Advantages of One Person Company: OPC Benefits Explained

Nov 29, 2024
Private Limited Company vs. Limited Liability Partnerships

An OPC is a unique business structure introduced by the Companies Act 2013 in India. It allows a single individual to form and operate a company, combining the benefits of both a sole proprietorship and a private limited company. OPC's meaning is straightforward - it is a company with only one member who is the sole shareholder and director. 

The primary objective behind introducing the OPC concept was to encourage solo entrepreneurship and facilitate the corporatisation of micro, small and medium enterprises (MSMEs) in India.

Table of Contents

What is the Nature of a One Person Company in India?

As per the definition provided in the Companies Act 2013, an OPC is a private limited company with only one member. The sole shareholder of the OPC holds 100% of the company's shares and is entitled to all the profits generated by the business. The full form of OPC is "One Person Company," emphasising its single-member structure.

The importance of OPC lies in its ability to provide a formal corporate structure to sole proprietors and small business owners. By registering as an OPC, entrepreneurs can enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. This unique combination of sole ownership and corporate features makes OPC an attractive choice for many budding entrepreneurs in India.

Benefits of OPC Company

Next up, let us understand why an OPC company will be right for you:

1. Benefits of Being Small Scale Industries

One of the key advantages of a one person company is its eligibility to be registered as a Micro, Small or Medium Enterprise (MSME). By obtaining MSME registration, OPCs can avail various benefits provided by the government, such as:

  • Priority sector lending from banks
  • Collateral-free loans up to ₹10 lakhs
  • Subsidy on patent registration
  • Reimbursement of ISO certification expenses
  • Concession on electricity bills
  • Exemption from excise duties

These MSME benefits can significantly reduce the financial burden on small businesses and help them grow faster.

2. Single Owner

Unlike partnership firms or private limited companies, an OPC has only one owner who holds all the shares and has complete control over the company's decision-making process. This streamlined ownership structure offers several benefits for OPC company, such as:

  • Faster decision-making without the need for consensus among multiple partners or directors
  • Flexibility to adapt quickly to changing market conditions
  • Ability to maintain confidentiality of business strategies and plans
  • Elimination of potential conflicts among partners or shareholders

3. Credit Rating

OPCs find it easier to obtain loans and credit facilities from banks and financial institutions than sole proprietorships. This is because OPCs have a separate legal identity and their financial statements are available in the public domain, allowing lenders to assess their creditworthiness more accurately. A good credit rating can help OPCs secure funding at competitive interest rates, providing a significant advantage over unregistered businesses.

4. OPC Benefits under Income Tax Law

OPCs enjoy certain one person company tax benefits under the Income Tax Act, 1961. Some of these advantages include:

  • Lower corporate tax rate of 25% for OPCs with an annual turnover of up to ₹250 crores.
  • Exemption from Minimum Alternate Tax (MAT) for OPCs with an annual turnover of up to ₹5 crores.
  • Ability to carry forward and set off losses for up to 8 years.
  • Deduction of up to ₹1.5 lakhs under Section 80C for investments made by the OPC owner.

These tax benefits can help OPCs optimise their tax liabilities and retain more profits for reinvestment in the business.

Received Interest Rate on any Late Payment

Under the MSME Development Act, 2006, OPCs registered as MSMEs are entitled to receive interest on delayed payments from their buyers. If a buyer fails to make payment within 45 days of accepting the goods or services, the OPC can charge an interest rate of three times the bank rate notified by the Reserve Bank of India (RBI). This provision helps ensure timely payments and improves the cash flow situation for small businesses.

6. Increase in Trust and Status

By registering as an OPC, small businesses can enhance their credibility and reputation in the market. The formal corporate structure and public disclosure of financial statements instil greater trust among customers, suppliers and other stakeholders. This increased trust can lead to better business opportunities, higher customer loyalty and improved bargaining power in commercial transactions.

7. Easy Funding

Apart from institutional funding, OPCs can also raise capital from individual investors. The Companies Act allows OPCs to issue shares to up to 200 shareholders, providing an alternative route for raising funds. This option can be particularly useful for OPCs with high growth potential, as they can attract angel investors or venture capitalists to fund their expansion plans.

