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Partnership

Partnership is one of the oldest form of business where two or more person decide to join hands to run a business and share it’s profits and losses with mutual consent. There are minimum compliance requirements in a partnership firm; however, to start a Partnership Firm there are two major requirements-

• Having a partnership deed
• Getting the Partnership firm registered

Though both the above are not mandatory legal requirements; still it is highly advisable to have a legally enforceable partnership deed

Why have a Partnership Deed

The Partnership deed is a document containing the firm details, nature of business, details of partners, profit sharing ratios and other terms and conditions, as mutually agreed by the partners.

Though it is not legally mandatory to have a written partnership agreement to start a partnership business; still, having a written partnership agreement is extremely important to avoid the possibility of conflicts in business. Even in case of partnership among close friends and relatives, the written agreements are highly recommended as the level of mutual trust and equations may change but the legal written documents will never change

Why to register the Partnership Firm

The partnership firms are registered with ‘Registrar of Firms’ of the area in the firm is situated or proposed to be situated.

As mentioned above, there is no mandatory legal requirement to get the Partnership Firm registered, still it is preferred to get it registered because the disadvantages of unregistered partnership firm are as under-

1. A partner of an unregistered firm cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.

2. No suit to enforce a right arising from an agreement can be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered.

3. An unregistered firm or any of its partners cannot claim set-off or other proceedings in a dispute with a third party.

Henceforth we strongly recommend you to get your partnership firm registered.

The partnership firm should be registered within one year from the date of constitution of firm; however even existing unregistered partnership firm may get registered on payment of nominal late fee.

Limited Liability Partnership (LLP)

The concept of Limited Liability Partnership (Commonly referred as LLP) was introduced vide Limited Liability Partnership Act, 2008. This is the newest form of business having combined features of Company and Partnership. There are minimum two partners required to form the LLP.

The main features of LLP are

• LLP is a separate legal entity from it’s partners, thus LLP protects the partners personal assets from business liabilities
• In a LLP, one partner is not responsible or liable for another partner’s misconduct or negligence
• In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, in case of a LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP

Documents Required for LLP Incorporation
1.  Address Proof of proposed Registered Office
   (a) Electricity Bill (not later than 2 months)
   (b) Property tax paid receipt
   (c) Shop Act license
2.  In case property is taken on Rent an NOC from the owner of the property is compulsory
3. Consent Letter
4. Subscriber Sheet
5. Draft LLP Agreement
6.PAN card/ Electricity bill/ Driving License/ Bank Statement of Last 2 months of all the Designated Partners

Difference among Partnership, LLP & Company

Criteria	Partnership	LLP	Company
Governing Act	The Partnership Act, 1932	Limited Liability Partnership Act, 2008	Companies Act, 2013
Regulatory Authority	Registrar of firms	Registrar of Companies	Registrar of Companies
Cost	Lowest	Medium	High
Managed by	Partners	Partners	Directors
Extent of Liability	All the partners are equally liable for any contravention by the firm or by any partner. The liability of firm may be recovered from personal assets of the partners	The liability is limited to the Capital Contribution of each partner. One partner is not personally liable for wrongful acts of any other partner. The liability of LLP shall be met out of LLP assets only	The liability is limited to the shareholding of each shareholder. Shareholders are not liable for any act of the company.
Compliances	Minimum	Medium	High

 

Benefits of Limited Liability Partnership:

• Lower Registration Cost
• No Minimum Capital Requirements
• No requirement of Compulsory Audit
• Lower Compliances
• Limited Liability

We at AAP Consulting Private Limited provide all the services related to incorporation of LLP including the drafting a comprehensive LLP agreement as per your business requirement.

Private Limited Company

It is most reputed form of business where a company is formed by promoter by investing in the Share Capital of the company. The ownership of company rests with shareholders, whereas the operations of the company are managed by directors. The directors may or may not be the shareholders of the company. There shall be minimum two directors and two shareholders in a Private Limited Company.

Steps of Incorporation of a Private Limited Company-

• check the availability of the proposed name; in case the any other company with similar name is registered then the name is not approved. Check Company Name Availability (Ministry Of Corporate Affairs – MCA Services )
• After preliminary check, the Name Approval Form is filed
• After the name approval the Spice+ form is to be filed. For filing this form, the Digital Signature Certificate (DSC) of proposed directors must be obtained
• After the Spice+ form is approved the company is incorporated. Along with the Registration Certificate, PAN & TAN are allotted.
• After incorporation, the Company’s current accounts is required to be opened and necessary registrations such as GST etc. are applied for.

