Starting-up? Here's Everything That You Need to Know!

Gone are those days when one chooses to work for a company until their last breath. These days entrepreneurial avenue is what people want to explore.

“All humans are entrepreneurs not because they should start companies but because the will to create is encoded in human DNA.” —Reid Hoffman, LinkedIn co-founder.

A new startup is the fruit of immense research, planning and decision-making. An entrepreneur has to be right only once to build a successful business venture. There are no thumb rules for a successful business, but the following points need to be considered when one decides to start-up:

1. Legal liability
2. Cost of formation and administration
3. Level of competition
4. Profitability
5. Tax implications
6. Goals and resources
7. Flexibility

One of the most important decisions a budding entrepreneur makes is the form of organization s/he chooses for the startup. This is a determining factor applicability of tax policy, the quantum of personal liability and the ability to raise money for the project.

Types of business entities

Sole Proprietorship

It is the least complex form of business in India. Under this form of business a single person owns and runs the business, and undertakes the personal liability. The time needed to set it up is a maximum of 15 days.

Partnership Firms

Persons entering into a partnership are called partners and partnership firm is the collective term used for them. It is a business carried on by all of them or any of them acting for all. This form of business entity is governed by the Indian Partnership Act; 1932. Moreover, the easy formation is one of its key benefits.

Limited Liability Partnership

The growing popularity of this form of business is due to its hybrid structure. Imagine a business organization having the flexibility of partnership firm and a limited liability feature of the company... the dream for any entrepreneur.

Private Limited Company

Private limited Company is an option for the new start-ups which require a lot of external funding…i.e. start ups requiring a fair amount of investment, as it is easy to raise money by issuing equity shares. A private limited company has all the advantages of partnership namely flexibility, a greater capital combination of different and diversified abilities, etc., and at the same time it has the advantages of limited liability, greater stability and legal entity.

Public Limited Company

A public Limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. Furthermore, this form of business has the most cumbersome compliance and restrictions under the Companies Act and various other laws governing the corporations.

Let us now analyze the important aspects relating to various business forms which will help us to understand the pros and cons of every form of business organization.

Firstly, choosing a right form of organisation is one of an essential factor for the success of the business. It is like planting the right tree to reap the benefits of the desired fruits. In addition to this, the type of entity also depends on a lot upon the projections, funding needs and a businessman’s appetite for risk. Finally, everyone can tell us about the risks but only an entrepreneur can see the rewards. However, it is good to see before you jump.

Think Big, play smart.

Also Read: Thinking of Investing Outside India? It’s Easier than You Think

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