12 February 2011
DEAR SIRS, TO DO A BUSINESS, WHICH ENTITY IS TO BE FORMED-PROPRIETORSHIP, PARTNERSHIP OR PVT LTD CO ? PL GUIDE ME WHICH ONE AND WHY AND HOW IT IS PROFITABLE FROM INCOME TAX POINT OF VIEW ? THANKS ANCKOORA.
12 February 2011
It depends upon the nature of business, fund resources and persons involved in the business. PROPRIETORSHIP: --------------- In case of a small business prop.ship is always preferred. A person can employ others in case he requires. He gets tax benefits like LIC, Medi-Claim and many more in chapter VIA. TDS provision in initial year is not applicable. PARTNERSHIP : ----------- When persons contributing funds, skills, and time, desires to have their share in business, this is the way in which after deciding the terms and conditions and entering into partnership business can be done. Partnerships are taxed @ 30% on after its profit after prescribed remuneration and Interest to partners.
PVT LTD CO ----------- Preferred when the promoters are having an ambition to rise to heights of the business and are ready to take risks. Tax impact is the highest in this case.
But initially it is advisable to start in proprietorship only.
CAclubindia
