There are various forms of Business Organizations. In India, they are broadly divided into nine categories, with some of them being sub-categorized. These categories are:One-man company,

Limited Liability Partnership,

Partnership firm,

Sole Proprietorship

Corporation,

Non-Profit Organization,

Cooperatives,

Joint Hindu Family Business, and

Joint venture .

BASIC PARTNERSHIP FIRM OPC LLP

Creation Created by Contract Created by law Created by Law

Distinct entity Not a separate legal entity Separate legal entity Is a separate legal entity under the

Limited Liability Partnership Act,

2008.

Name of Entity Any name as per choice Name to contain ‘one person company’ or ‘OPC’ as suffix.

Name to contain 'Limited Liability

Partnership' or 'LLP' as suffix.

Perpetual Succession It does not have perpetual

succession as this depends upon the

will of partners

It has perpetual succession. It has perpetual succession and

partners may come and go

Common Seal There is no concept of common

seal in partnershipIt denotes the signature and

OPC may have its own

common seal, dependant upon

the terms of the Agreement

It denotes the signature and LLP

may have its own common seal,

dependant upon the terms of the

Agreement

Formalities of Incorporation In case of registration, Partnership

Deed along with form / affidavit

required to be filled with Registrar

of firms along with requisite filing

fee

Various eforms are filled with

Registrar of OPC with

prescribed fees

Various eforms are filled with

Registrar of LLP with prescribed

fees

BASIC PARTNERSHIP FIRM OPC LLP

Legal Proceedings Only registered partnership can sue

third partyAn OPC is a legal entity can sue and be sued

A LLP is a legal entity can sue and

be sued

Foreign Participation Foreign Nationals can not form

Partnership Firm in India

RESTRICTION ON NATIONALITY OF THE MEMBER

Foreign Nationals can be a Partner

in a LLP.

Number of Members Minimum 2 and Maximum 20 1 person can start the business Minimum 2 partners and there is no

limitation of maximum number of

partners.

Liability of Partners/Members Unlimited. Partners are severally

and jointly liable for actions of

other partners and the firm and

liability extend to their personal

assets.

Liability of a member is limited Limited, to the extent their

contribution towards LLP, except in

case of intentional fraud or

wrongful act of omission or

commission by the partner.

Tax Liability Income of Partnership is taxed at a

Flat rate of 30% plus education cess

as applicable.

Income of OPC is taxed at a

Flat rate of 30% plus education

cess as applicable.

Income of LLP is taxed at a Flat

rate of 30% plus education cess as

applicable.

Dissolution By agreement, mutual consent,

insolvency, certain contingencies,

and by court order.

Business will not come to an end on

the death of an individual person

Voluntary or by order of National

Company Law Tribunal.

SECTION 2(62) DEFINES A “ONE PERSON COMPANY” MEANS A COMPANY WHICH HAS ONLY ONE PERSON

AS A MEMBER THE ONE PERSON COMPANY IS A BUSINEESS STRUCTURE WHERE A SINGLE PERSON IS THE

MEMBER OF THE COMPANY .IT IS A STRUCTURE THAT WAS INTRODUCED AS BEING PARALLEL TO A SOLE

PROPRIETORSHIP BUT UNLIKE SOLE PROPRIETORSHIP, A ONE PERSON COMPANY IS TREATED AS A

SEPARATE LEGAL ENTITY FROM ITS OWNER ,OR PROPRIETOR AND IS TREATED AS A PRIVATE COMPANY

,HOWEVER WHEREAS THERE IS A MINIMUM REQUIRMENT OF TWO MEMBER FOR A PRIVATE COMPANY

,THE NEW BILL ALLOWS MINIMUM ONE DIRECTOR FOR ONE PERSON COMPANY WHERE THE MEMBER

HIMSELF MAY BE THE DIRECTOR .THIS HOWEVER ,DOES NOT PRECLUDE THE COMPANY FROM

APPOINTING MORE THAN ONE DIRECTOR BUT ,THERE IS A CAP OF FIFTEEN DIRECTOR . SECTION 2(62)

DEFINES A “ONE PERSON COMPANY” MEANS A COMPANY WHICH HAS ONLY ONE PERSON AS A MEMBER.

NOMINEE OF THE

COMPANY

PRIVATE COMPANY

SEPARATE ENTITYLIMITED

LIABILITY

ONE DIRECTOR AND

SHAREHOLDER

Features ………

OPC has only one person member / shareholder.

