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LLC, Pvt., Inc. et al... Difficult To Decide the Right Incorporation? - We Get You Their Advantages And Disadvantages To Help You Decide.

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Whether or not to get a company incorporated is a big question in itself.

That coupled with which kind of incorporation is best for the company,

makes it an even bigger question.

If you don’t choose the right one for your company, you might scream out “HELP!”

sooner than you think. A freaky picture indeed!

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If you are still in the indecision-state, we get you the advantages and disadvantages of several incorporations to help you walk the tightrope (and we’ll be brief for that

matter)!

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While choosing which type of incorporation is best for you, you need to be clear about

your ownership structure (number of business owners, whose assets are at

stake, etc.),

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The nature of your business (what

products are sold, what is the target market,

etc.),

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Your tactics to raise investments (whether

from bank credits, angel investors, etc.), the type of tax classification that will work best for your

company.

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1. Private Limited Company

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Advantages of Private Limited Company

O Its members have limited liability.O It will continue to exist even after all

its members desert it or die.O It has less legal restrictions.O It can utilize surplus funds available

in its business by making a loan or investing them in the shares of another company.

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Disadvantages of Private Limited Company

O The shares allotted to members are not freely transferable between them.

O The company cannot invite the public to subscribe to its shares.

O There is a high possibility of undemocratic control.

O Such a company has scope for promotional frauds.

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2. Public Limited Company

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Advantages of Public Limited Company

O It will continue to exist even after all its members desert it or die.

O It has a larger amount of capital.O Its members have limited liability.O Management is efficient.

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Disadvantages of Public Limited Company

O The company is subject to strict regulations.

O There is scope for promotional frauds.

O There is a high possibility of undemocratic control.

O Directors may be biased towards making personal profit.

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3. Partnership Business

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Advantages of General Partnership

O It is easy to establish.O All partners of the business can

contribute towards managerial and financial strengths of company.

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Disadvantages of General Partnership

O The partners are at risk of unlimited legal and financial liabilities.

O Partners are likely to commit the business to liabilities or obligations without approval from other business partners.

O The business will cease to exist upon death of a partner.

O The liability incurred by one partner makes all other partners vulnerable to liabilities and seizure of personal and business assets.

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4. Limited Partnership

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Advantages of Limited Partnership

O The assets can be protected from seizure even if one partner loses a lawsuit.

O All partners are protected from liability.O Profit made by the business is reported on

the personal tax returns of the partners.O There is no cap of the amount of money

garnered by the partners from the business.

O An LP can own property, sue, and be sued because they have the status of being a separate legal entity.

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Disadvantages of Limited Partnership

O A large amount of legal documentation is required during this incorporation.

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5. Limited Liability Partnership (LLP)

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Advantages of LLP

O It provides legal framework to the initiation of the business.

O Partners are protected from liability of the company as their liability depends on the amount of their invested capital.

O This incorporation is more tax advantageous than a private company.

O It is not required to set up a termination date for the partnership agreement.

O Dividends paid to the partners of the business are reported on their personal tax returns.

O An LLP can own property, sue, and be sued because they have the status of being a separate legal entity.

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Disadvantages of LLP

O The Limited Liability Partnership requires more legal documentation than say a General Partnership due to its’ status as a legal entity

O The business is considered dissolved when the Limited Liability Partnership loses a partner

O In some states only professionals, such as attorneys, architects and accounts may use this type of entity.

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6. Sole Proprietorship

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Advantages of Sole Proprietorship

O There is minimal documentation required.

O It is easy to form.O There are very few legal restrictions.O Dissolution of the business is easy.O The income is reporter on the tax

returns of the business owner.O There is maximum incentive for

work.

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Disadvantages of Sole Proprietorship

O There is unlimited personal liability for debts.

O The personal assets of business owners are at risk in case of a lawsuit.

O The business will end upon owner’s death.

O Raising capital for the business is a challenge.

O The business operates on limited capital.

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Centre for Innovation and Entrepreneurship

C-4, IIT-H Foundation, Gachibowli, Hyderabad

9618402751, 9000600247

Reach us at:prabha@accuprosys.com simplify@accuprosys.com anuradha@accuprosys.com

 For more details, please

visit: www.accuprosys.com