8. Limited Liability

One of the most significant benefits of OPC is the limited liability protection it offers to the owner. Unlike sole proprietorships, where the owner's personal assets are at risk in case of business liabilities, an OPC provides a corporate veil that separates the owner's personal assets from the company's obligations. In the event of any legal disputes or financial losses, the liability of the OPC owner is limited to the extent of their investment in the company.

9. One Person Company Tax Benefits

In addition to the income tax benefits mentioned earlier, OPCs also enjoy several other tax advantages. For instance, OPCs with an annual turnover of up to ₹2 crores can opt for the presumptive taxation scheme under Section 44AD of the Income Tax Act. Under this scheme, the OPC is required to pay tax on only 8% of its total turnover, reducing the compliance burden and tax liability significantly.

10. MSME Benefits

As discussed earlier, OPCs registered as MSMEs are eligible for various government schemes and subsidies. Some additional benefits include:

  • Preference for government tenders
  • Assistance in marketing and export promotion
  • Subsidies for participating in international trade fairs
  • Skill development and training programs for employees
  • Access to credit guarantee schemes

These benefits can provide a much-needed boost to small businesses, helping them compete with larger players in the market.

11. Ease of Management

Managing an OPC is relatively simpler compared to other business structures. With a single owner and no board of directors, decision-making is faster and less complicated. 

Additionally, OPCs have fewer compliance requirements under the Companies Act. For instance, OPCs are not required to hold annual general meetings or prepare cash flow statements. This reduced compliance burden allows OPC owners to focus more on their core business activities.

Eligibility Criteria for OPC

To register as an OPC, the following eligibility criteria must be met:

  • The OPC must have only one member who is an Indian citizen and resident. This ensures that the business is managed by someone who understands local regulations and market conditions.
  • The sole member must be a natural person, not a company or an institution. This stipulation reinforces the OPC's structure as a personal enterprise.
  • The member should not be a minor to ensure legal competency in business dealings.
  • The member should be of sound mind and not be declared insolvent by any court. This criterion ensures that the individual can manage the company's affairs effectively.
  • The member should not have been convicted of any offence related to company formation or management in the past five years, which helps maintain the integrity of business practices.
  • The member should not be a nominee or shareholder in any other OPC.

OPC Registration Process

The OPC registration process involves the following steps:

The registration process for an OPC is streamlined and can be completed online through the Ministry of Corporate Affairs - MCA portal. Here are the essential steps involved:

  1. Obtain a Digital Signature Certificate (DSC): The first step is to acquire a DSC for the sole member, which is necessary for signing electronic documents during the registration process.
  2. Apply for Director Identification Number (DIN): Following the DSC, the next step is to apply for a DIN, which is required for the proposed director of the OPC.
  3. Name Approval: The applicant must submit an application for name approval using Part A of the SPICe+ form on the MCA portal. It is advisable to propose at least two names to ensure one can be approved.
  4. Prepare Necessary Documents: Essential documents include: 
  • Memorandum of Association (MoA) and Articles of Association (AoA)
  • Proof of registered office address
  • Consent from the nominee
  • KYC documents for both the member and nominee
  1. File SPICe+ Form: Once all documents are prepared, submit Part B of the SPICe+ form along with all necessary attachments to complete the application for incorporation.
  2. Payment of Fees: Pay the requisite registration fees online, which may vary based on the company's nominal share capital.
  3. Certificate of Incorporation: If all details are accurate and compliant with regulations, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, officially recognising the OPC as a legal entity.

This structured approach not only simplifies the registration process but also ensures that all legal requirements are met efficiently, making it easier for entrepreneurs to start their businesses as a One Person Company in India.

Conclusion

OPC offers a unique blend of sole ownership and corporate features, making them an attractive choice for solo entrepreneurs and small business owners in India. The benefits of an OPC company are numerous, ranging from limited liability protection and separate legal identity to tax advantages and easier access to credit. 

Additionally, the reduced compliance burden and simplified management structure make OPCs well-suited for individuals who want to focus on their core business activities without getting bogged down by excessive paperwork.

To register as an OPC, an individual must meet certain eligibility criteria and follow the prescribed registration process. Once incorporated, an OPC can enjoy various benefits available to MSMEs and small-scale industries, helping them compete effectively in the market.

In conclusion, the One Person Company is a progressive business structure that encourages solo entrepreneurship and facilitates the growth of small businesses in India. By providing a formal corporate framework with minimal compliance requirements, OPCs have opened up new avenues for aspiring entrepreneurs to turn their ideas into successful ventures.