OPC can be registered only as a private company.

OPC may be either a company limited by shares or a company limited by

guarantee or an unlimited company.

An OPC is required to give a legal identify by specifying a name under which

the activities of the business could be carried on.

The word “ One Person Company “ should be mentioned below the name of

the company, wherever the name is affixed, used or engraved.

Name Fill documents

Details of

Nominee

Type of

Business

Capita

l

Steps of Incorporation

Annual General Meeting

• Single person can start the company.• Liability of a member is limited.• Minimum No. of Directors required is One.• OPC is treated as Separate Legal Entity from an

individual.• No need to arrange AGM during the year.• Business will not come to an end on the death of

an individual person.• Good for small and medium scale enterprises.

RESTRICTION ON NATIONALITY OF THE MEMBER ,WHICH MIGHT CREATE A DISADVANTAGES FOR A FOREIGN COMPANY OR PERSON TO SET A ONE PERSON COMPANY JUST LIKE A SOLE PROPRIETORSHIP, HIRING EMPLOYEES MAY BE DIFFCULT ,BECAUSE THEY MAY CHOOSE LARGER FIRMS .THE COMPANY MAY NOT OFFER SOME EMPLOYEE BENEFITS.

Though the concept of an OPC has been incorporated in the Companies Act, 2013

but the concept of same does not exist in tax laws as yet, as a result an OPC can

be put in the same bracket of taxation as other private companies. In case of Sole

proprietorship, business income is added to the individual income and hence tax

slab between 10% and 30% is available. But the same is not the case with private

company. According to Income Tax Act,1961 a private limited company is taxable

at a flat base rate of 30% in addition to that surcharge and education cess is also

applicable. Also, provision of Minimum Alternative Tax (MAT) is also applicable

to private company. The concept of one person company is an attempt to organize

the unorganized, yet a very large, sector of proprietorship concerns. and other

entities which will be convenient to regulate and manage if the same is in the

form of One Person Company

A Limited Liability Partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. This is an important difference from that of an unlimited partnership. In an LLP, some partners have a form of limited liability similar to that of the shareholders of a corporation. In some countries, an LLP must also have at least one “General Partner” with unlimited liability.

Hybrid structure

Perpetual in nature

Conversion from any org.

to LLP

No joint liability of a

partner LLP

agreement between partners

Separate legal & corporate entity

Features ………

2 or more persons are required to file incorporating document with the concernedROC. (Form 2)ROC to register and give Incorporation Certificate within 14 days of completion of allformalities.It would be possible for any LLP to change its object, name or registered office, admitnew partners…. by executing a supplemental deed and to file prescribed particularswith ROC.

Note :-Procedure for obtaining name of LLP is similar to that of a company.

Approve the name.

Must not be similar to any existing LLP.

Must end with words “LLP” (full/abbreviated, any)

Apply to ROC for reservation of name.

Limited liability

Legal entity

Internal flexibility

Lesser compliance

requirement

No audit requirement

Advantages ………

Any act of the partner without the consent of other partners, can bind the LLP.

Under some cases, liability may extend to personal assets of the partners.

An LLP are not allowed to raise money from Public.

Because of the hybrid form of the business, it is required to comply with various

rules & regulations and legal formalities.

It is very difficult to wind up the business in case of exigency as there are a lot of

legal compliances under Limited Liability Partnership (Winding Up and

Dissolution) Rules and it is very lengthy and expensive procedure.

At present, the proposed tax on an LLP is 30%. At the international level, the tax is levied on the partners, while an LLP is exempt from such tax paying. In India , however for the purpose of Income Tax returns, an LLP is treated as taxed as a partnership firm, such that the partners are exempted, and the tax is levied on the LLP itself. Furthermore, there is no tax on conversion of a partnership or a private limited company to an LLP.

EXAMPLES OF LLP:

EY is the result of a series of mergers of ancestor organizations. The oldest originating partnership was founded in

1849 in England as Harding & Pullein. In that year the firm was joined by Frederick Whinney. He was made a

partner in 1859 and with his sons in the business it was renamed Whinney Smith & Whinney in 1894.

In 1903, the firm of Ernst & Ernst was established in Cleveland by Alwin C. Ernst and his brother Theodore and in

1906, Arthur Young & Co. was set up by the Scotsman Arthur Young in Chicago.

