • No Big Business
    • Difficult Conversion
    • Owner is fully liable

1.2 Partnership Firm

  • When two or more people come together and pool funds to start a business, it’s known as a partnership firm.
  • The primary aim of partnership firms is to earn profit.
  • Registration
    • Optional - registration under Partnership Act, 1932
    • Partnership DEED/Agreement mandatory
  • Name
    • Can use any name
  • Liability
    • Unlimited liability
  • Members
    • Min 2, Max 20
  • Taxation
    • Flat 30%
    • Separate PAN
  • Compliance
    • Low

A to Z of Partnership Firm | Registration, Compliances, Partnership deed | Business Basics #3

1.3 Private Limited (Pvt. Ltd.)

  • It is a business entity formed under Companies Act, 2013
  • Registration
    • Ministry of Corporate Affairs (MCA)
  • Name
    • Approved my MCA
    • Suffix added: NAME Pvt. Ltd.
  • Liability
    • Limited liability
  • Members
    • Min 2 Directors and 2 Shareholders
    • Max 200 Shareholders
  • Taxation
    • 22%, 25% or 30% - based on turnover
    • Separate PAN
  • Compliance
    • High

Save 2x Tax with HUF | Can HUF Buy & Sell Stocks? Business Basics #4

Ultimate Guide to Private Limited Company w/ @CAAnoopBhatia | Business Basics EP 5

1.4 Limited Liability Partnership (LLP)

  • It is a business entity formed under Limited Liability Partnership Act, 2008
  • Registration
    • Ministry of Corporate Affairs (MCA)
  • Name
    • Approved my MCA
    • Suffix added: NAME LLP
  • Liability
    • Limited liability
  • Members
    • Min 2 partner, Max unlimited
  • Taxation
    • Flat 30%
    • Separate PAN
  • Compliance
    • Moderate

1.5 One Person Company (OPC)

  • Registration
    • Ministry of Corporate Affairs (MCA)
  • Name
    • Approved my MCA
    • Suffix added: NAME OPC Pvt. Ltd.
  • Liability
    • Limited liability
  • Members
    • 1 Director and 1 Nominee Director
  • Taxation
    • 22%, 25% or 30% - based on turnover
    • Separate PAN
  • Compliance
    • Moderate

Is “One Person Company” good for small businesses? OPC vs pvt ltd | Business Basics#6

1.6 HUF(HINDU UNDIVIDED FAMILY)

What is HUF?

A Hindu Undivided Family (HUF) is a unique legal and tax entity specific to Hindu families in India.

It is based on the concept of a joint family that includes all family members across generations, with the eldest male member typically acting as the head or "Karta" of the family.

Who are the Members of the HUF?

All individuals belonging to a Hindu family, including husbands, wives, children, their respective spouses, and their offspring, are eligible to be included in a HUF.

In this structure, the male family members are referred to as coparceners, while the female family members are simply termed as members. The right to request a division of the HUF is exclusively reserved for coparceners.

How to Save Taxes by Building A HUF?

  • The HUF has its own Permanent Account Number (PAN) and files a separate tax return.
  • A separate joint Hindu family business is created, with the HUF being a distinct entity from its members.
  • Deductions under Section 80 and other applicable exemptions can be claimed in the HUF’s income tax return.
  • The HUF can take out insurance policies on the lives of its members.
  • Members contributing to the functioning of the HUF can be paid a salary, which is then deductible from the HUF’s income.
  • Investments can be made from the HUF’s income, and returns on those investments are taxable in the hands of the HUF.
  • The HUF is taxed at the same rates applicable to individual taxpayers.

Download HUF DEED pdf

Save 2x Tax with HUF | Can HUF Buy & Sell Stocks? Business Basics #4