Benefits of OPC - FAQs

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Frequently Asked Questions

What is a one person company?

A one person company is a type of private limited company that has only one member who is the sole shareholder and director of the company. It was introduced in India by the Companies Act 2013, to encourage solo entrepreneurship and facilitate the corporatisation of small businesses.

What are OPC benefits in India?

Some of the key advantages of one person company in India include:

  • Limited liability protection for the owner
  • Separate legal identity from the owner
  • Easier access to credit and funding
  • Lower tax rates and tax benefits
  • Reduced compliance requirements
  • Simplified management structure
  • Eligibility for MSME benefits and schemes

However, OPCs also have certain limitations, such as restricted capital infusion and dependency on a single individual for decision-making. Together, these broadly sum up the advantages and disadvantages of a one person company. 

Who is eligible for OPC?

To be eligible for OPC registration, an individual must:

  • Be an Indian citizen and resident
  • Be a natural person, not a company or institution
  • Not be a minor or declared insolvent by any court
  • Not have been convicted of any offence related to company formation or management in the past five years
  • Not be a nominee or shareholder in any other OPC

What is the limit of OPC?

An OPC can have a maximum of one member and one director, who should be the same person. The paid-up share capital of an OPC is limited to ₹50 lakhs, and its average annual turnover should not exceed ₹2 crores in the immediately preceding three financial years. If an OPC crosses these thresholds, it must convert into a private or public limited company.

What is the importance of OPC?

The one person company concept is important because it provides a formal corporate structure to sole proprietors and small business owners, allowing them to enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. OPCs help promote entrepreneurship, facilitate the growth of MSMEs and contribute to the country's overall economic development.

Related Posts

Corporate Identification Number (CIN) Explained: Importance, Usage and More

Corporate Identification Number (CIN) Explained: Importance, Usage and More

A Corporate Identification Number (CIN) is a unique identifier issued to companies registered with India's Registrar of Companies (ROC). This number is provided at the time of registration and plays a vital role in company compliance. It must be included in all official filings, audits, and reports submitted to the Ministry of Corporate Affairs (MCA). 

To ensure smooth business operations, you must include your CIN in all required documents. It’s mandatory and demonstrates your company’s legal standing.

Table of Contents

What Is a Corporate Identification Number (CIN)?

A Corporate Identification Number or CIN number is a 21-character alpha-numeric code assigned to companies registered under the Registrar of Companies in India. It acts as a unique identifier, reflecting details like the type of company, its state of registration, and year of incorporation.

A CIN is provided to all companies registered in India, including:

  • Private Limited Companies (PLCs)
  • One Person Companies (OPCs)
  • Companies owned by the Government of India
  • State Government Companies
  • Not-for-Profit Section 8 Companies
  • Nidhi Companies, etc.

In contrast, Limited Liability Partnerships (LLPs) are assigned an LLPIN (Limited Liability Partnership Identification Number). The CIN plays a vital role in company identification and compliance with legal obligations.

Importance of Corporate Identification Number

The CIN is critical for identifying and tracking a company’s activities from its incorporation. Assigned by the Registrar of Companies, it ensures every registered company has a distinct identity under the Ministry of Corporate Affairs. This 21-character alpha-numeric code provides key details, such as the company’s registration type, state, and year of incorporation.

For example, a typical CIN might look like U12345MH2024PLC567890, where each segment represents specific company details.

The CIN must be included in all filings, audits, and reports submitted to the ROC or MCA. It is essential for verifying company information during legal and financial transactions, offering transparency and credibility. The CIN acts as the foundation for company identification, ensuring compliance with Indian business regulations.

Breaking Down Corporate Identification Number

A CIN is a 21-character alphanumeric code that reveals key details about a company. It is structured into six sections, each offering specific information that aids in company identification and regulatory tracking by the ROC and the MCA. Here’s a breakdown:

Section-1: Listing Status

The first character indicates whether a company is “Listed” or “Unlisted” on the stock market.

  • L: Listed on the Indian stock exchange.
  • U: Unlisted.

Section-2: Industry Classification

The following five numeric digits represent the company’s primary economic activity or industry. The MCA assigns each category of economic activity a specific code. For example, 12345 could signify a particular industry, such as technology or healthcare.

