Desired Business- Company or Partnership

In the ongoing dynamic environment, a wiser selection about the constitution of business is of utmost importance.

The decision should be taken keeping in mind overall factors be it Fund Raising, Tax Implications, Long term objective and Desired Organisational Structure.

A Professional consultant having good experience in formation of business entity and its compliances like statutory audit, Tax Management and Internal Controls testing can provide a valuable guidance in this area.

Further, a SWOT analysis of ongoing scenario in business environment can help in strategic decision making.

1. Partnership or Company
Selection of better option
Dhingra Gaurav & Associates
Sep 24

2. PresentationFlow
SN Subject Slide#
1 Major Features of Company 3
2 Major Features of Partnership 4
3 Selection between Company &
Partnership
5,6 & 7
4 About Team 8
2

3. Major Features of Company
3
Legal Structure and FormationSeparate Legal Entity in which
-Shareholders have ownership in shares and control over director
appointment.
-Directors are involved in internal management.
A Company exists independently of its directors and shareholders.
Thus, Companywill continue to exist if director or
shareholders leave the company.
A company can be formed by its registration withMCA.
Number of Shareholders Maximum number of shareholders in a company is 50.
Liability of
shareholders
Every shareholder in a PrivateLimited company has a
limited liability as defined in MOA.
Tax Structure Tax Rate on income of a private limited company is 25 percent.
Capital Raising Can raise freshcapital by issuing more shares to investors,
subject to authorized capital in MOA.

4. Major Features of Partnership
3
Legal Structure and FormationPartnership Firm can be formed by a written partnership deed.
A written partnership agreement helps in
-Defining theexact roles of partners in firm.
-Sets out the profit sharing ratio between partners.
A Partnership does not have a separate legal entity and
partners are personally liable for partnership debts and
losses.
Number of Partners Maximum number of partners in a firmis 20. APartnership firm
consisting of 2 partners stands dissolved if one of the partner
leaves firm.
Liability of
shareholders
The partner's liability of a partnership firm has unlimited
liability.
Tax Structure Tax Rate on income of a partnership firmis 30percent.
Capital Raising A partner can introduce fresh capital as per partnership deed.

5. Company or Partnership ?
●Setup and Compliances costs
The setup and annual compliance requirementslike annual filing of accounts, ongoing
requirements like director duties and paperwork are more stringentin case of a company,
where as in a partnership there are no such requirements. Hence setting a partnership is
cost effectiveas compared to company.
● Flexibility
A Partnership offers more flexibilityin conduct of business as partners can between
themselves decide terms and conditionsof partnership as per their requirements and
profit sharing ratio to be drafted in written agreement. On the other hand, MOA and AOA
of company are more or less standardized.
●Control
Since control of businesswill be directly done by partners without any further
5

6. Company or Partnership ?
involvement. It would be better to form apartnership as its organizational structure is not
sizeable, which is generally in case of a company. In case of sizeable structure,
micromanagement of different division is involved.
● Taxation Perspective
Though tax rates on income of partnership is more as compared to a company, but method
of computation of taxable incomein case of a company and partnership are different.
Furtherif we compare the total tax liability of partnership and its
partners vis a vis company and its directors, tax liability in case of partnership and its
partners comes out to be lesser asper the experience in my practice.
Conclusion–The profitability of a business and its worth in market solely depends on its
owners and their decision making.
From that perspective, it doesnotmatter whether a company is formed or partnership. However
6

7. Company or Partnership ?
if we consider other factors such as controlling and financial, it is clear that Partnership is a
far better option as compared to company as can be seen from 5 bulletpoints
mentioned above.
Theonly area where company has edge over partnership is liability of directors/
partners. In company liability of directors is limited whereas in partnership liability of
partners is unlimited.
Also, it is possible to form a blend of partnership and company i.eLimited Liability
Partnership
7

8. About the team
8
Gaurav Dhingra, Practicing
Chartered Accountant
-CEO of the firm and CA from Institute of Chartered Accountants of
India.
-Holds 9 year of post qualification experience in audit, taxation and
certification works.
-Worked in Big 4 such as EY and KPMG previously.
-Have specialization in startup advisory and audits of sizeable
companies.
Puneet Jain Holds the position of mentor and advisor in firm. Recently moved to
Vietnam and worked as Finance head in various corporates.
Atul Bhutani Heads business development area in the firm.

9. ThankYou
Dhingra Gaurav & Associates
607-608,Tower C,NirvanaCourtyard
Sector50,Gurugram
122018
GauravDhingra–[email protected]/72910-71576
9