Taxation- Every legal structure has different tax brackets. Proprietorship firm classifies their firm revenue as personal income. A partnership firm has a 30% slab while companies have a 25% tax rate and may go up to 30% with an increase in turnover. Your decision about your structure has a big influence on your tax burden because firms, companies and LLPs are taxed at different rates.

Compliance- Depending on the type of business structure, various compliances get triggered and they are specific to each legal structure. For example, if you are starting with a Private Limited Company, a Statutory Audit by CA is applicable even if you do not have any business. In the case of LLP, Audit is not applicable up to 25 Lakhs of Capital Contribution and 40 Lakhs of Turnover. Also, in terms of compliance, private companies have to adhere to more compliance and thus become costlier. 

Management- A board of directors is required for a company. In the case of OPC, minimum of 1 director is required. In the case of LLP, 2 Designated Partners are required. In a public limited company, you need to have a minimum of 3 directors.

Funding- Additionally, your structure may prevent you from obtaining money in some ways. Sole proprietorships, for instance, are typically unable to provide stocks. Companies are the primary holders of such privilege.

Simplicity- There aren't many legal requirements or papers needed to set up a sole proprietorship, and it can be done for a reasonable price.

Total Control- As the only proprietor, you have total authority over all business decisions, operations, and earnings.

Benefits to Taxation- By reporting business income and expenses on their tax returns, sole proprietors avoid the complications associated with separate employment taxes.

Shared Responsibilities: By combining their networks, resources, and experience, partners may make decisions together and utilize complementary skill sets.

Ease of Formation: It requires less documentation requirements to create a general partnership compared to other business models.

No Minimum Capital Requirement: There is no minimum financial commitment needed to launch an LLP.

Suitability: Compared to a private limited company, forming an LLP is a simpler process with fewer legal requirements.

There is no cap on the number of entrepreneurs: This type of legal structure allows for two or more partners.

Reduced Registration Fee: Compared to a private limited company or public limited business, there are fewer registration fees.

Less Compliance: Only the Annual Return Statement (Form 11) and the Statement of Accounts (Form 8) are required to be submitted by LLPs as far as MCA compliance is concerned. The compliance requirements are lower compared to private limited companies.

Simple Exit: LLP can be filed for Fast Track Closure on FTE by filing Form 24 if there is no business operation even after 1 year of incorporation or 1 year has passed since there is no business activity.

Independent Legal Entity: A private limited company is an independent legal entity. An entity is anything that is recognized by law. Moreover, the business may file lawsuits under its name and may likewise be sued itself.

Borrowing capacity: A private limited company can borrow more money than an LLP. This is due to its greater choices for taking on debt. There is always the possibility of issuing convertible debentures. It is in addition to regular debentures also. Private limited companies are more widely accepted by banks and other financial institutions than partnership firms.

Simple Exit: Sometimes, a private limited company is sold or transferred, in whole or in part, to another person or organization. In these scenarios, there is no impact on the ongoing operations.

The ability to sue and be sued: To sue is to bring legal action against someone. In the same way that an individual can file a lawsuit against another in that person's name, a distinct legal entity, can file a lawsuit under its name.

Continuous Existence: The resignation or death of a member/ director has no impact on the company's ability to continue operating.

Limited responsibility: A shareholder's responsibility is capped to the amount of their interest. The company does not have any shareholders; hence it may be sued.

Number of Members: Seven shareholders are required at a minimum, but the number of members can be as high as the share capital that the company can hold.

Continuous existence: The passing of a shareholder or member has no bearing on the public limited company's lifespan.

Massive Capital: By offering bonds and debentures to the public, public limited companies can now have a greater capacity to raise capital through the stock market.

Adaptability- What direction is your business going, and what kind of legal structure will enable the expansion you hope to achieve? Consult with Compliance Calendar LLP to define your strategy to evaluate your objectives and choose which structure best fits them. Your organization should encourage development and change rather than prevent it from reaching its full potential.

Intricacy- A sole proprietorship is a simple business structure in terms of starting and operating difficulty. Get Trademark Registration for your Brand Name/ Logo, get your business going, declare the profits, and pay personal income taxes on them. However, obtaining outside finance may not always be easy. In contrast, a formal agreement outlining the responsibilities and profit-sharing percentages is necessary for partnerships. 

Liability- Since a company is considered to be an independent legal body, it is subject to the least level of personal culpability. This implies that although creditors and clients may file a lawsuit against the company, they will not be able to seize any of the executives' or shareholders' private property. According to the terms of a partnership agreement, partners in a partnership share liability and may be jointly and severally liable.

Control- A sole proprietorship or One Person Company can be the best option if you desire complete or main control over the company and all of its operations. Such control may also be discussed and agreed to in a partnership agreement if you are forming a Partnership Firm or LLP.

Investment of capital- You could be better off forming a company if you need to get outside investment from a bank, venture capitalist, or investor. Compared to sole proprietorships, companies have easier difficulty collecting outside investment.

Taxes- A sole proprietorship owner is subject to the same taxation as a single proprietor. All profits are taxed as personal income at the end of the year. Partners in a partnership may additionally deduct their income from their portion of the earnings. Your accountant may recommend that initial payments be made quarterly or bi-annually. This is to minimize the impact on your tax returns. Each year, the company files its tax returns and pays taxes on the profits. However, it is after deducting salaries and other expenses. You will pay your taxes on your return, including Social Security and Medicare taxes.