Comparison Between Proprietorship, Partnership, LLP & OPC
In India, there are five types of business structures: Proprietorship, Partnership, Limited Liability Partnership (LLP), One Person Company (OPC), and Company.Starting a business requires making several critical decisions, including choosing the right type of business structure. The right business structure will depend on several factors such as the nature of the business, the number of owners, and the level of control required. In this blog, we will be comparing these structures to help you make an informed decision.
Proprietorship Firm:
A Proprietorship firm is the most common and straightforward form of business structure. It is a single-person ownership structure that does not require registration with the Ministry of Corporate Affairs (MCA). The proprietor is personally liable for all debts and losses incurred by the business. The main advantage of a Proprietorship firm is its simplicity and ease of formation. However, it has limitations in terms of raising funds and scalability.
Partnership Firm:
A Partnership firm is a business structure where two or more individuals come together to start a business. The partners share profits and losses in a pre-agreed ratio. A Partnership firm is not a separate legal entity and is taxed as per the income tax slab rate of the partners. The partners are personally liable for all debts and losses incurred by the business. A Partnership firm is ideal for small and medium-sized businesses where the partners can pool their resources to start and run a business.
Limited Liability Partnership (LLP):
A LLP is a hybrid business structure that combines the features of a Partnership and a Company. It provides limited liability protection to its partners, meaning that their personal assets are protected from the debts and losses incurred by the business. A LLP is a separate legal entity and must be registered with the MCA. The partners share profits and losses in a pre-agreed ratio, and the LLP is taxed at a flat rate of 30%. A LLP is ideal for businesses that require limited liability protection and have multiple partners.
One Person Company (OPC):
An OPC is a business structure that allows a single person to start and run a business. It provides limited liability protection to the owner, meaning that their personal assets are protected from the debts and losses incurred by the business. An OPC is a separate legal entity and must be registered with the MCA. The owner has complete control over the business, and the OPC is taxed at a flat rate of 30%. An OPC is ideal for small businesses where the owner wants limited liability protection and complete control over the business. It is like Private Limited Company.