Understanding SME proprietorship firm registration and the laws governing limited liability partnerships in India

Why do SME s need to register themselves?

There are varied advantages of registering your SME ranging from liability protection to ensuring growth. Registered companies are favored by all in the corporate world. IT gets so much easier to get loans and also to develop a market and wield business influence.

Ensures legal security
Gives you a competitive advantage
Lowers tax burden
Reduces liability
Fundraising gets easier
Easy to pass ownership shares

What is proprietorship firm registration?

In a Sole Proprietorship, the business is totally managed by a single person. It is especially suited for individuals who want to start a business with a small investment. He is solely entitled to the gains and bears all the losses as the case may be.He can appoint persons to help him run the business and controls the management of affairs in toto.

For incorporating as a Sole proprietorship, one needs to

Apply for a PAN card first.
Get a name for the business
Open a bank account in the business name
Obtain a certificate of registration under the shops and establishments act of the state in which his business is located.
Advantageous to register as a Small and Medium Enterprise (SME) under the MSME Act.
GST registration if the turnover is more than 20 lakhs.

What is a limited liability partnership?

An LLP is registered with the Ministry of Corporate affairs. LLP s allow a partnership structure wherein each partner’s liability is limited by the amount he/she has invested in the business. This way the risk is spread over the partners. This concept of a limited liability partnership in India started in 2008.Here all partners are the agents of the LLP and the actions of one partner do not bind the others. Such a start-up must have a minimum of two partners and at least two individuals as designated partners.

Getting to know the key differences between the above two registration models:

With a bevy of boosters for SMEs, it is important to know the incentives and relaxations that are on offer for Sole Proprietorship, as well as Limited Liability companies. Each of the above company registration formats comes with its own set of advantages. While proprietorship has fewer compliances, limited liability companies have a smoother and more structured form of governance. In the latter, the risk to the personal assets of the director or shareholder is limited to his stake in the company. Proprietorship is not required to audit accounts each financial year and the company is easy to terminate without any liquidator.

Conclusion:

Why does hiring a consultant for deciding how exactly to register your firm help?

The quandary faced when you are about to get your company registered is duly addressed by hiring experts who help you with the decision-making, depending on your investment and the immediate needs of the company.

Legalo services might just be what you are looking for:

We cover all services from advising on how to register the SME till the business is a legal entity
We have an expert team that helps with the PAN , the name choice, bank account opening, GST registration, etc.
Our services can be accessed online and you can keep track on an easy-to-use dashboard.
An excellent support team will help you with your queries throughout the process.