My Mothers Tip for Choosing a Business Entity!

When I was young, My Mom picked my Christmas Suites.  When I was 15 years old, I chose to do it myself; My Mom was happy; She gave me some Cash and a sensible tip, She said  ”œChoose what suits you, Don”™t choose something, just because one of your favourite friend is picking it”. This tip is equally good for choosing a business entity. Many a time we end up choosing a business entity simply because a everybody does it; little do we realise that this is more or less a irrevocable decision and needs a strong thought and professional guidance. Let”™s flush this out!

Though I religiously struck to my mom”™s instructions; My Choice of the dress was based on the following considerations

  1. Do I have enough cash?
  2. Will I be able to get my Dress stitched before Christmas? How long is it going to take?
  3. How long do I intend to use the Dress?
  4. Does it have a cost of maintenance?
  5. Who”™s my co-shopper? Does he like/approve my choice?

Choosing a Business Entity is more or less similar to buying a dress. You have to make a choice between four types of Business forms; Proprietorship, General Partnership, Limited Liability Company and Private Limited Company. The first two are the ”œLight weights”. They are easy to incorporate and easy to shut down, cost of incorporating and maintenance are low. The last two are ”œHeavy weights”, they have lot more procedures and have a higher cost of incorporation and maintenance.

Let”™s ask the same Questions again, but this time, to choose your entity:

1. Do I have enough cash?

If you are just out of college and have decided to start your venture alone with just about nothing in hand, choose a Sole Proprietorship concern. This Business Form needs no registration and hence can be started with zero cash. All you will need is a Bank Account to get started ( A current account in the name of your business, not your regular SB Account ). If you are not alone and there are more people joining you in the venture, choose a General Partnership. Drafting and stamping a General Partnership will cost you less that a 1000 bucks and is less complicated. ( For incorporating a PLC with a authorised capital of Rs. 1 Lakh, Your CA could charge you anywhere between Rs. 25, 000 – Rs. 35,000 )

2. How long is it going to take?

Floating a Sole Proprietorship (you alone) or a General Partnership (Less than 10 of you) is instant, on the other hand, incorporating a Limited Liability Partnership or a Private Limited Company will take 60-90 days. So, If you already have a High Value order and the customer is not ready to wait till you form an entity, it makes sense to get started with a Proprietorship or General Partnership and later think about converting it into a better business structure.

3. How long will the business go on?

If you intend to do a seasonal business, like selling crackers for diwali or cakes for Christmas, choose the ”œLight weights”, because you can close them easily. A proprietorship or a Partnership at will is a ideal fit. The ”œ Heavy weights” ( LLP, PLC ) have a lot of associated procedures on shutting down and are hence not advised for short Ventures.

4. What is the cost of Maintenance?

Every Business has a Maintenance Cost in the form of Taxes and Statutory Compliances. A PLC has to be audited mandatorily irrespective of the fact whether you do business or not and hence have a high maintenance cost. ( Your CA could charge you anywhere between 25-30K every year to complete the Tax and Statutory Audits ). The other forms have to be audited on satisfying a few criteria, however you will have a cost of filing monthly and Annual Tax Reports.  Proprietorship is generally the lowest on maintenance.

5. Who is my co-funder? (Bank, VC, Angel)

If your project is self-funded, Get started with a ”œLight Weight”, on the other hand if your project is funded by Banks or VC”™s, they would prefer the PLC because it give them an option to participate passively and also because your financial status is transparent ( because of mandatory audits and filing of public documents ), so if you intend to raise funds from non-personal sources; you will do well to form a LLP or a PLC.

Eventually I realised that I never picked the best Dress, rather I picked what I considered good for me. Honestly, Choosing the Right Business Entity is the same. ”œThere is no One Best Business Form, rather a form which is good for you” Choosing the Business Form will depend on various permutations and combinations which will vary with each individual entrepreneur. Do not decide your Business Structure based on the Tax Rates; (as it is generally done), Remember, every form of business has its own Tax Advantages outside the purview of the Tax Rates. So, Ask yourself the questions above and choose what fits you the most, Put the ”œBusiness First”

The presentation below could further help you:

Tip: Its recommended to call us before you freeze your structure. We will help! Good Luck J

  1. Tax Man 9 years ago

    The IRS e-flie system is now open, most W-2s and 1099s will be in mail in the next couple of weeks. Is everybody ready for tax time?

