Discover which Company Registration is best for Startup

1. Discover which Company Registration is best for Startup! After covid, there has been a rapid rise of startups in India. Many budding entrepreneurs started showing interest in acquiring their own startup entity. Once the startup is registered, the question that strikes is whether the startup should be incorporated as a Private Limited Company or a Limited Liability Partnership. The answer to this question will be discussed in this blog and give an idea of on Which Company Registration is Best for Startups. The Startup India scheme which was introduced by our current Prime Minister of India Narendra Modi is quite helpful for startups to get developed and seek various advantages. Which Company Registration is best for Startups: Right Corporate Entity Once the startup is registered, a startup can either be incorporated into a Private Limited company or a Limited Liability Partnership (LLP). There are other two options for the incorporation as One Person Company (OPC) or Sole Proprietorship. These two options are mostly not adopted, it is because they are not that good in attracting the investment of the company also in Sole Proprietorship, the proprietor enjoys personal unlimited liability which is not appreciable. So these are the reasons why these two options are mostly excluded and not incorporated by the startups.

2. So, if these two are not on the list of incorporation, the rest two left are Private Limited Companies and Limited Liability Partnership. So in these, a startup can incorporate according to its wish. Next, it will discuss the startup incorporating as an LLP and as a Private Limited Company. Startup as an Limited Liability Partnership (LLP) LLP is one of the options for the startups to get incorporated under it, as it provides various advantages to the startups like limited liability and flexibility in the partnership firm. Basically, an LLP can enter into a contract by itself, and also it can hold or purchase the property of its own. There are a few disadvantages found when the startup is incorporated as LLP, (1) It doesn’t matter whether the particular startup is active or not but they have to file the income tax returns annually. (2) An LLP must have at least 2 partners which is difficult for the startup to carry out. Hence, it is the choice of a startup to incorporate as LLP or not. Startup as a Private Limited Company It is very evident nowadays that Private Limited Company is used as a go-to option in many businesses. There are chances that startups might have very tight capital investment during that time private limited companies are useful as there are no minimum capital requirements for the Private Limited Company. Also, the great advantage is that the Private Limited Company can use the DFDI (Foreign Direct Investment), and also the Private Limited Company secures the credibility of the customers which is merit for the startups. There are some disadvantages found in LLP when a startup is incorporated under it likewise here also there are some disadvantages when the startup is incorporated as a Private Limited Company.

3. (1) It has too much of compliances that are to be followed during the registration and even after the registration. (2) A Private Limited Company is exempted from tax and labour laws. Keeping this all in mind, it can be tough to take the decision of these two corporate entities when it comes to the incorporation of startups that are in India. It completely depends upon the business that the startup is carrying out and later it can decide whether to opt for a Private Limited Company or Limited Liability Partnership (LLP). Therefore it is very important that the Startups keep all the merits and demerits of both entities and choose the proper entity wisely for the purpose of incorporation.