A sole proprietorship is the simplest form of company formation. In this form of business incorporation, you set up a business solely on your own. Sole proprietorship business is not separate from the owner, i.e., it does not have a separate legal identity of its own. The personal income tax return of the owner is used to file taxes for the business as well. In this form of business, a person alone is liable to pay the debts, if any, and enjoy the profits earned. A sole proprietorship is the preferred form of business for professionals such as consultants, lawyers, etc. Its popularity stems from factors such as simple to set up, low cost of formation, etc.
It is easy to form a sole proprietorship company. Since the entire business is done on the name of the owner itself, there is less paperwork to be done while setting up this kind of business. It is a hassle-free form of business. Any person who wishes to start a business that is not so complex, he/she may consider the Sole Proprietorship form of business.
The following steps must be followed to form a Sole Proprietorship business:-
A sole proprietorship is the best way to start a business if you have no funding, and you want to test your product in the market. It entails little liability and compliance while setting up a new business and creating a brand name for your product.
The general misconception among prospective founders is that to start up, they require at least one more co-founder. What they miss out on is the fact that with the recent reforms introduced in the Companies Act it has been made possible to form a One Person Company or OPC which can be setup by a single person. Such a company works wonders for someone who wants 100% control over his company. However, an OPC may have certain issues such as not having the ability of introducing a partner, personal liability and not being high on the priority list of investors. Through this post, we discuss how is an OPC set up and what are the legal requirements associated with the same.
Following are the requirements for setting up a One Person Company:-
Following steps need to be followed in order to set up a OPC:
The following compliances are required for an OPC:
* Balance sheet
* Accounts of profits and losses
* Cash flow statement
* Change in equity
An OPC may seem like a natural choice for entrepreneurs who do not want to indulge in high cost of formation and want to retain control over their company. However, an OPC provides very little benefit to an investor and hence it is difficult to raise funding in such an entity. Also, ESOPs cannot be granted in an OPC. An OPC is a good entity choice if one wants to start a bootstrapped company with low cost of formation and with least outside interference.
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