It is an amazing time when you are starting a new business. We know your dreams are high, ideas are flowing and you are ready to go to start your business. But what next?? Is one of the basic question that always comes in mind before moving further?
If you couldn’t able to choose than give us a time to help you, Call or Click: 011-46074008, www.centrik.in
We have come across many businesses that are just starting out and always ask themselves the question of entity selection for their small business. In this article we will discuss pros and cons of Sole Proprietorship VS Partnership business:
Sole proprietorship
Sole Proprietorship is the oldest form of business activity. It is a one-man organization where a single person manages and control over the business.
| Advantages | Disadvantages |
| It is less expensive form of business as it does not require any elaborate legal requirement for formation | It is an unorganized form of business and not be consider as detrimental form of business |
| The proprietor would be the sole owner and can make all the decisions to govern the same | The Liability of the owner is unlimited as he/she would be the sole owner. No name Protection of the firm |
| A person residing outside India can make investments in Sole proprietorship after obtaining approval from RBI | Limited ability to raise capital. |
| Tax advantages to owner as it would enjoys slab benefit unlike partnership and can also claim some deductions u/s 80C of income tax act. | Limited life expectancy as only one person runs the business |
Partnerships
A partnership is defined as a relation between two or more persons who have agreed to share the profits of a business conducted by them or any of them, who is acting for the others.
| Advantages | Disadvantages |
|
Beside from low start- up cost, it is an easy form as it does not require any cumbersome legal formalities to register it. |
A firm is deprived of certain legal benefits if it is not got themselves registered. Limit has fixed at the time of payment of remuneration as per Income tax act |
| Losses can be also be shared with other partners unlike in case of sole proprietorship. | A partner cannot transfer his/her interest to any other person without the consent of all existing partners. In partnership there is more possibility of Conflict between partners. |
| Improved management with more than one owner | The liabilities of the partners is unlimited as they are legally considered to be jointly and severally liable for the firms liabilities. One of the most obvious disadvantages of partnership is the danger of disagreement between the partners |
Protecting a business can be a task but the efforts will make the success of a business smoother. For any assistance go to www.centrik.in
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thankyou so much for sharing such useful information. this article has helped me a lot. it has resolved many of my confusions. keep writing. hope to read many such articles in future.
Can a sole proprietorship firm be converted to a Partnership firm later if you found some partners?
yes
I would like to understand Tax Advantages to the owner of a Proprietorship firm, especially the slab-benefits and deductions u/s 80C of income tax act, that you mentioned above. If it is too much to explain here, please direct me to an authentic resource that I can read and understand this myself.
pls send your details at business@centrik.in or call us at 8448487143
Which is the best way partnership firm or proprietorship firm.
While coming to taxing part, some auditor saying proprietorship firm is best.
Some saying partnership firm is best and taxation part have lot of benefits and comparing to both tax part will become lesser.
Your view please.