Section-3: Registration State

The following two letters identify the state where the company is registered. Examples include:

  • TN: Tamil Nadu
  • GJ: Gujarat
  • UP: Uttar Pradesh

This section functions similarly to state codes in vehicle registration numbers.

Section-4: Year of Incorporation

The next four numeric digits represent the company’s year of incorporation. For example, "2015" signifies that the company was established in 2015.

Section-5: Company Classification

The following three characters indicate the company type. Examples include:

  • PLC: Public Limited Company
  • NPL: Not-for-Profit Organisation
  • SGC: State Government Company

Section-6: Unique Registration Number

The last six digits are the company’s unique registration number, assigned by the ROC to distinguish it from other entities.

CIN number example: U12345TN2015PLC789101

This example shows an unlisted company (U) operating in a specific industry (12345), registered in Tamil Nadu (TN), incorporated in 2015 (2015), classified as a public limited company (PLC), with a unique registration number of 789101.

{{company-reg-cta}}

Abbreviations in CIN Number

The abbreviations used in Section 5 of the CIN include:

  • FLC: Financial Lease Company as Public Limited.
  • FTC: Private Limited Company Subsidiary of a Foreign Company.
  • GAP: General Association Public.
  • GAT: General Association Private.
  • GOI: Government of India-owned companies.
  • NPL: Not-for-Profit License Company.
  • PLC: Public Limited Company.
  • PTC: Private Limited Company.
  • SGC: State Government-owned Companies.
  • ULL: Unlimited Liability Limited Company.
  • ULT: Unlimited Liability Trust.

Usage of Corporate Incorporation Number

The CIN is essential for ensuring compliance and maintaining legitimacy. It must be used in the following:

  • Invoices: To identify the company in financial transactions.
  • Notices: For official communication with stakeholders.
  • Letterheads: To reflect the company’s legal identity in correspondence.
  • Annual Reports: As a mandatory disclosure for regulatory purposes.
  • MCA e-forms: To ensure accurate filing with the Ministry of Corporate Affairs.
  • Publications: For transparency in public-facing materials.

Using the CIN correctly ensures smooth corporate communication and compliance with Indian legal requirements.

Penalty for Non-Compliance of Mentioning CIN Number

Failing to comply with the requirement of mentioning the CIN on official documents can lead to significant penalties. If the requirements are not met, the defaulting company and its officers in default face a penalty of ₹1,000 per day, continuing until the non-compliance is rectified. The maximum penalty for such defaults is capped at ₹1,00,000. These penalties ensure strict adherence to regulatory norms and maintain transparency in corporate operations.

Changing Corporate Identification Number

You cannot directly change the Corporate Identification Number (CIN), but it automatically updates when specific changes occur in your company’s status or structure. These changes include:

  • Listing Status: The CIN updates automatically if your company transitions from private to public or is delisted. For example, a Private Limited Company converting into a Public Limited Company will update its CIN to reflect the new listing status.
  • Registered Office Location: Moving your company’s registered office to another state will result in an updated CIN to match the new state code. For example, if your company relocates its registered office from Maharashtra to Karnataka, the CIN will change from 'MH' to 'KA'.
  • Industry or Sector: A change in your company’s primary business activity will update the industry classification in the CIN. For example, a company shifting from software services to financial services will modify its CIN to reflect the new industry.

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  • Businesses looking to issue shares
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BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

How to apply for CIN?

A CIN is automatically assigned to a company during its registration with the Registrar of Companies (ROC). You do not need to apply for it separately. Ensure you complete all registration requirements with the Ministry of Corporate Affairs (MCA).

How do I find my company's CIN number?

You can find your company’s Corporate Identification Number (CIN) on the MCA website by following these steps:

  1. Visit the MCA website.
  2. Click on the 'MCA Services' tab on the homepage.
  3. From the 'Company Services' dropdown, select 'Find CIN'.
  4. Choose the 'Search Based on Existing Company/LLP Name' option.
  5. Enter the company name in the 'Existing Company' field, complete the captcha, and click 'Search'.

Is CIN allotted to LLP?

No, CIN is specific to companies registered under the Companies Act. Limited Liability Partnerships are assigned a unique identification called an LLPIN instead of a CIN.

What is an example of a corporate identity number?

An example of a CIN is U12345MH2020PTC098765, where:

  • U indicates an unlisted company.
  • 12345 represents the industry.
  • MH denotes Maharashtra as the state of registration.
  • 2020 is the year of incorporation.
  • PTC indicates a private limited company.
  • 098765 is the unique registration number.