As early as 1924, these American firms allied with prominent British firms, Young with Broads Paterson & Co. and

Ernst with Whinney Smith & Whinney. In the year 1979, this led to the formation of Anglo-American Ernst &

Whinney, creating the fourth largest accountancy firm in the world. Also in 1979, the European offices of Arthur

Young merged with several large local European firms, which became member firms of Arthur Young International

ERNST AND YOUNG (LLP)

While in 1989, in most countries, Deloitte, Haskins & Sells merged with Touche Ross forming Deloitte & Touche, in the United Kingdom the local firm of Deloitte, Haskins & Sells merged instead with Coopers & Lybrand (which today is PwC). For some years after the merger, the merged UK firm was called Coopers & Lybrand Deloitte and the local firm of Touche Ross kept its original name. In the mid-1990s however, both UK

firms changed their names to match those of their respective international organizations

DELOITTEE AND TOUCHE (LLP)

The PricewaterhouseCoopers name was formed by the combination of the names of Price Waterhouse and Coopers & Lybrand, following their merger in 1998. On 20 September 2010, PricewaterhouseCoopers rebranded as PwC, although the legal name of the firm remained PricewaterhouseCoopers

PRICEWATERHOUSECOOPERS (LLP)

Section 4 of the Companies Act, 1956, provides that the number of partners in a firm shall

not exceed 20, and a partnership having more than 20 persons will be illegal.

When there is partnership between two firms all the partners of each firm will he taken

into account for the purpose of this provision but if a partnership is between the Karta or

any member of HUF on the one hand and another individual or Individuals on the other,

the members of the joint family will not be taken into account. A Hindu Undivided family

carrying on business as such, not being a partnership, S 11 of the Companies Act will not

apply even if the members of that family are more than 20. But where two or more Hindu

Undivided families are carrying on business in partnership the number of the members of

those families except minors will be taken into account for the purpose of S. 11 of the

Companies Act

Easy formation

Limited life

Unlimited liability

Not a separate

legal entity

Regulated no. of partners

Features………

Under Section 58 of the Act, a firm may be registered at any time ( not merely at the time of its formation but subsequently also ) by filing an application with the Registrar of Firms of the area in which any place of business of the firm is situated or proposed to be situated.

Application shall contain:- name of the firm

place or principal place of business

names of any other places where the firm carries on business.

date on which each partner joined the firm

name in full and permanent address of partners.

duration of the firm

Application shall be signed and verified by all the partners or their duly authorized agents.

Ease of formation

Larger resources

Sharing of risk

Flexibility in operation

Better management

Advantages ………

Instability

No legal status

Limited capital

Unlimited liability

Disadvantages ………

The Income Tax Act, 1961 governs taxation of partnership firm is treated as a

separate entity, and is taxed accordingly, different from the partners.

However, there is no difference between for assessing a partnership either as a

Firm, or as an Association of persons.

At present, direct income tax on a partnership firm is applicable at 30%, and

education cess at 3%. There is no double taxation, as the partners are not

liable to pay tax on the dividends or the profits. However, based on the nature

of the business carried out, a firm may be required to pay indirect taxes, for

eg: sales tax, service tax, etc.

EXAMPLES OF PARTNERSHIP :

SBI AND KOREA PARTNERSHIP

Mumbai: State Bank of India on 13th MAY 2013 said it has entered into a partnership with the Industrial Bankof Korea to help the Korean small businesses doing business here in the country. The agreement will helpabout 480 Korean small and medium enterprises operating in the country, SBI said in a statement issued inMumbai.In the absence of a branch of the Korean bank in the country, "this agreement will assist Korean companies to meet their financial requirements", it said. Additionally, it would also help SBI in channelizing business for its upcoming representative office in Seoul.

FACEBOOK AND SKYPE PARTNERSHIP

Facebook users will be able to make free video calls to their friends through the site after the social networking giant announced a partnership with the web telephony service Skype. On 6TH July 20111

MC DONALDS AND COCA COLA PARTNERSHIP

Both Coca-Cola and McDonald’s have produced good investor returns over the last decade. From lows in early 2009, Coke’s stock has more than doubled. After shutting many stores and investing heavily in upgrades as well as supply chain efficiencies, over the last decade McDonald’s value has risen 6-fold!

BY : PRIYA SINGH