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Propreitory concern or pvt ltd company

Poonam (Student CA Final ) (90 Points)

16 December 2013

Hello everyone ,

I just want to know for tax planning purpose which is the best ,,, Propreitory Concern Or Pvt Ltd Company ??

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7 Replies

CS BHAVIN SHETH (MANAGER-Company Secretary) (131 Points)
Replied 16 December 2013

DEAR POONAM,

PVT LIMITED COMPANY IS BETTER

regards

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Mihir (Wealth Manager) (5293 Points)
Replied 16 December 2013

Lot of compliance in pvt ltd co.

Poonam (Student CA Final ) (90 Points)
Replied 16 December 2013

Originally posted by : CS BHAVIN SHETH
	DEAR POONAM, PVT LIMITED COMPANY IS BETTER regards

Sir , can u explain it, How ??

CS BHAVIN SHETH (MANAGER-Company Secretary) (131 Points)
Replied 16 December 2013

Dear Poonam,

For your understanding, please see the below mentioned table differentiating between Proprietary concern and PVT LTD company. Also Income tax slabs for understanding.

Apart from given differences, I feel its easy to get loan through Pvt Ltd compare to Propritar ship and risk level is less but yes complainces are more but for that we are here, so not to worry

Features	Sole proprietary concern	Partnership firm	Limited liability company (includes Private limited and public limited companies)
Liability of business debts	Unlimited liability. Liability extends to the individual’s private property.	Unlimited liability. Liability extends to the individual’s private property for satisfaction of partnership debt.	Limited liability. Limited to the extent of shares held but not paid.
Minimum and maximum no. of people	One person	Minimum 2 but not more than 20.	In a private limited company the minimum is two and maximum is 50. In a public limited company the minimum is seven and no limit on maximum.
Separate legal entity status	No separate legal entity	It does not acquire a separate legal personality even if registered.	Has a corporate personality distinct from the individuals who are its members.
Charter documents	None	Partnership Deed	Memorandum and Articles of Association
Registrations required to start. Other registrations required are under the purview of separate legislations such as service tax, professional tax, PF, ESI etc. as applicable.	None.	Register the Partnership Deed with the Registrar of Firms.	Incorporate the company with Registrar of Companies
Termination / continuity	Dissolved on the death of the sole proprietor.	Dissolved on the death of a partner, unless there is a contract to the contrary. Can be terminated by voluntary action of dissolving the partnership.	Perpetual. Terminated through prescribed winding up processes.
Ownership of property	Property belongs to the individual.	The property of the firm belongs to the partners and they are collectively entitled to it.	Property belongs to the company.
Capacity to sue	Not a separate legal entity, hence the individual can sue or be sued.	Only a registered partnership firm can sue or be sued. Else, action may be brought in the name of the members either individually or collectively.	Since a separate legal entity, a company can sue and be sued in its own name.

Sole proprietary concern

Partnership firm

Company

Taxed as an individual.

Tax Slabs:

Upto Rs. 1,10,000 : No tax

Rs.1,10,000 to Rs.1,50,000: Taxed at 10%

Rs.1.5 lakhs to Rs.2.5 lakhs: Taxed at 20%

Rs.2.5 lakhs to Rs. 10 Lakhs: Taxed at 30%. No surcharge

Above Rs. 10 Lakhs: Taxed at 30% + surcharge

Taxed as a partnership firm. The profits from partnership is not included in the partner’s (individual’s) tax return.

Tax Slabs:

Upto Rs. 1 crore: Taxed at 30% + cess

Above Rs. 1 crore: Taxed at 30% + surcharge + cess

Taxed as a company. Dividend tax to be paid by the company.

Tax Slabs:

Upto Rs. 1 crore: Taxed at 30% + cess

Above Rs. 1 crore: Taxed at 30% + surcharge + cess

Thus considering points mentioned above, My personal Answer would be Pvt Ltd Company on financial point of view

regards

BHAVIN SHETH

Sanket (!..Live to Give..!) (16427 Points)
Replied 16 December 2013

Proprietorship is best.....

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Poonam (Student CA Final ) (90 Points)
Replied 16 December 2013

Originally posted by : CS BHAVIN SHETH
	Dear Poonam, For your understanding, please see the below mentioned table differentiating between Proprietary concern and PVT LTD company. Also Income tax slabs for understanding. Apart from given differences, I feel its easy to get loan through Pvt Ltd compare to Propritar ship and risk level is less but yes complainces are more but for that we are here, so not to worry Features Sole proprietary concern Partnership firm Limited liability company (includes Private limited and public limited companies) Liability of business debts Unlimited liability. Liability extends to the individual’s private property. Unlimited liability. Liability extends to the individual’s private property for satisfaction of partnership debt. Limited liability. Limited to the extent of shares held but not paid. Minimum and maximum no. of people One person Minimum 2 but not more than 20. In a private limited company the minimum is two and maximum is 50. In a public limited company the minimum is seven and no limit on maximum. Separate legal entity status No separate legal entity It does not acquire a separate legal personality even if registered. Has a corporate personality distinct from the individuals who are its members. Charter documents None Partnership Deed Memorandum and Articles of Association Registrations required to start. Other registrations required are under the purview of separate legislations such as service tax, professional tax, PF, ESI etc. as applicable. None. Register the Partnership Deed with the Registrar of Firms. Incorporate the company with Registrar of Companies Termination / continuity Dissolved on the death of the sole proprietor. Dissolved on the death of a partner, unless there is a contract to the contrary. Can be terminated by voluntary action of dissolving the partnership. Perpetual. Terminated through prescribed winding up processes. Ownership of property Property belongs to the individual. The property of the firm belongs to the partners and they are collectively entitled to it. Property belongs to the company. Capacity to sue Not a separate legal entity, hence the individual can sue or be sued. Only a registered partnership firm can sue or be sued. Else, action may be brought in the name of the members either individually or collectively. Since a separate legal entity, a company can sue and be sued in its own name. Sole proprietary concern Partnership firm Company Taxed as an individual. Tax Slabs: Upto Rs. 1,10,000 : No tax Rs.1,10,000 to Rs.1,50,000: Taxed at 10% Rs.1.5 lakhs to Rs.2.5 lakhs: Taxed at 20% Rs.2.5 lakhs to Rs. 10 Lakhs: Taxed at 30%. No surcharge Above Rs. 10 Lakhs: Taxed at 30% + surcharge Taxed as a partnership firm. The profits from partnership is not included in the partner’s (individual’s) tax return. Tax Slabs: Upto Rs. 1 crore: Taxed at 30% + cess Above Rs. 1 crore: Taxed at 30% + surcharge + cess Taxed as a company. Dividend tax to be paid by the company. Tax Slabs: Upto Rs. 1 crore: Taxed at 30% + cess Above Rs. 1 crore: Taxed at 30% + surcharge + cess Thus considering points mentioned above, My personal Answer would be Pvt Ltd Company on financial point of view regards BHAVIN SHETH