How to get a CIN certificate?

Once a company is successfully registered, the ROC provides a CIN certificate. The certificate includes the CIN and other registration details as official proof of the company’s incorporation.

Are CIN and GST the same?

No, CIN and GST are entirely different. CIN is a company identification number issued during registration, while GSTIN (Goods and Services Tax Identification Number) is related to business tax compliance under the GST Act.

Is mentioning CIN on the company’s invoices, bills, and receipts mandatory?

Yes, the Corporate Identification Number (CIN) must be mentioned on invoices, bills, receipts, letterheads, notices, and other official documents. Non-compliance can result in penalties.

What is Partnership? Features, Types and Benefits

What is Partnership? Features, Types and Benefits

A partnership is a formal arrangement where two or more parties come together to manage and operate a business. Partnerships are a common way for individuals and entities to pool resources, expertise, and efforts to achieve shared goals. They can take various forms, such as general and limited liability partnerships, each with unique characteristics.

Unlike running a business alone, a partnership fosters teamwork, shared decision-making, and mutual responsibility. In a partnership, profits, liabilities, and operational responsibilities are typically shared among partners according to the terms of a partnership agreement.  It’s a model built on trust and cooperation, making it a popular choice for startups and growing businesses.

In this blog, we’ll explore partnerships, their key features, and why they’re an attractive option for many entrepreneurs looking to build something together.

Table of Contents

Features of Partnerships

Partnerships are defined by several key features:

  • Shared Responsibilities: Partners collaborate on business operations, contributing their expertise, resources, and capital to achieve mutual goals.
  • Shared Resources: Partnerships allow the pooling of financial and intellectual resources, enhancing operational efficiency.
  • Shared Goals: Partners align on strategic objectives to grow the business and share in its success.
  • Flexibility: Partnerships can be structured to suit specific needs, from informal agreements to formal legal contracts.
  • Decision-Making Process: Decision-making is often a collective process, emphasising the importance of trust and mutual understanding among partners.
  • Legal Agreements: While partnerships can be informal, formal agreements provide clarity on roles, profit-sharing, and conflict resolution.
  • Dissolution: Partnerships can be dissolved legally if required, often guided by the terms of the agreement or applicable laws.

Types of Partnerships

There are various types of partnerships, each serving different purposes and offering distinct advantages. For-profit partnerships generally fall into three main categories:

1. General Partnership

In a general partnership, all partners share equal responsibility for the business’s liabilities and profits. Each partner is personally liable for the business’s debts, making it crucial to draft a partnership agreement that outlines profit-sharing, roles, and responsibilities. 

For example, two entrepreneurs starting a retail business together would likely form a general partnership.

2. Limited Partnership

Limited partnerships (LPs) feature both general partners and limited (or silent) partners. General partners manage the business and assume entire liability, while limited partners contribute capital and enjoy liability protection up to the amount they invest. 

An example might be a real estate development project funded by silent investors.

3. Limited Liability Partnership

Limited liability partnerships (LLPs) protect partners’ personal assets by limiting liability for business debts. LLPs are particularly common in professions like law and accounting, where personal liability is a significant concern. 

For example, in a law firm LLP, equity partners own a share of the business, while salaried partners do not hold ownership but receive bonuses tied to performance.

{{llp-cta}}

What is the Partnership Act 1932?

The Partnership Act of 1932 is a legal framework governing partnerships in India. Key provisions include:

  • Definition and Formation: Outlining what constitutes a partnership and the requirements for its formation.
  • Rights and Duties: Defining the rights, responsibilities, and liabilities of partners.
  • Partnership Agreements: Emphasising the importance of clear agreements to avoid disputes.
  • Dissolution: Providing guidelines for legally dissolving a partnership.

The Act ensures transparency and fairness in business partnerships, making it a crucial reference for anyone entering into such arrangements.

Advantages and Disadvantages of Partnerships

Advantages

  • Easy to establish and operate
  • Shared financial and intellectual resources
  • Tax benefits, such as pass-through taxation
  • Flexible business structure

Disadvantages

  • Unlimited liability for general partners
  • Potential for conflicts among partners
  • Limited lifespan unless explicitly agreed otherwise
  • Shared profits

How to Form a Partnership?