  2. Author

    […] The most easily manageable form of entity is called a sole proprietorship. This form of ownership requires NO special communication or filings to the Registrar of Companies or Income Tax. As a sole proprietor, you have an exemption to Tax Registrations and Mandatory audit till your revenues cross some specified limits. ( Read more on this ) […]

  3. Author

    […] There is no best fitting Legal Entity. ( My mothers Tip on Choosing the right business entity […]

  4. I was studying some of your articles on this internet site and I believe this internet site is real informative! Continue putting up.

  5. Just wanna comment that you have a very nice internet site , I like the style and design it really stands out.

  6. Simply wish to say your article is as surprising. The clarity in your post is just spectacular and i could assume you’re an expert on this subject. Well with your permission let me to grab your RSS feed to keep updated with forthcoming post. Thanks a million and please carry on the rewarding work.

  7. But wanna comment on few general things, The website style is perfect, the written content is real good : D.

  8. Howdy very nice website!! Man .. Beautiful .. Wonderful .. I will bookmark your site and take the feeds also…I’m happy to find numerous helpful info here within the put up, we want work out extra techniques in this regard, thank you for sharing.

  9. 4 years ago

    I like this web site so much, saved to my bookmarks. “Nostalgia isn’t what it used to be.” by Peter De Vries.

  10. 4 years ago

    You have observed very interesting details ! ps decent site. “He that will not sail till all dangers are over must never put to sea.” by Thomas Fuller.

  11. sluzebnosc przesylu 4 years ago

    Only a smiling visitant here to share the love (:, btw outstanding style .

  12. 4 years ago

    F*ckin’ awesome issues here. I’m very satisfied to peer your article. Thanks a lot and i am having a look forward to touch you. Will you kindly drop me a mail?

  13. wonderful points altogether, you just gained a logo new reader. What might you suggest about your put up that you simply made some days in the past? Any positive?

  14. retenir ejaculation 4 years ago

    I gotta bookmark this web site it seems handy very beneficial

  15. 4 years ago

    Hello, i think that i saw you visited my site so i came to “return the favor”.I am trying to find things to improve my web site!I suppose its ok to use a few of your ideas!!

  16. Merely wanna input on few general things, The website style is perfect, the subject material is rattling superb. “Drop the question what tomorrow may bring, and count as profit every day that fate allows you.” by Horace.

  17. Merely wanna say that this is invaluable , Thanks for taking your time to write this.

  18. Thanks, I’ve just been searching for info about this subject for a long time and yours is the best I have came upon till now. However, what about the conclusion? Are you positive in regards to the supply?

  19. I simply desired to appreciate you once more. I am not sure the things that I would have undertaken in the absence of the techniques provided by you regarding this subject. Completely was a very scary problem in my circumstances, but seeing the professional way you processed it made me to cry for fulfillment. I will be grateful for the work and even hope you really know what an amazing job you’re accomplishing training the others through the use of your website. Most likely you haven’t met any of us.

  20. frezowanie CNC 4 years ago

    Great – I should certainly pronounce, impressed with your site. I had no trouble navigating through all tabs as well as related info ended up being truly easy to do to access. I recently found what I hoped for before you know it at all. Quite unusual. Is likely to appreciate it for those who add forums or anything, site theme . a tones way for your customer to communicate. Excellent task.

  21. I think this is among the most vital information for me. And i am glad reading your article. But wanna remark on some general things, The web site style is wonderful, the articles is really excellent : D. Good job, cheers

  22. I have read some good stuff here. Certainly worth bookmarking for revisiting. I surprise how much effort you put to create one of these wonderful informative web site.

  23. This is very interesting, You are a very skilled blogger. I’ve joined your feed and look forward to seeking more of your wonderful post. Also, I have shared your web site in my social networks!

  24. I don’t even know how I ended up here, but I thought this post was great. I don’t know who you are but certainly you’re going to a famous blogger if you are not already 😉 Cheers!

