As a mutual fund distributor, you might be tempted to get your business registered as a company at a certain stage. And you should surely do that. Registration of a business leads to formalisation of operations and brings with it host of advantages like tax benefits and access to cheaper credit.
If establishing a company is in your mind then you need to consider the options in hand. Indian laws allow registration of companies in several forms. You should pick the one that best suits your business.
Here’s a list of different forms of companies that you can consider:
Proprietorship Firms
Also known as sole proprietorship, this is the easiest form of doing business in India. It is not governed by any separate law.
Even after getting registered, the operations remain same as in the case of an unregistered business. In sole proprietorship, the business is owned, managed and controlled by a single person.
The benefits of getting a proprietorship registration is tax benefits and access to more credit options.
One Person Company
It is a company formed with only one person as a member, unlike the case of other forms of companies which need at least 2 members. This is an ideal option for business owners to acquire corporate identity without diluting their stake.
Benefits of One Person Company:
One person companies enjoy almost all benefits listed for corporates. Some of the major benefits are:
- It is a separate legal entity
- The liability of owner is limited
- Access to corporate banking facilities
- Corporate identity helps win trust of investors
Partnership Firm
A partnership firm is formed when two or more persons agree to operate a business and share the profit and loss on the basis of ratio decided by them. The biggest advantage with partnership firms is that audit is not mandatory and there is no minimum capital requirement.
Limited Liability Partnership
This is a mix of private company and partnership. It provides the benefits of limited liabilities of a company and the flexibility of a partnership. The LLP is a separate legal entity and is liable to the full extent of its assets.
Benefits of LLP
- It is easy to form and the costs are low
- Liability of each partner is limited. They are liable only for their own act. Whereas in partnership, they can be held liable for their partners' mistakes as well
- The restrictions are less as compared to a private limited company
- An LLP can file and face cases using its own name. So, the partners do not have to deal with cases in their own name
Private Limited Company
Regulations wise, this is one of the most complex business forms. These businesses are governed by Companies Act, 2013. It can have a minimum of 2 members and a maximum of 200 members. The liability of the members is limited.
On paper, private limited companies are just the bigger form of LLPs. The advantages of both the business forms are quite similar like separate legal identity and limited liability. The only difference is that compliances go up in case of private limited companies.
ARN/ EUIN fee structure for different business types:
|
Category of distributor |
ARN/EUIN registration fee |
|
Private limited company |
Rs 20,000 |
|
One person company |
Rs 20,000 |
|
Limited liability partnership |
Rs 20,000 |
|
Partnership firm |
Rs 10,000 |
|
Proprietorship firms |
Rs 1,500 |
