SIX REASONS TO REGISTER YOUR BUSINESS ENTITY

Six reasons to register your Company - MyEfilings

Upon Registration the business becomes a separate entity. Standing apart from its owners and promoters, it acquires a distinct legal status and is considered as an artificial juridical person created under law. The status of a separate legal entity is accompanied with the perks of perpetual succession, common seal, separation of ownership and control, right to hold and dispose property, and the right to sue and be sued in its own name

Types Of Business Entity - MyEfilings.com Blog ( Private Limited Company, Sole Proprietorship Company, Limited Liability Company, Proprietorship Company )

Business Entity

A corporation may be registered as a private limited company, a sole proprietorship, a partnership, a one-person company, etc., each with its own set of rules. For instance, the Companies Act 2013 governs all private limited companies and LLPs, which are registered with the Ministry of Corporate Affairs.

  • Governed by Ministry of Corporate affairs.
  • Highly popular form of organization in India
  • Need minimum two directors & share holders of which at least one should be Indian resident
  • Tax Rate for Pvt Ltd Company
  • Protects members from unlimited liability at the time of loss or closure of company
  • Single Ownership
  • No sharing of Profit & Loss
  • Unlimited Liability
  • Less Legal Formalities
  • One men control
  • Partnership Firm Registration
  • Two or more Members
  • Lawful Business
  • Competence of Partners
  • Sharing of Profit
  • Unlimited Liability
  • Restriction on Transfer of Interest
  • Its a legal entity separate from its partners
  • This form of organization provides benefit of both Pvt Ltd & Partnership Company
  • LLP can raise funds from Partners, Banks, NBFCs
  • Post incorporation, LLP can have limitless partners
  • Partners of an Limited Liability Partnership have the right to manage the business directly

Six most important advantages of registration

Advantages of Company registration - MyEfilings.com ( TRANSFERABLE OWNERSHIP, LIMITED LIABILITY, PERPETUAL SUCCESSION, EASY FINANCE, GROWTH, BRAND NAME/ GOODWILL )

The Capital of the company is divided into shares of fixed amount held by the shareholders which makes them the owners of the company.

The benefit of registering the company is that these shares can be transferred to any other person for consideration.

The procedure of such transfer is short and simple and upon successful transfer of share to new shareholder becomes the owner and is entitled to all the rights and duties of owner of the company.

On similar lines, The Limited Liability Partnership Act, 2008 allows admission and removal of partners simply by executing a supplementary agreement.

Thus, the transfer of ownership becomes a hassle-free process and does not hamper the business operations of the company.

In the event of liquidation of the company the liability of the Members is limited to:

  1. Unpaid Share Capital subscribed by the shareholder, or
  2. Amount that they have guaranteed to pay in the Memorandum of Association

No Member is liable to any amount over and above his unpaid share capital or amount of guarantee and will not be held personally liable to the acts of the company.

This safeguards the personal assets of the members against the liabilities of the company, while keeping intact their rights as owners.

Similarly, the partners of registered LLP also enjoy the benefit of limited liability. They are liable only to the extent of contribution agreed by them in the partnership deed.

This advantage of limited liability is not available to unregistered business concerns wherein the owners are personally liable to the creditors.

A registered company enjoys perpetual succession. Unlike a natural person the life of a company is not limited to a fixed span of years.

Even upon unfortunate demise of the owners of the company the company does not cease to exist.

It continues to operate simply by transmission of ownership in line with the Succession Act.

The successors become the owners and the business is smoothly carried on by the next generation.

An LLP continues to exist until it is wound up or struck-off. Unlike general partnership firm LLP continues with its business regardless of change in partners.

A registered business entity, being an LLP or a company,is regulated by the Ministry of Corporate Affairs. It has to comply with all legal provisions applicable to it failing which penalty will be levied upon it.

It can be said that registration mandates compliance, which in turn provides a sense of protection to all the stakeholders including the banking and financial sector.

A registered and compliant business entity is always favored by the financial institutions and facilitates easy access to loans and other means of finance.

The scope of growth of a registered business is much broader than that of unregistered business. Registered businesses are hotspots for mergers and acquisitions.

A registered business attracts investors such as Private equity players, Venture capital, Angel investors. These investors aid in funding the business requirements at the nascent stage.

Upon registration the business acquires a structure which is essential for success and growth. A registered company or LLP commands goodwill and creates brand recognition over a period of time.

This Goodwill and brand image enhances the valuation of the company/ LLP in the market and bags a good deal in mergers, acquisitions and sale of business

Registering the business in the form of a company or a LLP is always advantageous in today’s competitive market. The process of registration has been relaxed and simplified enabling businessmen to incorporate their companies and LLPs efficiently.

We at MYEFILINGS ensure that the registration of your company is done timely and accurately with compliance to regulatory requirements of Ministry of corporate.

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