Incorporation of a company needs many compliances, what are the other possible ways to start a business?
To start a business by incorporating a company comes with numerous compliances, procedures, rules etc. Certain minimum requirements have to be followed including capital, a number of directors and shareholders, name reservation, obtaining PAN and TAN etc. It costs you time and money to start a company by following the proper procedure as stated under Companies Act. Also at many times, a person faces rejection by the Registrar of Companies due to some or the other reason. Thus fails to get his company incorporated.
However, there are other ways also to get your business started. It includes Sole Proprietorship, Hindu Undivided Family and Partnership Firm. These are the business structures which do not come under the purview of company law. It is your choice, which of them you want to opt to start your business with as different business structures have their own compliances. For instance, a company needs to file annual returns with the Registrar of Companies and Income Tax Returns with the Income Tax department, whereas a sole proprietorship firm has to file only an income tax return. You should be mentally prepared as to how much compliance you are ready to deal with and then choose the right business structure.
Let us go through the different business structures other than the company.
Sole Proprietorship is the easiest and the least expensive way to start a business. It is such a business in which an individual starts a business under his or her own name. In a sole proprietorship, the sole proprietor and the business is one i.e. the business is not a separate entity from the individual. You need not to prepare any legal documents for the business. All you need to do is create a business name and decide the place of business from where you will receive business-related communications from the clients. Open a bank account in the name of a business firm. And that’s all to start your business. Isn’t it so easy!!
Hindu Undivided Family
Unlike sole proprietorship firm, a HUF is a separate business entity created by the members of the family. The senior most person in the family is considered as KARTA. To start with a HUF, the first thing is that you need to be a Hindu. Then you need to create a HUF deed on a stamp paper stating the names of the Karta and the Co-parceners (members) of the HUF. A HUF is required to apply for a separate PAN Card in Form 49A since it is treated as a separate entity different from its members. Also, a bank account is required to be opened in which it will receive and make all the payments. This sum up the creation of HUF and the business can now be started.
A partnership is an arrangement where parties, known as partners agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. To start a business as a partnership firm, partners should create a partnership deed stating the important terms of the relationship between them. A minimum of two and a maximum of 20 members can join in to start a partnership firm. After you are done with the registration process of the partnership firm, obtain PAN and TAN from the relevant authorities. This is how a partnership firm gets started.
So, whenever you wish to start a business and do not want to get into company compliances and all other things. Just relax and opt for one of these business structures to carry your business in an easy manner.