A sole proprietorship is an enterprise an individual runs without creating a separate entity. A sole proprietor is accountable for all financial burdens with unlimited liability. Consequently, this form of business is said to be the easiest and most inexpensive way of starting a firm. Therefore, a sole proprietor could be a digital agency owner, mom & pop shop owner, IT consulting services provider or a personal trainer.
A fitness trainer starts a gym in the neighbourhood and enters into an agreement with a local real estate developer. Together, they form a partnership. Therefore, two or more persons together form a partnership firm, where each person is a partner. Consequently, the partners involved in this business bear risk. A partnership agreement is created to layout the granular details, like profit sharing, risk sharing, etc.
Private Limited Company (PLC)
When people say ‘company’, they usually refer to PLC. A company may have shareholders, which is a more complex legal structure with higher compliances. If in case you intend to hire many employees, or plan on selling share (a single unit of ownership in a company or financial asset), then PLC is the way to go. The shareholders have limited liability and the directors have personal liability. Companies such as Flipkart, Ola and CAxpert are private limited companies.
ROC Compliance Requirement for Private Ltd. Companies
- Appointment of auditor (Form ADT 1)
- Statutory audit of accounts
- Filing of annual return (Form MGT-7)
- Filing of financial statements (Form AOC-4)
- Holding an annual general meeting
- Preparation of directors’ report
One-person Company (OPC)
The OPC is the latest addition in the business structure. It allows individual entrepreneurs to limit their liability and have moderate compliances. As a result, the OPC stands somewhere between a sole proprietorship and a private limited company. It gives you complete ownership and control over the business affairs. In short, an OPC lets you reap most of the benefits offered by a PLC with limited liability and lesser compliances.
Limited Liability Partnership Firm (LLP)
In a limited liability partnership, you reap the benefits of a sole proprietor while being in a partnership. As a result, you enjoy the benefits of a partnership and restrict your liability. It is a newer way of forming a company. Usually, accountants, attorneys, architects, physicians, and licensed financial advisors form such partnerships.
ROC Compliance Requirement for LLPs
- Filing of annual return (Form 11)
- Filing of statement of account & solvency (Form 8)
TDS Return Applicable to All The Above
One should deposit the TDS by the 7th of the succeeding month in which TDS is deducted. The return should be filed by the month-end, following the end of the quarter for which the return is filed.
The Form-26Q is for TDS on commissions, rent, interest, etc. Subsequently, the Form-24Q is for TDS on salary. This applies to all types of businesses mentioned above.
New GST System
The 31st GST Council Meet has decided to introduce a new return system. The new system includes simplified return forms for ease of filing for all taxpayers under GST. According to the 39th GST Council Meeting, the new GST Regime will be implemented from September 2020.
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