{"id":12385,"date":"2020-07-08T14:31:37","date_gmt":"2020-07-08T09:01:37","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=12385"},"modified":"2020-10-13T15:20:37","modified_gmt":"2020-10-13T09:50:37","slug":"proprietorship-firm-vs-private-limited-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/proprietorship-firm-vs-private-limited-company\/","title":{"rendered":"Proprietorship Firm vs. Private Limited Company: Key Differences"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Identifying a perfect business structure is one of the most daunting challenges faced by new startups. Whether you want to avail higher ROI or avert tax liabilities, you must have sufficient knowledge about the different business structures to reap those benefits. This blog will draw your attention to the concept related to Proprietorship Firm vs Private Limited Company. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"589\" height=\"503\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-33.png\" alt=\"Proprietorship Firm vs. Private Limited Company\" class=\"wp-image-12386\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-33.png 589w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-33-300x256.png 300w\" sizes=\"(max-width: 589px) 100vw, 589px\" \/><\/figure><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/proprietorship-firm-vs-private-limited-company\/#What_is_a_Private_Limited_Company\" >What is a Private Limited Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/proprietorship-firm-vs-private-limited-company\/#What_is_Proprietorship_Firm\" >What is Proprietorship Firm?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/proprietorship-firm-vs-private-limited-company\/#Proprietorship_Firm_vs_Private_Limited_Company\" >Proprietorship Firm vs. Private\nLimited Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/proprietorship-firm-vs-private-limited-company\/#Conclusion\" >Conclusion:<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Private_Limited_Company\"><\/span><strong>What is a Private Limited Company?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>private limited company<\/strong><\/a> is a type of business structure that defies the right of share trading with the general public. That means in the private limited company, the trading of share is strictly an internal affair. Also, the liability in such a business structure depends on the magnitude of share possessed by the shareholders\/members. <\/p>\n\n\n\n<p>Although Shareholders hold the right to pursue the company\u2019s operation, they can hire directors to serve the same purpose. The number of shareholders that can serve one private limited company is limited to 200. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/business-structures-raising-fund\/\">A Complete overview on Business Structures &#038; Raising Fund<\/a><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Benefits offered by a Private Limited Company <\/strong><\/h3>\n\n\n\n<ul><li>The shareholder\u2019s liability depends on the amount of share they hold in the company. <\/li><li>Their personal assets cannot be used to cover up the company\u2019s debt. However, in the case of bankruptcy or fraud, this provision will dissolve without any exception. <\/li><li>The hostile takeover of share in a private limited company is comparatively lower than other business structures.&nbsp; <\/li><li>Private Limited Company works in an autonomous framework, and the absence of its core members cannot disrupt it. The company will continue to exist and operate in full control even after the demise of the shareholder. <\/li><li>Private Limited Company possesses its own assets and liability. The company has the discretion to sue any entity w.r.t legal disputes. <\/li><li>This type of business structure works under the strict of Companies act 2013. This let them ensure transparency in their business practices. <\/li><li>It confronts limited tax liabilities under the <strong>income tax act 1961<\/strong><sup><a href=\"https:\/\/www.incometaxindia.gov.in\/pages\/acts\/income-tax-act.aspx\"><strong>[1]<\/strong><\/a><\/sup><strong>.<\/strong> <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Proprietorship_Firm\"><\/span><strong>What is Proprietorship Firm? <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A <a href=\"https:\/\/corpbiz.io\/sole-proprietorship-registration\"><strong>sole proprietorship firm<\/strong><\/a> is a kind of business structure that requires a single owner instead of several core members. The difference between the owner and this business form is next to negligible. Here is the single owner is accountable for the well-being of the company. The following list will give a better idea of proprietorship\u2019s advantages. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Proprietorship advantages concerning a private limited company<\/strong><\/h3>\n\n\n\n<ul><li>The formation of a proprietorship-based business is\neasier than other business forms.<\/li><li>The proprietorship-based setup discourages the\ninclusion of the shareholders of the Director due to negligible legal\ndifferences between the business and the owner. <\/li><li>The owner is the only accountable person to address the\ncompany\u2019s related matters. <\/li><li>The proprietorship business doesn\u2019t attract strict\ncompliances or regulation as compared to other business forms.&nbsp; <\/li><li>The proprietorship business is free from dual taxation. That means the owner needs to bear the income-related tax instead of business income tax. