Business Formations

A sole proprietorship—also referred to as a sole trader or a proprietorship—is an unincorporated business that has just one owner who pays personal income tax on profits earned from the business. Many sole proprietors do business under their own names because creating a separate business or trade name isn't necessary. 

A partnership is a kind of business where a formal agreement between two or more people who agree to be the co-owners, distribute responsibilities for running an organization, and share the income or losses generated by the business.

LLP is an alternative corporate business form that gives the benefits of the limited liability of a company and the flexibility of a partnership. The LLP can continue its existence irrespective of changes in partners.

OPC is the perfect hybrid of a Private Limited Company and a Limited Liability Partnership (LLP). It offers the limited liability benefits of a Pvt Ltd as well as the flexibility of an LLP.

A private company is a company which is owned by non-governmental organizations or a relatively small number of shareholders or members of a company. Usually, a private company does not offer or trade its shares to the general public on the stock exchanges, but rather the private stock of the company is owned and traded.

A public company—also called a publicly traded company—is a corporation whose shareholders have a claim to part of the company's assets and profits. Through the free trade of shares of stock on stock exchanges or over-the-counter (OTC) markets, ownership of a public company is distributed among general public shareholders.

HUF is not defined under the Income Tax Act but is covered under the Hindu Law. By definition, HUF consists of all individuals who are lineally descended from a common ancestor and also comprises of unmarried daughters. HUF is not formed by a contract but by the status of a family i.e., it is created automatically in any Hindu Family. Having a common ancestor is a pre-requisite to form a HUF

Trusts, Associations of Persons (AOPs), and Bodies of Individuals (BOIs) are legal entities formed when individuals come together for a common purpose. Trusts are created to manage assets for beneficiaries and are generally tax-exempt, while AOPs and BOIs are formed for business, profession, or other activities and are subject to taxation. AOPs and BOIs are taxed at the same rates as individual taxpayers and their income is calculated in the same manner. Understanding the differences between these entities can help individuals choose the appropriate legal structure for their specific needs.