CS Executive:Setting Up & Closure [Ch-1 Choice of Business Organisations]

Factors governing the decision for choice of form of business organization 

• Nature of business activity 

• Scale of operations 

• Capital requirements 
• Managerial ability  
• Degree of control and management 
• Degree of risk and liability 
• Stability of business 
• Flexibility of administration 
• Division of profit 
• Costs, procedure and government regulation 
• Tax implication 
• Geographical mobility 
• Transfer-ability of ownership 
• Managerial needs 
• Confidentiality 

• Independence 

• The above stated factors are independent 
• Not exhaustive 
• Weights can be assigned to different factors and the  highest weighted factor is considered the most. 

FEATURES OF PVT. LTD. COMPANY

•  

  Business funding: start ups might start with being a pvt. Company as investors can be offered shares. 
• Ltd. Liability 
• Zero cost for those companies who have Authorized capital 10 lakh up-to 20 members in case of company having no share capital 
• Requires greater compliance 
• Few tax advantages 

FEATURES OF A LIMITED LIABILITY PARTNERSHIP 

• Start up cost rs. 5000 and no paid-up capital 
• For unscalable business 
• Fewer compliances 
• Tax advantages 
• No limit in the number of partners 

FEATURES OF A PARTNERSHIP FIRM 

• Unlimited liability 
• Easy to start 
• Relatively inexpensive (cheap) 

FEATURES OF SOLE PROPRIETORSHIP 

• Unlimited liability 
• Easy to start 

FEATURES OF ONE PERSON COMPANY 

• For solo entrepreneurs 
• High compliance requirements 
• Minimum tax advantages 
• Revenues above 2 crore and paid-up capital above 50 lakhs needs to be converted into a private company. 
• Zero cost for those companies who have Authorized capital 10 lakh up-to 20 members in case of company having no share capital.