COMPARISON OF BUSINESS FORMS
CRITERIA Minimum Number of Members
PROPRIETORSHIP 1 Person (either natural or artificial)
PARTNERSHIP 2 Persons (either natural or artificial)
LIMITED COMPANY 2 in case of Private Limited Company and 7 in case of Public Limited Company 50 in case of Private Limited and unlimited in case of Public Limited Company The cost of Registration, mainly the statutory filling fees depends on the proposed Authorised Capital Company has separate Legal entity other than its shareholders and Directors and can operate like a legal person Ownership lies with members Managed by the Directors elected / appointed by members of company A Company purchases its Property in its own name Ownership is easily changeable , as shares of Company are freely transferable The liability of members are Limited to the share taken and does not extends to personal property
Maximum Number of Members
Cost of Registration
As there is no registration required, No Statutory fees is payable
20 except in case of banking business. 10 in case of banking business The cost of registration is negligible
Legal Entity
Proprietorship does not have legal entity as the Proprietor and the firm are same persons
Partnership does not have Separate Legal Entity other than partners of the firm
Ownership of Business Management
Ownership lies with Proprietor Managed by the proprietor
Ownership lies with the partners Managed by the Partners
Ownership of Property
Flexibility in Ownership
Ownership lies with Proprietor as the Proprietor and the firm are same persons The entire business needs to be sold
Ownership lies with the Partners
Liability
The liability of the Owner is unlimited and extends to his personal assets
Ownership is restrictive; any change in partnership requires the approval of other partners. The liability of the Partners are unlimited an extends to personal property
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CRITERIA Creditworthiness
PROPRIETORSHIP The creditworthiness of Proprietorship firms depends upon the goodwill and creditworthiness of its Proprietor Death or Insolvency of Owner dissolves the Proprietorship
PARTNERSHIP The creditworthiness of Partnership firms depends upon its goodwill and creditworthiness of its partners Death, resignation or Insolvency of Partner, dissolves the firm
LIMITED COMPANY Due to Stringent Compliances & disclosures under various laws, companies enjoys high degree of creditworthiness A Company has Perpetual Succession, death or insolvency of members does not effect its existence Negligible, all the decisions are taken collectively by board of directors A Company being a creation of law, can be dissolved as per procedures laid down in Law A Company has a capacity to enter into any contract It is governed by Companies Act, 1956
Business Durability
Chances of individual fraud
Very High, any act of individual partner will bind the firm
Dissolution/Termin ation
A Proprietorship being a creation of will, can be terminated as per will
A Partnership being a creation of will, can be terminated as per will of partners The contracts are entered into the name of partner Management of partnership not governed by any specific law
Contractual Capacity
Legal Governance
The contracts are entered into the name of Proprietor They are not governed by any specific law
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