Companies: Its types, basics, purpose and registration benefits.
People builds companies to make wealth, contributes to the society, generates employment and ultimately contributes to the country’s GDP.
Companies are always built in a stepping stone process so no company can be built in an overnight time period. As it has people, stakes, and liabilities on its shoulders so it does takes time.
Companies’ business can relate to any nature, it is not dependent upon which type of companies can be.
There are many types of companies are there in the world but I have listed few of them here to discuss about which is listed below:
- Sole Proprietorship.
- Single Member Company (SMC).
- Private Limited Company.
- Limited Liability Partnership (LLP).
- Non-Profit Organization (NPO).
In the following section I have discussed in details about the above-mentioned companies.
Sole proprietorship is registered if your company comprises of a single member in order to get recognized by either your own name or your proposed desired name in the marketplace. It is not a company rather; it is a proprietor firm. It is such a form of business in which the owner has complete grip on the business, is liable for all the profit and loss incurred upon the business, and no one has the authority to interfere with the business owner’s decision. The owner has to file the income tax returns in person of the company and also to pay the company taxes. Tax rates are lower for this type of business reasoning to the unlimited liability of the owner. In case of any adverse situation like financial failure or debt crisis, then the owner has to shoulder all the load
How you can avail benefits by registering your sole proprietorship firm?
- With Sole Proprietorship Registration you will have all the control, all the liability and debts from your business.
- By registering your sole proprietorship firm, you will be the final decision maker and no one will have interference in your business matters.
- By registering your sole proprietorship firm, you will pay your business taxes through your personal income tax return.
- By registering your sole proprietorship firm, you will be benefitted from lower tax rates.
Single Member Company:
‘SMC’ is abbreviated for Single Member Company. A single member private company is comprised of only one member and director and that will avail privileges of limiting the liability. The owner and director’s capital is the only liability. SMC has a separate legal entity. That one member will be benefitting from the entire operations of the company. SMC can enjoy corporate tax benefits to a greater extent. The idea of single member company has supported the sole proprietor in a manner that it enabled them to equip the corporate status and also to limit their proprietorship liability.
How you can avail benefits by registering your SMC company?
- With Single Member Company Registration, the existence of your company would not be ceased on the death of yours and/or a member.
- By registering your SMC, you will have to pay lower corporate tax.
- By registering your SMC, you will have a complete control over how the business is operated. You will make all business decisions independently and will receive the full share of distributed profits.
- By registering your SMC, you will not have to deal with shareholders or a board of directors as a company would be required to do so.
Private Limited Company:
Private limited company is registered if your company comprises of having more than one member in order to get recognized by your desired name in the market. A private limited company is comprised of members which are limited to 50. Therefore, members are not the parameter to decide the upper limit or lower limit but the shareholders are. This type of company is required to get registered with at least two shareholders, two directors, and a CEO. Whenever registering the company, the capital amount has to be declared by the directors, the declared amount must be divided upon the ration of 50-50% and the same declared amount must be deposited from the directors’ personal account to company account.
How you can avail benefits by registering your private limited company?
- With Private Limited Company Registration, your company will have a separate entity than you and your directors. Loss of any person will not affect the company in return.
- By registering your private limited company, your company will have limited liability in simple words in case of any loss incurred to company, you will only lose your company share but will not compensate it with your personal assets.
- By registering your private limited company, the company ownership transfer is easy you can transfer your company ownership from one person to another and also from yourself to others.
- By registering your private limited company, your company would have higher rating scores than other form of companies.
AOP/partnership is registered in order to operate and manage any business with minimum 2 persons and maximum 20 persons. Partners in this form of business, have conjoint business relationships and they tend to share the business earnings with each other. Persons in the association/partnership have to provide the business capital, shoulder the loss and profit based upon the mutual agreed terms. Partnership taxes are paid by the general partners in their personal tax returns, with respect to the proportion of share as per their agreement. Persons individually are associated partners and collectively they are partnership firm.
How you can avail benefits by registering your AOP/partnership company?
- With AOP/partnership Registration, two or more concerned persons will be agreed to share the business overall.
- By registering your AOP/partnership company, you can kick start small and medium size start-ups.
- By registering your AOP/partnership company, all the authorized partners are bound to the partnership deed and agreement signed therein.
- By registering your AOP/partnership company, it’s relatively inexpensive to set it up and subjective to fewer government regulations. Partners will pay personal income taxes on their share of profits.
Limited Liability Partnership (LLP):
LLP is registered to bridge the gap between small and medium enterprises such as sole proprietorships and partnerships. Every partner in the LLP has their own limited liability, each partner is not responsible for partner’s wrong doing and forgery. It allows people to organize their business in a flexible, innovative, and efficient manner. An LLP is a separate legal entity. Which reflects that liability of each partner is limited to his/her ownership in the LLP. Partners in an LLP can appoint a Partner who will be responsible for all administrative matters. If the partners opt not anybody, all partners may have to act as a designated partner from time to time.
How you can avail benefits by registering your LLP company?
- With LLP company Registration, the company will become separate legal entity in which each partner is limited with their ownership.
- By registering your LLP company, each partner will have a limited liability not any partner is liable for other’s conduct.
- By registering your LLP company, your company will only be complied with single taxation layer.
Non-Profit Organization (NPO):
NPO is registered for collective, public, or social benefit. An NPO can also be called non-business entity, or not-for-profit organization, or nonprofit institution. A non-profit organization is subject to any revenues that exceed expenses must be committed to the organization’s purpose. The types of organization which can be NPO includes: political organizations, schools, business associations, social clubs, consumer cooperatives and etc. NPOs by their nature of the entity are tax exempted by the government, some may require exemption, and few entities may operate without seeking tax exemption status.
How you can avail benefits by registering your NPO company?
- With NPO/NGO Registration, your company will be seen as accountable, trustworthy, and opened for every person who has invested time, money, and faith in your company.
- By registering your NPO company, your company will be accountable to the donors, volunteers, sponsors and the public communities.
- By registering your NPO company, your company’s operations will be financed through donations, fund raising programs, sponsors, investments, and public confidence.
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