Proprietorship and Private Limited
Here are some of the significant contrasts:
Ownership:
A proprietorship is solely owned and controlled by an individual, whereas a Private Limited Company is owned by shareholders, with the company’s management entrusted to the Board of Directors.
Liability:
In a proprietorship, the owner bears unlimited liability, implying personal responsibility for all business debts and losses. Conversely, in a Private Limited Company, shareholders’ liability is limited to the extent of their shareholding.
Legal entity:
A proprietorship is not consider a separate legal entity from its owner, implying that legally and for tax purposes, the owner and the business are treat as one. Conversely, a Private Limited Company is recognize as a distinct legal entity from its shareholders, allowing it to enter contracts, file lawsuits, own assets and liabilities independently.
Funding:
Typically, a proprietorship relies on the owner’s personal savings or loans for funding, while a Private Limited Company has the capability to raise funds from external sources such as investors, banks, and financial institutions.
Taxation:
In a proprietorship, the owner is subject to personal income tax rates. In contrast, a Private Limited Company is subject to corporate tax rates, and the shareholders are tax on the dividends they receive from the company.
Overall, while proprietorships offers a simpler and more cost-effective means to commence a business, a Private Limited Company provides greater scalability, limited liability, and the ability to secure funds from external sources.
https://www.incometax.gov.in
FAQs
1.What is a Proprietorship?
Answer: A proprietorship is a business own and run by a single individual, with no legal distinction between the owner and the business.
2. What is a Private Ltd Company?
Answer: A Private Limited Company is a separate legal entity, where ownership is divide into shares, and it limits the liability of its shareholders.
3. Who controls a Proprietorship?
Answer: The proprietor has full control over the business, making all decisions independently.
4. How is control divided in a Private Limited Company?
Answer: In a Private Limited Company, control is divided among shareholders and directors, following the company’s Articles of Association.
5. What is the liability difference between Proprietorship and Private Limited?
Answer: In a proprietorship, the owner has unlimited liability, meaning personal assets are at risk. In a Private Limited Company, liability is limited to the value of shares held.
6. How is taxation handle in a Proprietorship?
Answer: In a proprietorship, business income is tax as the individual owner’s personal income.
7. How is taxation handled in a Private Ltd Company?
Answer: A Private Limited Company is tax separately as a legal entity, and profits are subject to corporate tax.
8. Can a proprietorship raise funds easily?
Answer: No, a proprietorship has limited ability to raise funds, as it depends on the owner’s resources and personal credit.
9. Can a Private Limited Company raise funds?
Answer: Yes, a Private Limited Company can raise funds by issuing shares or borrowing from financial institutions.
10. What is the registration requirement for a Proprietorship?
Answer: A proprietorship has minimal registration requirements, often needing just local business licenses.
11. What is the registration process for a Private Ltd Company?
Answer: A Private Limited Company must be register with the Ministry of Corporate Affairs and follow specific regulations for incorporation.
Related Topics
what is sole proprietorship form of business?
What is a sole proprietor business license?
Can a sole proprietorship have multiple businesses?
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