Proprietorship vs. Partnership vs. Pvt Ltd vs. LLP, what to do. ? Advantages vs Disadvantages, what to make for a Startup / New Venture ?

Want to open a new Company or LLP ? What are the Advantages and Disadvantages ?

Query in your mind ? Which one to open ? Private Limited or LLP or Partnership or Proprietorship   ?

So, You have thought of a new idea. Good

and want to start New Joint Venture ? Good

or a New Startup Idea ? Very good

Advantage and Disadvantage

What  are the Advantages… ?

You may say … Looks Great. Ok. Feels Big, OK, Get visiting card of a Director….hmmm…. anything else ?

What are the Disadvantages ? Did you think about it ? 

You must read this before you go ahead

First, Closing down the company ?

What if, the business idea does not work ?

or, What if you and your new friend / Partner cannot work together due to any reason ?

or, What will happen if you are in LOSSES ?  and there is no Hope of revival in near future ?

Answer to the first set of three questions is …

the Company can be given birth in a week / month… but takes many months/even a year to close down.

Source : https://www.compliancecalendar.in/close-llp

This site also says.. every year Tens of Thousands of Companies and LLP are made but … this site and we ourselves know that average 70% don’t start business or dont continue beyond the first 2 years

Second, Big Risk of being DisQualified and removed from your own Main company ?

What if, the New Company / LLP is not able to file its Annual return ? due to any reason ?

Effect : You will stand Disqualified from all your other companies also .. including your running “existing businesses”.

 

Want evidence ? see this …

Source : https://cleartax.in/s/director-disqualification-removal-disqualification

• Where he/she is the director of a company that has either –
• a. Failed to file the annual returns for 3 years running
• b. Failed to pay interest on/repay the deposits for over a year
• c. Failed to pay any dividend that was declared for over a year
• d. Failed to redeem debentures or pay interest on debentures for over a year

In short, if your this new Company does not file its return due to mis-up between the partners… you become disqualified to remain director of your main business also.

 

Can you afford this Risk ?

What is the Probability.. that new business will not work ? ….

you might say it will work 100%… but market past shows that only 30% work and 70% do not work. So, better get somebody else in the family to become the Director till the company becomes of a significance and can be seen as a working company.

Can the procedure to close the LLP or Company be done with single party signatures ?

Of Course not. Both Parties , or say 100% of the Partners  , Directors, and shareholders must sign  the MOU for “closure”.

So, you are in a problem. Yes.

Sad part is that if both parties are not on talking terms,… and other party has nothing to lose…

Reasons ? maybe he has got a job somewhere, or he has left India for job outside India…. or ….. he does not want to pay for the LLP / Company closing expenses……he just wants to tease you …. 

in this case, you are saddled for life.

Daily rate penalty starts in all laws : GST, TDS, ROC, and Income Tax.

Let us see TDS first

 

https://taxguru.in/income-tax/section-201-consequences-non-compliance-tds.html

TDS starts at first first professional payment in case of a LLP , a company and a Partnership..  but you are EXEMPT from TDS net as a payee.. till you have last year turnover over Rs 1 crore… so, you are surely free for first year.. maybe for many many years

So, daily penalty of  Rs 200 per day for TDS return non filing alone. 100 days = 20000 Rs, …and 365 days= about 73000 Rs penalty for one Quarter TDS return alone (subject to max of TDS )

Need some latest  masala ?

https://timesofindia.indiatimes.com/city/mumbai/film-producer-gets-3-months-ri-for-delay-in-depositing-rs8l-tds/articleshow/69065185.cms

so, even the smallest of thing = TDS is not easy

 

LLP Returns last date ?

LLP Form 11 Annual Return Due Date

Form 11 is due on 30th May of each year. … just 60 days… that is very tight time schedule…..

All LLPs enrolled under the limited liability act, of 2008 need to yearly furnish two forms- Form 11 and Form 8.

Annual Return: Form 11 is needed to be submitted within 60 days of the closure of the fiscal year which is 30th May of each year. (Fiscal year closes on 31st March.)

Account and Solvency Statement: within 30 days from the expiry of 6 months LLP form 8 is needed to be submitted from the closure of the financial year which is 30th October of each year.

Filing of LLP Form 11 is a mandatory annual compliance for all LLPs, irrespective of turnover or profit or business activity. Hence, even a LLP that has no activity must file LLP form 11 or pay a penalty of Rs. 100 per day of delay in filing Form 11.

So, daily penalty of  Rs 100 per day for TDS return non filing alone. 100 days = 10000 Rs, …and 365 days= about Rs 36,500 penalty for one year one form (Form-11) return alone (.. .no maximum limit = unlimited

Need some latest  masala ? https://fastlegal.in/blog/llp/reduced-late-fee-for-llps/

The new amended rules will be applicable from the 01st day of April 2022. as per this site

but why go into all this ?

Similar problem in Income Tax, for non filing of income tax returns.

for risk reduction

So ordinary “Proprietorship” , and “Partnership” gives Freedom, to start and to close

Rule 1 : Start as a Propreitorship / Partnership, and upgrade to a Company or LLP… when you reach a critical cut off point of Turnover

say Rs 10 Crores p.a. or even Rs 5 crores p.a.

so usually, dont Saddle yourself with making a LLP or Company if you are small at this point of time.

Contact our Knowledge Partners on page click here

www.mlgassociates.org and www.mlgassociates.in their websites

Proprietorship vs Partnership vs Pvt Ltd vs LLP, what to do. ? Advantage vs Disadvantages, what to make for a Startup / New Venture ? Hope this comparison was well taken in positive light. Benefits , Decision making