Entity Selection & Incorporation

What is entity selection and incorporation?

Before you start trading, you choose a legal structure: a proprietorship, a partnership firm, an LLP, a One Person Company, or a Private Limited Company. The choice decides your personal liability, how you're taxed, whether you can raise investment, and how much compliance you'll face every year.

Incorporation is the process of registering the chosen entity — with the Registrar of Companies for companies and LLPs, or through state and tax registrations for proprietorships and firms.

The key terms

A few factors drive the decision:

Limited liability

In an LLP or company, owners' personal assets are generally protected from the business's debts. In a proprietorship or partnership, they aren't.

Separate legal entity

Companies and LLPs exist separately from their owners — they own assets, sign contracts, and continue if owners change.

Raising equity

Only companies can issue shares to investors. LLPs and firms can't take equity investment in the same way.

Compliance burden

Companies face the most annual compliance — audit, AGM, ROC filings. Proprietorships face the least.

Taxation

Proprietors are taxed at personal slab rates, firms and LLPs at 30%, and companies can opt for 22%.

SPICe+ and FiLLiP

The MCA's integrated forms for incorporating a company and an LLP, which also allot PAN, TAN, and DINs.

Name approval

Company and LLP names are reserved through RUN or as part of incorporation, and must not clash with existing names or trademarks.

Why the choice matters

Changing structure later is possible, but costs time and money:

Personal risk

Unlimited liability puts your personal assets at stake if the business can't pay its debts.

Fundraising

Investors put money into companies. Starting as the wrong entity means converting before a round.

Tax efficiency

The best structure for tax depends on profit levels and how you take money out.

Credibility

Some customers, banks, and tenders prefer or require a company or LLP.

Running costs

Company compliance costs more every year. For a small solo business, it may not be worth it.

Continuity

A company or LLP continues when owners change; a proprietorship ends with its owner.

Conversion costs

Moving between structures later involves filings, tax conditions, and re-registrations.

Who is this for?

Each structure has its own detailed page with the full incorporation process — Private Limited Company, LLP, OPC, Proprietorship, and Section 8 Company.

The main structures compared

At a glance:

What we'll need from you

Founders' details

PAN, Aadhaar or passport, photos, and contact details for every founder.

Registered office

An address with a utility bill, and a rent agreement and owner's NOC if rented.

Proposed names

Two or three names, checked against existing companies and trademarks.

Business activity

What the business will do, for the objects clause and codes.

Ownership split

Shareholding or profit-sharing between founders.

DSCs

Digital signatures for directors or designated partners — we can arrange these.

Government fees and stamp duty depend on the entity type, capital, and state.

How we help you choose and incorporate

From decision to registration:

1. 1

   Understand your plans

   We discuss your business, co-founders, funding plans, and expected profits.

2. 2

   Recommend a structure

   We compare the options for your situation, including tax and compliance costs.

3. 3

   Check the name

   Proposed names are checked against the MCA database and trademark registry.

4. 4

   Prepare documents

   Constitution documents, DSCs, and address proofs are prepared.

5. 5

   File for incorporation

   The company or LLP is incorporated through SPICe+ or FiLLiP, or registrations completed for a proprietorship.

6. 6

   Post-incorporation setup

   Bank account, GST, and other registrations follow, with a compliance calendar.

After incorporation

The first months set the pattern:

Bank account

Open a current account in the entity's name, and keep business and personal money separate.

Registrations

GST, Professional Tax, Shops & Establishments, and Udyam, as applicable.

Commencement of business

Companies file INC-20A within 180 days, after receiving share capital.

First auditor

Companies appoint their first auditor within 30 days of incorporation.

Founders' agreement

Put the founders' arrangement in writing, with vesting and IP assignment.

Compliance calendar

Diary annual filings from the first year.

Benefits and responsibilities