If you are looking to start a business or a startup, you need to register it. But before you do that, you must know the different types of business formations. In India, below are the types of business formations that are allowed.


Types Of Business/Startup In India

1] Proprietorship Firm

Simply put, a business/firm, etc that is owned by one single person is called a Proprietorship business/firm. You don’t have any liabilities that make this type of business the simplest and easiest to start with. You will need a service tax registration certificate or GST registration certificate and you have to open a current bank account in the name of your company. Therefore, when you aren’t sure of the path that you want to take in business and just want to test your ideas, this is the best way to go.

 Startup In India

2] Partnership Firm

You can easily guess from the name that this firm would have 2 or more people with equal stakes. It is similar to proprietorship in regards to that the liability is unlimited. The requirements are also the same. You need to register your partnership criteria with the current bank account and also GST registration will be necessary based on the type of business.

 Startup In India

3] Private Limited Company

This is for the formation of big business. Since 2015, the process to register such a company has been made much easier by INC 29 Form and you won’t be asked to keep a minimum capital of 1 Lakh rupees. There must be at least 2 Directors. If you have a great business idea and can make it into a big business then this is for you. This will also help you secure funds from an investor as well.

 Startup In India

4] Limited Liability Partnership

This type of firm is a mixture of a Private Limited Company and Partnership firm. Therefore, features would be similar to both of these types. It will need a minimum of 2 partners. Many start-ups chose this type of business formation because Private Limited Company required more fee for registration and before 2015, it was mandatory to have a minimum of 1 Lakh rupees capital.

 Startup In India

5] One Person Company

It is evident from the name as this company will have only one owner. The difference between this and proprietorship is that this will be the same as a Private Limited Company and will have the same features.

 Startup In India

There you have it. The above discussed are the 5 types of business formations under any one of those you can start your business. If you are looking to start a business and are confused about what kind of business formations you should go with, then below are some tips that I think would be helpful.
  1. If you are starting a business on a small scale like a tech website or some shop or an internet service provider etc, you should go with proprietorship. This is because you don’t hove to pay much for registration and it has very few legal liabilities.
  2. If there are 2 or more people who want to start the business but to continue with their jobs, then Partnership Firm is the best way to go. This is when you are just testing your ideas and not sure of the business much. It requires very less amount for registration and is a simple business formation.
  3. When you have a very good idea and also you are sure of the business and revenue model and want to go all out, then you must choose a Private Limited Company. As stated earlier, you can get funds from an investor for such a business. The cost of registration is a bit more, but compared to the business that you want to create, it is very minimal.
  4. When you are low on budget but want to enjoy all the features of a Private Limited Company then go for a Limited Liability Partnership.
  5. When you don’t want to have partners but want to enjoy maximum features of the Private Limited Company, then you can choose One Person Company.

Important Things To Remember

  • Trademark Registration is extremely important and vital to any business. This is unique to your own business and no one can use it without your authorization. This makes it useful as when your business grows, people will directly recognize you only by looking at your TradeMark Logo or Name, etc. If anyone uses your TradeMark in any form, then you can claim it or ask for compensation or can even take legal action.
  • For any kind of business, it is essential that you must make a draft of all the rules and regulations of your company before you start the business. You must have a privacy policy, third-party policy, disclaimer, refund policy, etc all figured out. This is very important and will be helpful in the long run.
  • If you have a product that you will be selling, then you must have strong Vendor Agreements. This is the person or company that helps you build your product or parts of it. It is also very essential as you must have a clear payout, refund policies, and other tax implications.

If you have any queries or suggestions then please leave a comment below.

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