Below are the steps for the partnership registration process:

  1. Draft a Partnership Agreement: Clearly outline roles, profit-sharing, and dispute-resolution mechanisms.
  2. Register the Partnership: Depending on the jurisdiction, registration may be required.
  3. Obtain Necessary Licenses and Permits: Ensure compliance with local regulations.
  4. Set Up Operations: Establish the business’s infrastructure and processes.

Partnerships vs. Companies

Choosing the right business structure is one of the most critical decisions for any entrepreneur. While partnerships and companies are both popular choices, they differ significantly in terms of ownership, liability, management, and regulatory requirements. 

Each structure has its own advantages and challenges, making it essential to understand which one aligns best with your business goals.

Feature Partnership Company
Legal status No separate legal entity Separate legal entity
Liability Unlimited (except LLPs) Limited
Profit distribution Shared among partners Distributed as dividends
Management Managed by partners Managed by the board of directors

Partnerships are generally more flexible but come with higher personal risk, whereas companies provide greater liability protection but involve more regulatory requirements.

Related Read: Private Limited Company Vs. Limited Liability Partnerships (LLP)

Frequently Asked Questions

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  • Service-based businesses
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Limited Liability Partnership
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BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

How Does a Partnership Differ From Other Forms of Business Organisation?

A partnership differs from other business structures like sole proprietorships, limited liability companies (LLCs), and corporations primarily in ownership, liability, and decision-making.

What Is a Limited Partnership vs. a Limited Liability Partnership?

A Limited Partnership (LP) and a Limited Liability Partnership (LLP) are two distinct types of partnerships:

  • Limited Partnership (LP):
    • Composed of general partners who manage the business and have unlimited liability and limited partners who contribute capital but have liability only up to their investment.
    • Common in investment ventures where limited partners provide funds, and general partners manage the operations.
  • Limited Liability Partnership (LLP):
    • All partners have limited liability, protecting them from personal responsibility for the business’s debts.
    • Ideal for professional businesses like law firms or accounting firms, where partners share management duties but seek protection from personal liabilities.

Do Partnerships Pay Taxes?

Partnerships themselves do not pay income taxes. Instead, they are considered pass-through entities, meaning that the partnership’s profits and losses are passed through to individual partners. 

Each partner reports their share of the partnership’s income on their personal tax return, where they are taxed based on their portion of the profit.

What Types of Businesses Are Best suited for Partnerships?

Partnerships are well-suited for businesses that benefit from shared expertise and resources. Some ideal types include:

  • Professional Services: Law firms, accounting firms, and medical practices, where partners bring specialised skills.
  • Family Businesses: Small family-owned businesses where partners are trusted to work together.
  • Creative Industries: Advertising agencies, design firms, or production companies that require collaborative efforts.
  • Startups: Early-stage businesses that need multiple people to contribute capital, ideas, and effort but do not want the complexity of a corporation.

What is a partnership, and how does it work?

A partnership is a business arrangement where two or more individuals share ownership and management responsibilities, pooling resources to run the business. The partners agree on how profits, losses, and responsibilities will be shared, typically outlined in a partnership agreement.

The partnership can be structured in various ways, such as general partnerships or limited partnerships, depending on the desired level of liability and control. 

What are the different types of partnership working?

There are several types of partnership structures based on liability and management involvement:

  • General Partnership
  • Limited Partnership (LP)
  • Limited Liability Partnership (LLP)
  • Joint Venture

Who is a secret partner?

A secret partner is a business partner who contributes capital and shares in the profits and losses but does not take part in the day-to-day management or operations of the business. Unlike a dormant or silent partner, a secret partner’s identity is not disclosed to the public or clients but is still legally bound by the partnership’s obligations and liabilities.

How many types of partners are there?

In a partnership, there are four main types of partners:

  1. Active Partner: Actively participates in the management of the business and shares in both profits and liabilities.
  2. Sleeping (or Dormant) Partner: Invests capital but does not participate in day-to-day management; however, they share in profits and losses.
  3. Secret Partner: A partner whose identity is kept hidden from the public but participates in the partnership’s activities and shares in profits and liabilities.
  4. Limited Partner: A partner who contributes capital but has limited liability, meaning they are only liable up to the amount they have invested in the business.

