Clear Comparison between Partnership Firm and Proprietorship in India


In India, the two most popular and common form of performing business is through a partnership or a proprietorship firm. The Proprietorship Compliance in India is the simplest form of performing business with minimum paperwork and is perfect for businesses that are in initial stages or need less capital. On the other Partnership Firm Compliance is slightly advanced but has a host of benefits on offer compared to proprietorship, which is worth the little extra effort of setting up the partnership.

Key Benefits of a Partnership Firm over a Proprietorship

• More people mean more capital to function. 2 or more people may fund more money than a single individual.
• Allows for pooling resources of different individuals with respect to cash, assets, knowledge, labor, etc.
• The income from the partnership is directly reported on the personal income tax return and does not require a host of compliance at the partnership level.
• Risk and profits are diversified. One individual is not solely held responsible for the losses or profits.

Disadvantages of Considering a Partnership Firm over a Proprietorship

• Decentralized control with many partners and lesser ability to make quick decisions
• Conflicts with respect to profit allocation as there is a very slim chance of people contributing equally towards profit generation
• It does not give protection from unlimited liability and the partners may be responsible for errors committed by one of the partners or for contracts undertaken by the Partnership Firm. This makes it like proprietorship and not much advantageous in case of suits
• Suitable for young people who are willing to take high risk for high profits
• We need to register as per the partnership act and need to keep a partnership agreement in place for disputes.

Proprietorship Compliance in India

Proprietorship Compliance is very simple and the least complicated compared to various other alternatives of setting up a business today. It is also the most common way of starting a business in India. Depending on the success and growth, the business transforms into different forms of business entity. There is no need to have a statutory audit if the turnover of a service-focused sole proprietorship is below the threshold Rs 50L. The same threshold of turnover is Rs 100L for businesses focused on goods or tangible products/assets.

The proprietorship does not create any legal entity and hence, all the assets, accounts, etc., are to be held by the sole proprietor. The same should be reported on the individual’s income tax return. Income is taxed at the rate of the pertaining Individual income tax return. GST filing, TDS reporting / return filing, CA Audit, bookkeeping/accounting, personal income tax return filing, etc., could be some services included in Proprietorship Compliance in India.

Partnership Firm Compliance

The Compliance of the Partnership Firm is like the sole proprietor. Except there is some additional effort in accounting and bookkeeping to determine the profit or distribution share. Maintaining / creating or updating the partnership deed based on the changes in the partnership arrangement or setup. The income tax return filing would be for all partners unlike one in proprietorship.

Neusource Startup Minds is a Business Management Consultant Company, offers the best business services like Startup Compliances Package, Bookkeeping and Accounting Services, Limited Liability Partnership Compliances and many other business services.
Location: India

Comments

  1. Anonymous28 August 2022 at 21:19

    If you are searching for bookkeeping services in India and their information. It is the best blog to know about it. Thanks for sharing.

    ReplyDelete

Post a Comment

Popular posts from this blog

Annual Compliances for Proprietorship Firm

Image
Sole Proprietorships of India have only the smallest legal acquiesced, which are much lesser than those applicable to the private or public limited corporations. It is essentially owing to the fact that a sole proprietorship has no disparate certified entity distinct from its owner or proprietary, and this form of industry existence does not make use of the benefits of limited liability. The annual revenue of the possessor is measured the annual earnings of the sole proprietorship firm. Henceforth, like other business or service entities that are listed and enrolled under the MCA, i.e., the Ministry of Corporate Affairs, the sole proprietorship firms are not required to record an annual statement or budgetary declarations with the MCA. The main and important statutory compliances to be executed by these proprietorship firms are consequently tax-related recurring and year-long compliances. Nonetheless, some more recurrent or annual compliances may also be required for the goal...
Read more

Top Benefits of Outsourcing Accounting and Bookkeeping Services

Image
Other companies are growing. Everything is the same in yours: the software, the economy, the education, the knowledge. Still, other firms and moving faster in the growth sector and also your clients are getting snatched away by them. These might be some of the concerns you might be facing. There can be multiple reasons why this is happening. One of the major reasons can be Accounting and Bookkeeping Services . Many people are of the assumption that bookkeeping services and accounting services are only about saving costs. But this is not true. Here are the some of the major advantages of outsourcing the Bookkeeping and Accounting Services are as mentioned below: ·         Your firm grows fast and becomes more sustainable and strong The outsourcing bookkeeping and accounting are entertained for the biggest reason and that is to assist you in maximizing the return on the competencies. Also, you can use this valuable time in making your co...
Read more

Compliances Involved in Proprietorship Firms, Partnership Firms and LLPs

Image
Sole Proprietorships of India have only the minimum legal acquiesced, which are much lesser than those relevant to the private or public limited corporations. It is essentially owing to the fact that a sole proprietorship has no disparate authorized entity distinct from its owner or proprietary, and this form of business existence does not make use of the benefits of limited liability. The annual revenue of the possessor is considered the annual earnings of the Sole Proprietorship Firm . Henceforth, like other business or service entities that are listed and enrolled under the MCA, i.e., the Ministry of Corporate Affairs, the sole proprietorship firms are not obligated to record an annual statement or budgetary declarations with the MCA. The main and significant statutory compliances to be executed by these proprietorship firms are consequently tax-related recurring and year-long compliances. Nonetheless, some more recurrent or annual compliances may also be needed for the goa...
Read more