Benefits of Private Limited Company

• Corporate Identity
• No minimum paid up capital requirement
• Best option to attract investors
• Flexibility – Shares can be easily transferred

–  Directors can be easily appointed and removed

• Limited Liability

We at AAP Consulting Private Limited provide all the services related to incorporation of company starting from checking name availability, Filing name approval, Professional drafting of AOA & MOA as per the business requirement, Getting the COI (certificate of incorporation), and post incorporation legal requirements such as – Appointment of First Auditors, GST registration etc.

Public Limited Company

It is a suitable option for large scale business involving huge investments. There should be minimum 7 members and 3 directors to form a Public Limited Company. The minimum share capital of Public Limited Company is prescribed as INR 5 Lakhs; the shares of the Public Limited Company may be listed or unlisted; however listing of shares with stock exchange provides the opportunity to raise the share capital form general public. The Public Limited Company have more responsibilities and obligations in terms of Statutory Compliances.
Check Company Name Availability:  Ministry Of Corporate Affairs – MCA Services

Steps of Incorporation of Public Limited Company

• The minimum number of members & directors are to be identified and minimum paid Share Capital is to be arranged by the shareholders.
• The proposed Directors need to obtain the DIN from the Ministry of Corporate Affairs and DSC (Digital Signature Certficate) from the Certificate Issuing Authority.
• Only the individuals can be the Directors of the company and not entities like LLP’s or Financial Institutions. Also, the number of directors cannot exceed 50. It is not necessary for the Director to be the Shareholder of the Company.
• The members of the company may be individuals as well as artificial jurisdictional person such as company, LLP etc. There should be minimum 50 members; however there is no maximum limit of number of members.
• Before starting the registration procedure, the name of the Company has to be approved by the ROC. It is mandatory that the name of the Public Limited Company ends with the word “Limited”. This application is filed in the RUN form of the Ministry of Corporate Affairs. It is better to provide a list of names in order of preference, in case a particular name is not available.
• Once the name of the Company has been approved, the crucial documents of the Company – MoA and AoA have to be executed. These documents have now gone electronic and can be prepared and submitted there itself. (eMoA: INC33 & eAoA: INC32)
• Once all the documents have been prepared, they are submitted to the ROC for verification.
• Upon proper verification of all the submitted documents, the ROC registers the company and issues a Certificate of Incorporation along with the CIN (Corporate Identification Number) of the Company.
• Mere Registration of of company is not sufficient for starting the business. Before commencement of business the company has to apply for Certificate of Commencement of Business within 180 days of receiving the COI, stating that all the subscribers have paid the subscription money.

Though the legal requirements and complinaces for incorporating and running a Public Limited Company are little stringent; yet it is preferable for Large Scale Business for the following reasons-

• Limited Liability
• Separate Legal Entity
• Easy to raise funds
• Easy to transfer the Shares
• Prestigious form of Business

We at AAP Consulting Private Limited provide all the services related to incorporation of company starting from checking name availability, Filing name approval, Professional drafting of AOA & MOA as per the business requirement, Getting the COI (certificate of incorporation), and post incorporation legal requirements such as – Appointment of First Auditors, GST registration etc.

One Person Company

This is a new form of Company introduced vide Companies Act, 2013 where only one person can start a company. All the shares of the One Person Company (OPC) are held by one member. However, there has to be one nominee member to hold the position in case of incapacity, death etc. of the member

The minimum number of Directors for OPC is also only one. The director and shareholder can be same person

OPC offers the features of the Private Limited Company such as limited liability, corporate identity etc. along with the ease of sole ownership and management.

One Person Company is the best option for the entrepreneurs to wish to start their business on their own expanding their opportunities, limiting their liability with minimal procedural/compliances

In case the paid up share capital of an OPC exceeds the prescribed limit or its average annual turnover of immediately preceding three consecutive financial years exceeds the prescribed amount, then the OPC has to mandatorily convert itself into private or public company.

Benefits of OPC:

• No Minimum Capital Requirement
• Easy to Start
• Minimum Copliances
• Corporate Identity
• Limited Liability
• Best option for solo start-ups

Other Entities

The other forms of entities include

• NBFC,
• Section 8 Company,
• Hindu Undivided Family (HUF),
• Trust,
• NGO,
• Society,
• Association of person etc.

The above entities are formed for special purpose such as-

To run a non-profitable organization you may register the same as a trust, as a society or a private limited company formed under section 8 of the companies Act, 2013.

To manage the inherited properties, business and tax planning you may form the HUF. HUF is a separate legal entity; forming the HUF can be an effective methods for tax planning

We at AAP Consulting Private Limited have a team of experts who may assist you in forming any of the above mentioned special entities – starting form the suggestion about suitable type of entity to be formed as per your specific requirements till obtaining the certificate of incorporation.