In our last article, we have talked about how you can create your account on Myntra and Jabong and then start selling on the platforms. However in order to get yourself registered you need to get your business registered as a legal business entity. Myntra allows 4 types of legal entities. In this article, we will help you decide which legal entity is right for you.
So, let’s start with what types of legal entities Myntra allows on their platform. There are 4 of them and they are mentioned below.
- Sole Proptiership firm.
- Partnership firm.
- Limited liability partnership.
- Private liability company.
Now each and every legal entity is different and each of them has some specific advantage and disadvantage which comes with each and every one of them. So let’s start with the first one.
Sole proprietorship firm.
As the name implies, in the sole proprietorship firm everything is held by one person. It can be compared to a dictatorship, where everything is controlled by one person only. Because of the nature of the firm, it is suitable for small and unorganized industries. As mentioned above everything come to only one person and this includes all the assets and all liabilities. Now we will look into the advantages of this kind of firm.
Advantages.
- No government fee.
- Fulfilling compliance not needed.
- No government regulatory paperwork.
- The owner earns all the profit.
- No double taxation.
- Income tax applies only on owner income
- Start in only 10 days.
Eligibility criteria.
The eligibility criteria for registration as a sole proprietorship is quite low. You can register if you have the following documents.
- Aadhaar card.
- PAN card.
- Bank account.
- Registered office proof (rental agreement or utility bills will be considered as valid office proof.
Partnership firm.
This one relatively easy to understand, as the name suggests it is a partnership between the two individuals. In a partnership firm, two or more people come tougher and they decide the rights and duties of the partnership. All of the roles and duties of the partners are defined in the partnership deeds. A partnership firm is slowly going out of focus as there are some better options. However, because it is very easy to incorporate with the low cost makes it a good option for the people who want to register their business and share both the profits and losses.
One of the things which you should know about this is that in a general partnership firm the partners have unlimited liability. In simple words, this means that if any partner fails to pay a loan or any other liability then the banks will take their personal assets in order to get their money back. This discourages partners to take big loans as failure to repay it will cost them their own assets. This is one of the reasons why it is used by small businesses.
Advantages.
- Start in under 4 days.
- Risk is shared between partners.
- Audit is not mandatory.
- Registration is not mandatory.
Minimum requirements.
Minimum two people. If you wish to create a general partnership firm then you need a minimum of two people, on the other side, the maximum number of people allowed to be in a general partnership is 20. In the case of the banking business, the maximum number of partners is reduced to 10.
These people who want to be in a partnership have to qualify the following.
- Everyone should be above the age of majority.
- Person should not be suspended by any other law.
Unique name. To be very honest this point does not need any explanation. If you are creating any kind of firm then it should have a unique name. This name should not be related to any pre-existing brand. You don’t want to be mistaken for some other firm, do you?
No minimum capital. In this kind of partnership firm, there is no limit set on the minimum capital. However, it should be kept in mind that, the firms constituted with a capital of up to two thousand rupees are not eligible to claim a set-off or other proceedings to enforce a right arising from the partnership.
No FDI allowed. If you were hoping to receive a little bit of help from the FDI then forget about it, as a general partnership firm is not allowed to get any kind of FDI. This is an important aspect if you are thinking to have some FDI in the future.
Documents required.
Basic documents to start a partnership.
- Notarized Partnership Agreement.
- Proof of Registered Address (not older than 2 months).
- NOC from the Owner of Premises.
Documents of all partners of the Firm.
- Two Photographs.
- Copy of PAN Card.
- Valid Identity Proof.
- Latest Address Proof.
If you want much more details about partnership firms then click here.
Limited liability partnership.
It can be best understood as the one who is in between the two. A limited liability firm partnership (LLP) is relatively cheaper when compared to a private partnership firm, but at the same time, it is better than the previously talked about general partnership firm. A LLP each owner shares individual tax liabilities. To put it in simple words it means that each partner will have to pay tax on their own earning. Also, unlike other business structures, LLPs are not liable for business debts. This means that the partner will not help accountable for the loan taken by the firm.
Advantages.
- Less paperwork compared to other business structure.
- Easier to form.
- Safety from the liabilities.
- Offers tax flexibility.
- Following business structure is not mandatory
- Flexible profit sharing.
All of the above make it quite a favourite choice amount people who want to establish their business as a legal entity.
The registration process for LLP.
Step 1
The first step is to acquire the DIN or DPIN (Designated Partner Identification Number). Click here to open to government portal for the ministry of corporate affairs. Any person who wishes to become a partner in any company needs to have a DIN number as it is required by the government. Once on the page, you will have to click on the link which describes your position.
If you want to become a director in a new company then you have to click the first link which is for SPICe Form. The second link is for people who want to become director in an already existing company. This link is for DIR-3.
If you want to change the particulars of the directors. Then you have to fill the DIR-6 form.
The above page will have all of the details which will guide you through the process of getting your DIN number. Overall the above page has 6 points and these 6 points will cover all of the things you need to know about DIN.
Step 2
In this step, you will have to register on MCA and obtain your digital signature certificate. Click here to go to the MCA service page of the ministry of corporate affairs. On this page, you will get directions for different positions such as Director, Manager/Secretary/CEO/CFO, and Practising Professional.
This makes it very easy for an individual to find the right set of directions for whatever your designation is.
Once you have registered on MCA then the next thing which you have to do is get your digital signature certificate. You can do this by clicking here. The digital signature is a must in this world which is moving on the digital road. This digital signature will help you to sign various official documents electronically. Again, the page is very with the instructions, making it very easy for a common man to follow along. The screenshot will help you make sure that you are on the right page.
Step 3
In this step, you will have to check whether or not your unique name is approved by the government or not. This is one of the points which we have discussed earlier in the article. You can click here to go to the page where you can check the status of your unique name.
The interface is very simple and straightforward. When you will click the link you will find a form you will have to fill LLP name and Activity type. And on the bottom, you will have to click search and then you will be able to see the result. Below is the screenshot of what the form looks like.
Step 4
Once your LLP name has been approved by the government we can move on to the next step. In this step, we will fill the incorporation form. You can click here to directly go to the incorporation form.
On this page, you will have to click the first option which says “How can I register an Indian company” Once you click that the page will expand with more details along with a video which will describe the process in detail thus making the process very simple and easy to follow.
Private liability company.
This is the last type of company that Myntra allows to work under their platform. This is one of the most prominent type of company which people register their business as. One of the reasons for this company type is that it allows you to have funding from outside. This means that it becomes very easy for the business to gather amount for any requirements such as to develop or expand their business. This type of company also puts a limit on the liabilities of the shareholders.
Advantages.
- Liability is limited to the number of shares.
- Easy to transfer shares.
- More TAX benefits.
- Ability to issuing debentures
The registration process for LLP.
The registration process is very similar to registering LLP. There are few difference in the process. I will only mention the difference so that there is no repetition.
Step 1
The first step is to acquire the DIN or DPIN (Designated Partner Identification Number). Click here to open to government portal for the ministry of corporate affairs.
Step 2
In this step, you will have to check for your company name you can click here to directly to the page where you can check the name of the company.
Step 3
In the third step, you will have to draft MOA and AOA via previously mentioned SPICE-E form. You can click here to directly go to the page. Here MOA defines the objective of your company whereas AOA defines the rules and regulations of the said company. You should be very clear and precise while creating these two.
Step 3
The last step is to get your PAN and TAN. You can do that by clicking here.