  25. Normally I don’t learn article on blogs, however I wish to say that this write-up very compelled me to take a look at and do it! Your writing taste has been surprised me. Thanks, quite great article.

  26. ray ban outlet 4 years ago

    You know I love your blog!!!

  27. I’ll right away clutch your rss feed as I can’t to find your e-mail subscription link or newsletter service. Do you’ve any? Kindly permit me realize in order that I may just subscribe. Thanks.

  28. 4 years ago

    Hi, i think that i saw you visited my weblog thus i came to “return the favor”.I am attempting to find things to enhance my web site!I suppose its ok to use some of your ideas!!

  29. Magnificent website. Lots of useful information here. I am sending it to a few friends ans also sharing in delicious. And naturally, thank you to your effort!

  30. of course like your web site but you have to check the spelling on quite a few of your posts. Many of them are rife with spelling problems and I to find it very troublesome to inform the reality then again I’ll certainly come again again.

  31. I really appreciate this post. I have been looking all over for this! Thank goodness I found it on Bing. You’ve made my day! Thank you again!

  32. Some genuinely choice articles on this site, saved to bookmarks .

  33. magnificent points altogether, you just won a new reader. What may you suggest in regards to your submit that you made a few days in the past? Any positive?

  34. I dugg some of you post as I cerebrated they were very helpful invaluable

  35. I am not sure where you’re getting your info, but great topic. I needs to spend some time learning much more or understanding more. Thanks for magnificent info I was looking for this information for my mission.

  36. 4 years ago

    Thanks for the sensible critique. Me and my neighbor were just preparing to do a little research on this. We got a grab a book from our area library but I think I learned more from this post. I’m very glad to see such fantastic information being shared freely out there.

  37. I see something truly interesting about your blog so I saved to my bookmarks .

  38. Thanks for helping out, superb information. “Whoever obeys the gods, to him they particularly listen.” by Homer.

  39. imprezy firmowe 4 years ago

    Appreciate it for helping out, superb information. “You must do the things you think you cannot do.” by Eleanor Roosevelt.

  40. I reckon something truly interesting about your blog so I bookmarked .

  41. their explanation 3 years ago

    I just want to say I am all new to blogging and seriously enjoyed this web site. More than likely I’m going to bookmark your blog post . You actually come with incredible articles. With thanks for sharing your blog.

  42. I like what you guys are up also. Such intelligent work and reporting! Carry on the superb works guys I’ve incorporated you guys to my blogroll. I think it’ll improve the value of my web site :).

  43. I precisely wished to thank you very much once more. I am not sure the things that I could possibly have implemented without the strategies shown by you concerning this problem. It was before a real fearsome situation in my circumstances, nevertheless noticing the professional technique you solved that made me to leap over delight. I am just grateful for your guidance and even pray you recognize what a powerful job that you are getting into teaching other individuals via your blog post. I am sure you’ve never got to know all of us.

  44. I truly enjoy reading through on this internet site, it holds good articles. “Beware lest in your anxiety to avoid war you obtain a master.” by Demosthenes.

  45. I have been surfing on-line more than 3 hours nowadays, yet I never found any interesting article like yours. It’s pretty price sufficient for me. Personally, if all site owners and bloggers made just right content material as you did, the net might be much more useful than ever before. “Nothing will come of nothing.” by William Shakespeare.

  46. Test 3 years ago

    We are a group of volunteers and opening a new scheme in our community. Your site provided us with valuable information to work on. You’ve done an impressive job and our entire community will be thankful to you.

  47. wisata thailand 2 years ago

    I think this is among the most vital information for me.
    And i’m glad reading your article. But want
    to remark on few general things, The website style is wonderful, the articles is really
    nice : D. Good job, cheers

Leave a reply

Your email address will not be published. Required fields are marked *


Subscribe To Our Newsletter
Subscribe to our email newsletter today to receive updates on the latest news, tutorials and special offers!
No Thanks
Thanks for subscription !
We respect your privacy. Your information is safe and will never be shared.
Don't miss out. Subscribe today.

Log in with your credentials

Forgot your details?