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Forms of Organisation

Forms of Organization,

Legal documents &

Legal Compliances


In India, businesses must register under specific laws, depending on the type of entity they choose to form. Each type of entity has distinct characteristics and legal requirements, so selecting the right form is essential for ensuring smooth operations.

The most common types of business entities in India include:

  1. Sole Proprietorship

  2. Partnership Firm

  3. Limited Liability Partnership (LLP)

  4. Private Limited Company (Pvt Ltd)

  5. Public Limited Company

  6. One Person Company (OPC)

  7. Section 8 Company

  8. Society/Trust

  9. HUF

Each entity type has specific registration procedures, documentation requirements and ongoing compliance obligations that businesses must follow. It’s important to choose the appropriate entity based on the nature of the business, liability considerations, and long-term goals.


The form of organization determines the legal structure, operational framework, taxation, liability, and overall management of the business. Here are some key reasons why selecting the appropriate form of organization is important:

  • Liability and risk management

  • Capital and Funding requirements

  • Control and Management

  • Compliance and regulatory burden

  • Taxation

  • Growth and expansion

  • Legal and Statutory Requirements

  • Credibility

1. Sole Proprietorship

Context:

  1. A single individual owns and manages the business.

  2. Not a separate legal entity; the owner's assets and liabilities are linked to the business.

  3. Less Legal compliances comparatively.

Legal documents for Sole Proprietorship:

  1. PAN of proprietor

  2. Aadhar of proprietor

  3. Trade License

  4. Labor License

  5. GST registration

  6. LUT Bond only in case of exports

  7. FSSAI license

  8. UDYAM registration certificate

  9. Current account in the name of proprietor

  10. LEI certificate

Legal Compliances required by a Sole Proprietorship:

  1. Income Tax Return (Annually)

  2. Renewal of Trade License (Annually)

  3. Renewal of Labor License (Annually)

  4. GST Return (Monthly/Quarterly/Annually)

  5. Renewal of LUT Bond (Annually)

  6. Renewal of FSSAI License (Annually)

  7. Renewal of Udyam Certificate (Annually)

  8. Renewal of LEI (Annually/Bi-annually)

2. Partnership Firm

Context:

  1. Formed by two or more people who agree to share profits and losses known as Partners of the firm.

  2. The maximum number of partners can be 50.

  3. Governed by the Indian Partnership Act, 1932.

  4. Widely known as “FIRM”

  5. Can be registered or unregistered, but registration provides certain legal protections. Registration will be done by “Registrar of Firms” (RoF)

  6. Any changes in the partnership terms shall be made through Partnership Deed.

  7. The liability of partners is unlimited, which means the personal properties are at stake in case of losses occurring by the firm.

Legal documents for a Partnership Firm:

  1. Partnership Deed

  2. Firm Registration certificate

  3. PAN of Firm

  4. Trade License

  5. Labor License

  6. GST registration

  7. LUT Bond only in case of exports

  8. FSSAI license

  9. UDYAM registration certificate

  10. Current account in the name of Firm

Legal Compliances required by a Partnership Firm:

  1. Income Tax Return (Annually)

  2. Renewal of Trade License (Annually)

  3. Renewal of Labor License (Annually)

  4. GST Return (Monthly/Quarterly/Annually)

  5. Renewal of LUT Bond (Annually)

  6. Renewal of FSSAI License (Annually)

  7. Renewal of Udyam Certificate (Annually)

  8. Renewal of LEI (Annually/Bi-annually)

  9. Amendment to partnership deed (in case of changes in partnership)

3. Limited Liability Partnership (LLP)

Context:

  1. A hybrid between a partnership and a company, offering limited liability to partners.

  2. Governed by the LLP Act, 2008.

  3. Must be registered with the Registrar of Companies (RoC).

  4. The underlying agreement is called “LLP Agreement”. Any changes in the partnership shall be made through “Amended LLP Agreement”

  5. The minimum number of Partners shall be 2. However, there is no upper limit on the maximum number of partners of an LLP.