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Proprietorship_Firm_vs_Private_Limited_Company\"><\/span><strong>Proprietorship Firm vs. Private\nLimited Company<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"table table-bordered\"><tbody><tr><td>\n  <strong>S.no<\/strong>\n  <\/td><td>\n  <strong>Factors <\/strong>\n  <\/td><td>\n  <strong>Private limited company<\/strong>\n  <\/td><td>\n  <strong>Proprietorship<\/strong>\n  <\/td><\/tr><tr><td>\n \n1.  \n  <\/td><td>\n  Registration&nbsp;&nbsp;&nbsp;&nbsp; \n  <\/td><td>\n  Private limited companies serve as a Companies Act 2013-registered\n  entity. \n  <\/td><td>\n  Proprietorship serves no formal registration.\n  <\/td><\/tr><tr><td>\n2.  \n<\/td><td>\n  Name of the business \n  <\/td><td>\n  The company has to include the term \u201cPvt. Ltd\u201d in its name\n  <\/td><td>\n  Proprietorship\u2019s firm has the discretion to serve this purpose. \n  <\/td><\/tr><tr><td>\n  3.\n  <\/td><td>\n  Liability\n  <\/td><td>\n  Here the number of shares held by the shareholders will decide the\n  liability. \n  <\/td><td>\n  Proprietorship\u2019s firm serves countless liabilities. \n  <\/td><\/tr><tr><td>\n  4.\n  <\/td><td>\n  Separate legal entity&nbsp;&nbsp; \n  <\/td><td>\n  Private Ltd. company can act as a separate legal entity as per Company\n  Act 2013.\n  <\/td><td>\n  This form of business doesn\u2019t have such liberty. The owner is the only\n  person accountable for the company\u2019s well-being.\n  <\/td><\/tr><tr><td>\n  5.\n  <\/td><td>\n  Number of members\n  <\/td><td>\n  Here the maximum number of members is limited to 200. The minimum limit\n  is one. \n  <\/td><td>\n  One \n  <\/td><\/tr><tr><td>\n  6.\n  <\/td><td>\n  Transferability \n  <\/td><td>\n  Here the Transferability is possible by the transfer of shares. \n  <\/td><td>\n  The proprietorship business is not transferable. \n  <\/td><\/tr><tr><td>\n  7.\n  <\/td><td>\n  Foreign ownership&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; \n  <\/td><td>\n  Some of the sectors support the concept of foreign ownership for growth\n  or expansion. \n  <\/td><td>\n  The proprietorship business doesn\u2019t permit the intervention of Foreign\n  ownership. \n  <\/td><\/tr><tr><td>\n  8.\n  <\/td><td>\n  Existence\n  <\/td><td>\n  Its existence does not depend on the relevant members and shareholders. \n  <\/td><td>\n  Depend on the owner only.\n  <\/td><\/tr><tr><td>\n  9.\n  <\/td><td>\n  Legal compliance\n  <\/td><td>\n  A private limited company is accountable for conducting board meetings\n  and AGM in the predetermined timeframe. \n  &nbsp;\n  &nbsp;\n  It also has the discretion to file \n  Annual Returns annually with the Registrar of the company every year. On\n  the taxation front, the company is entitled to file its taxes in a timely\n  manner. \n  <\/td><td>\n  Since the proprietorship firm served by the single owner, there is no\n  point in conducting a board meeting here. \n  &nbsp;\n  Also, such a business form defies the concept\/provision of filling of\n  the annual report or income tax return. \n  <\/td><\/tr><tr><td>\n  10.\n  <\/td><td>\n  Taxation\n  <\/td><td>\n  Its profit attracts taxation of 30% plus a surcharge. The cess is also\n  applicable here.&nbsp; \n  <\/td><td>\n  Here the tax is applicable on the owner\u2019s income \n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong>: <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Selecting the wrong business structure could lead to dire consequences; thus, its essential for an upcoming entrepreneur to analyze their options inside out. Proprietorship firms are good at rendering tax-free income and mental peace, whereas Private Limited Company is all about credibility, transparency, and better business practices. If you wish to handle all the liabilities on your own and seek negligible intervention and low tax burden, then proprietorship is the best option. <\/p>\n\n\n\n<p>On the contrary, if you are a supporter of the transparent environment and want to grow your business rapidly, it&#8217;s better to register with the Company Act, 2013. However, it would be best if you kept in mind that Private limited firm attracts tax to a considerable degree and often expose to cess. We strongly believe that you have now got better idea w.r.t Proprietorship Firm vs Private Limited Company. Feel free to provide your valuable feedback through the comment section in case if you need any assistance. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/difference-between-private-limited-company-and-llp\/\">Guide on Difference between Private limited Company and LLP\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Identifying a perfect business structure is one of the most daunting challenges faced by new startups. Whether you want to avail higher ROI or avert tax liabilities, you must have sufficient knowledge about the different business structures to reap those benefits. This blog will draw your attention to the concept related to Proprietorship Firm vs [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":12388,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[741],"acf":{"service_id":"1"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":21398,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/12385"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=12385"}],"version-history":[{"count":17,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/12385\/revisions"}],"predecessor-version":[{"id":17859,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/12385\/revisions\/17859"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/12388"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=12385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=12385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=12385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}