Promoting Innovations in Individuals, Startups and MSMEs (PRISM)

Promoting Innovations in Individuals, Startups and MSMEs (PRISM)

Promoting Innovations in Individuals, Startups, and MSMEs (PRISM) is a program that offers grants, technical support, and mentorship to individual innovators, including students, guiding them through each stage of incubating their ideas into new enterprises.

Description Who is it for? Benefits
To provide grants, technical advice, and mentorship to individual innovators, guiding them through the various stages of incubating their ideas until they transform into viable enterprises For Innovators in the technology area Upto INR 2,00,000 or 90% of the approved project cost for prototype or model development
The essentials of US Incorporations - documents, eligibility and process.

This grant-aid support is implemented in phases:

  • Phase-1
    Category 1: For Proof of concept/prototype/models
    Category 2: For fabrication of working model/ process know-how/testing & trail/ patenting/ technology transfer, etc.
  • Phase-2
    For scaling up technology-based innovations, including patenting/design registration/trademark registry/ technology transfer to develop a marketable product/process towards enterprise creation.

Table of Contents

Eligibility

  • For PRISM Phase-1:
    Any Indian citizen, including student innovators, can avail support to develop their novel ideas into demonstrable models/prototypes.
  • For PRISM Phase-2:
    PRISM innovators who have demonstrated success or innovators who have proven their concepts with assistance from other government institutions or agencies.

Eligible Sectors for the Scheme

The proposals are encouraged to focus on sectors such as

  • Green Technology
  • Clean Energy
  • Industrial Smart Materials
  • Waste to Wealth
  • Affordable Healthcare
  • Water & Sewage Management
  • Other technology or knowledge-intensive areas.

Application procedure for Startups

  • Submit your project proposal following the prescribed format to the nearest TePP Outreach cum Cluster Innovation Centres (TOCICs). Here’s a list of TOCICs in India.
  • Once received, TOCIC coordinators will review proposals for completeness and forward them further.
  • Domain Knowledge Experts associated with TOCIC will then assess the proposals.
  • Evaluated proposals are forwarded to DSIR for further action and reviewed by the PRISM Advisory and Screening Committee (PASC) for recommendation.
  • Upon Department approval, "Terms & Conditions" must be signed before grants-in-aid release.
  • Initial fund release is based on project milestones and PASC recommendations. Subsequent releases depend on project progress evaluated by the Project Review Committee (PRC).
  • TOCIC and network partners, along with technical experts, will monitor approved projects.
  • TOCIC will provide project status reports to DSIR every 3 months, while PRCs will review project progress at least once every 9 months.
  • Upon successful project completion, the DSIR will accept the project completion report based on PRC recommendation.

Benefits of the PRISM Scheme

The PRISM Scheme includes various phases designed to support innovators in different stages of their project development. Each phase may involve different levels of support, resources, and guidance tailored to the specific needs of innovators.

  • For Phase-1:
    Category 1: Maximum support within this category is capped at INR 2,00,000 or 90% of the approved project cost, whichever is less.
    Category 2: Maximum support is limited to 20.00 lakh or 90% of the total project cost, whichever is lower.
  • For Phase-2:
    For projects with costs ranging from INR 5 Lakhs to INR 35 Lakhs, maximum support of either INR 20 Lakhs or 90% of the total project cost (whichever is lower) is provided.

Please note: If the project beneficiaries abandon the project, innovators must reimburse the funding disbursed, along with a 12% interest rate, to the DSIR.

Frequently Asked Questions

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  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

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  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

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  • Service-based businesses
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  • Businesses seeking investment through equity-based funding


One Person Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What is the objective of the PRISM Scheme?

The PRISM Scheme aims to encourage innovation, research, and development activities among individuals, startups, and MSMEs by providing financial support and fostering a conducive ecosystem for growth and experimentation.

Can individuals or only organizations apply for the PRISM Scheme?

Both individuals and organizations, including startups and MSMEs, are eligible to apply for the PRISM Scheme as long as they meet the eligibility criteria outlined by the scheme.

Are there any specific criteria for project selection under the PRISM Scheme?

Projects are selected based on criteria such as innovation quotient, technical feasibility, market potential, scalability, and socio-economic impact.

Do projects funded under the PRISM Scheme get evaluated later?

Projects funded under the PRISM Scheme are subject to regular monitoring and evaluation to ensure compliance with project milestones, utilization of funds, and achievement of desired outcomes.

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