Legal documents for an LLP:

  1. LLP Agreement

  2. Incorporation certificate from ROC

  3. PAN of LLP

  4. TAN of LLP

  5. Trade License

  6. Labor License

  7. GST registration

  8. LUT Bond only in case of exports

  9. FSSAI license

  10. UDYAM registration certificate

  11. Current account in the name of LLP

  12. DIN of all partners

  13. DSC of all partners

Legal Compliances required by an LLP:

  1. Income Tax Return (Annually)

  2. Audited Financial Statements

  3. ROC Form-8 (Annually, Due date is 30th October of following year)

  4. ROC Form-11(Annually, Due date is 31st May of following year)

  5. Renewal of Trade License (Annually)

  6. Renewal of Labor License (Annually)

  7. GST Return (Monthly/Quarterly/Annually)

  8. Renewal of LUT Bond (Annually)

  9. Renewal of FSSAI License (Annually)

  10. Renewal of Udyam Certificate (Annually)

  11. Renewal of LEI (Annually/Bi-annually)

  12. Amendment to LLP deed (in case of changes in LLP Agreement) and filing ROC Form-3 and ROC Form-4 (Within 30 days of change)

  13. DIR-KYC of all the partners

4. Private Limited Company (Pvt Ltd)

Context:

  1. A separate legal entity with limited liability for shareholders.

  2. Governed by the Companies Act, 2013.

  3. Requires registration with the RoC and must have at least two directors and two shareholders.

Legal documents for a Private Limited Company:

  1. Articles of Association (AOA)

  2. Memorandum of Association (MOA)

  3. Incorporation certificate from ROC

  4. PAN of company

  5. Tan of company

  6. Trade License

  7. Labor License

  8. GST registration

  9. LUT Bond only in case of exports

  10. FSSAI license

  11. UDYAM registration certificate

  12. Current account in the name of Company

  13. DIN of all directors

  14. DSC of all directors

Legal Compliances required by a Pvt Ltd:

  1. Income Tax Return (Annually)

  2. Audited Financial Statements

  3. Board’s Report

  4. Board meetings

  5. Annual general meeting (AGM)

  6. ROC Form-AOC-4 (Annually)

  7. ROC Form-MGT-7 (Annually)

  8. Renewal of Trade License (Annually)

  9. Renewal of Labor License (Annually)

  10. GST Return (Monthly/Quarterly/Annually)

  11. Renewal of LUT Bond (Annually)

  12. Renewal of FSSAI License (Annually)

  13. Renewal of Udyam Certificate (Annually)

  14. Renewal of LEI (Annually/Bi-annually)

  15. Filing of Resolution in ROC Form-14 (Within 30 days from date of passing resolution)

  16. DIR-KYC of all the directors

5. Public Limited Company

Context:

  1. A separate legal entity, typically larger in size than a private limited company, with shares that can be publicly traded.

  2. Must comply with stringent regulations under the Companies Act, 2013.

  3. Registration with the RoC is mandatory, along with having at least three directors and seven shareholders.

6. One Person Company (OPC)

Context:

  1. A relatively new entity structure where a single individual can form a company.

  2. Offers limited liability protection to the individual.

  3. Governed by the Companies Act, 2013 and registered with the RoC.

Legal documents for an OPC:

  1. Articles of Association (AOA)

  2. Memorandum of Association (MOA)

  3. Incorporation certificate from ROC

  4. PAN of company

  5. Tan of company

  6. Trade License

  7. Labor License

  8. GST registration

  9. LUT Bond only in case of exports

  10. FSSAI license

  11. UDYAM registration certificate

  12. Current account in the name of Company

  13. DIN of director

  14. DSC of director

Legal Compliances required by an OPC:

  1. Income Tax Return (Annually)

  2. Audited Financial Statements

  3. Board’s Report

  4. Board meetings

  5. Annual general meeting (AGM)

  6. ROC Form-AOC-4 (Annually)

  7. ROC Form-MGT-7 (Annually)

  8. Renewal of Trade License (Annually)

  9. Renewal of Labor License (Annually)

  10. GST Return (Monthly/Quarterly/Annually)

  11. Renewal of LUT Bond (Annually)

  12. Renewal of FSSAI License (Annually)

  13. Renewal of Udyam Certificate (Annually)

  14. Renewal of LEI (Annually/Bi-annually)

  15. Filing of Resolutions in ROC Form-14 (Within 30 days from date of passing resolution)

  16. DIR-KYC of the director

7. Section 8 Company

Context:

  1. A non-profit organization formed for promoting charitable causes, education, and other social objectives.

  2. Governed by the Companies Act, 2013 and registered with the RoC.

Legal documents for a Section 8 Company:

  1. Articles of Association (AOA)

  2. Memorandum of Association (MOA)

  3. License under Section 8

  4. Incorporation certificate from ROC

  5. PAN of company

  6. Tan of company

  7. Trade License

  8. Labor License

  9. GST registration

  10. LUT Bond only in case of exports

  11. FSSAI license

  12. UDYAM registration certificate

  13. Current account in the name of Company

  14. DIN of all directors

  15. DSC of all directors

Legal Compliances required by a Section 8 company:

  1. Income Tax Return (Annually)

  2. Audited Financial Statements

  3. Maintenance of Statutory Registers

  4. Board meetings

  5. Director’s report

  6. Annual general meeting (AGM)

  7. ROC Form-AOC-4 (Annually)

  8. ROC Form-MGT-7 (Annually)

  9. Renewal of Trade License (Annually)

  10. Renewal of Labor License (Annually)

  11. GST Return (Monthly/Quarterly/Annually)

  12. Renewal of LUT Bond (Annually)

  13. Renewal of FSSAI License (Annually)

  14. Renewal of Udyam Certificate (Annually)

  15. Renewal of LEI (Annually/Bi-annually)

  16. Filing of Resolutions in ROC Form-14 (Within 30 days from date of passing resolution)

  17. DIR-KYC of the director

8. Society/Trust

Context:

  1. Non-profit entities registered under the Societies Registration Act, 1860, or the Indian Trusts Act, 1882, respectively.

  2. Established for charitable, educational, religious, or cultural purposes.

  3. The minimum number of persons shall be 7.

Legal documents for a Society:

  1. Memorandum of Association (MOA)

  2. Rules and Regulations of the Society

  3. List of Governing body members

  4. PAN of Society

Legal Compliances required by a Section 8 company:

  1. Income Tax Return (Annually)

  2. Audited Financial Statements

  3. Maintenance of Statutory Registers

  4. Board meetings

  5. Filing of Annual returns with Registrar of Societies

  6. Annual general meeting (AGM)

  7. ROC Form-AOC-4 (Annually)

  8. ROC Form-MGT-7 (Annually)

  9. Renewal of Trade License (Annually)

  10. Renewal of Labor License (Annually)

  11. GST Return (Monthly/Quarterly/Annually)

  12. Renewal of LUT Bond (Annually)

  13. Renewal of FSSAI License (Annually)

  14. Renewal of Udyam Certificate (Annually)

  15. Renewal of LEI (Annually/Bi-annually)

9. HUF

Context:

A Hindu Undivided Family (HUF) is a legal entity in India recognized under Hindu law.

It is a family that consists of all persons lineally descended from a common ancestor, including their wives and unmarried daughters.

HUFs are governed by Hindu law, and they primarily exist to manage and hold ancestral property, while also offering tax advantages.

An HUF is automatically formed at the time of marriage or birth within a Hindu family. There’s no formal deed required for the creation of an HUF.

The head of the HUF is known as the Karta (usually the senior-most male member), who manages the family assets and represents the HUF.

Tax Benefits:

  • Separate Tax Entity: An HUF is treated as a separate tax entity under Indian tax law, meaning it can file an independent income tax return.

  • Deductions: HUFs are eligible for various tax deductions, similar to individuals, under Sections like 80C and 80D.

  • Income Splitting: The income of the HUF is taxed separately from the individual incomes of the members, allowing for potential tax savings by splitting the income between family members.

How to Form an HUF:

Creation: An HUF is automatically created upon marriage or through inheritance, but a deed (HUF Deed) can be created for legal clarity. The deed typically declares the Karta and all coparceners and members of the HUF.

PAN Application: Apply for a PAN card in the name of the HUF through the NSDL or UTIITSL website.

Bank Account: Open a bank account in the name of the HUF for financial transactions.

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