Sole Proprietorship

It is the most basic form of business owners because it is promoted and owned by a single person. The business and the individual running it is considered as one. The profit, loss, assets, or liabilities are that of the individual. The initial capital for starting the business is brought in or mobilized by a single person who is the sole owner. While a person can enjoy the entire profits, he or she is personally responsible for its losses and liabilities. The legal formalities for starting a business as a Sole Proprietorship is very minimal.

Partnership

In this form of business ownership, two or more people join to promote a business. The sharing of profit, loss, assets, and liabilities among the partners is according to the ratio of capital brought in by each individual. As the individual partners and the partnership business (called a firm) are assessed separately by the income tax department, the profits shared by the partners are not taxed again at the hands of the partners. One should note that each partner in their capacity is personally liable for the liabilities of the firm. The partnership will cease to exist when there is a change in partners.

Hindu Undivided Family – HUF (Joint Hindu Family business)

This type of business is unique to India. The Hindu Undivided Family or HUF is an extended undivided family living in the same household, they can form a HUF by pooling the assets of the family unit. The HUF and the individuals are assessed for tax separately.

Limited Liability Partnership(LLP)

Unlike the partnerships mentioned earlier, LLP in India is a corporate body and is an entity independent of its partners. They have Perpetual succession, and any change of partners in LLP does not affect the existence of rights or its liabilities. As it is a corporate body and an entity independent of its partners, LLP can enter into contracts and hold properties. The most notable difference between the traditional partnership and LLP is that the Partners’ Liability is limited to the agreed contribution. LLP is an entity registered under the Limited Liability Partnership Act, 2008.

One Person Company

It is now possible to register a “One Person Company “ or OPC as a corporate entity under the Companies Act 2013. Unlike in a Private Limited Company where at-least two persons are needed, in an OPC, a single person runs the company while enjoying the protection of limited liability.