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Desired Business- Company or Partnership
- 1. Partnership or Company Selection of better option Dhingra Gaurav & Associates Sep 24
- 2. Presentation Flow SN Subject 際際滷 # 1 Major Features of Company 3 2 Major Features of Partnership 4 3 Selection between Company & Partnership 5,6 & 7 4 About Team 8 2
- 3. Major Features of Company 3 Legal Structure and Formation Separate Legal Entity in which - Shareholders have ownership in shares and control over director appointment. - Directors are involved in internal management. A Company exists independently of its directors and shareholders. Thus, Company will continue to exist if director or shareholders leave the company. A company can be formed by its registration with MCA. Number of Shareholders Maximum number of shareholders in a company is 50. Liability of shareholders Every shareholder in a Private Limited company has a limited liability as defined in MOA. Tax Structure Tax Rate on income of a private limited company is 25 percent. Capital Raising Can raise fresh capital by issuing more shares to investors, subject to authorized capital in MOA.
- 4. Major Features of Partnership 3 Legal Structure and Formation Partnership Firm can be formed by a written partnership deed. A written partnership agreement helps in - Defining the exact roles of partners in firm. - Sets out the profit sharing ratio between partners. A Partnership does not have a separate legal entity and partners are personally liable for partnership debts and losses. Number of Partners Maximum number of partners in a firm is 20. A Partnership firm consisting of 2 partners stands dissolved if one of the partner leaves firm. Liability of shareholders The partner's liability of a partnership firm has unlimited liability. Tax Structure Tax Rate on income of a partnership firm is 30 percent. Capital Raising A partner can introduce fresh capital as per partnership deed.
- 5. Company or Partnership ? Setup and Compliances costs The setup and annual compliance requirements like annual filing of accounts, ongoing requirements like director duties and paperwork are more stringent in case of a company, where as in a partnership there are no such requirements. Hence setting a partnership is cost effective as compared to company. Flexibility A Partnership offers more flexibility in conduct of business as partners can between themselves decide terms and conditions of partnership as per their requirements and profit sharing ratio to be drafted in written agreement. On the other hand, MOA and AOA of company are more or less standardized. Control Since control of business will be directly done by partners without any further 5
- 6. Company or Partnership ? involvement. It would be better to form a partnership as its organizational structure is not sizeable, which is generally in case of a company. In case of sizeable structure, micromanagement of different division is involved. Taxation Perspective Though tax rates on income of partnership is more as compared to a company, but method of computation of taxable income in case of a company and partnership are different. Further if we compare the total tax liability of partnership and its partners vis a vis company and its directors, tax liability in case of partnership and its partners comes out to be lesser as per the experience in my practice. Conclusion The profitability of a business and its worth in market solely depends on its owners and their decision making. From that perspective, it doesnot matter whether a company is formed or partnership. However 6
- 7. Company or Partnership ? if we consider other factors such as controlling and financial, it is clear that Partnership is a far better option as compared to company as can be seen from 5 bullet points mentioned above. The only area where company has edge over partnership is liability of directors / partners. In company liability of directors is limited whereas in partnership liability of partners is unlimited. Also, it is possible to form a blend of partnership and company i.e Limited Liability Partnership 7
- 8. About the team 8 Gaurav Dhingra, Practicing Chartered Accountant - CEO of the firm and CA from Institute of Chartered Accountants of India. - Holds 9 year of post qualification experience in audit, taxation and certification works. - Worked in Big 4 such as EY and KPMG previously. - Have specialization in startup advisory and audits of sizeable companies. Puneet Jain Holds the position of mentor and advisor in firm. Recently moved to Vietnam and worked as Finance head in various corporates. Atul Bhutani Heads business development area in the firm.
- 9. Thank You Dhingra Gaurav & Associates 607-608, Tower C, Nirvana Courtyard Sector 50, Gurugram 122018 Gaurav Dhingra cagauravdhingra15@gmail.com / 72910-71576 9