Choosing the right type of business set-up is a crucial step as each business model has its own merits & demerits.
- Proprietorship:- Simplest of all business models with less or no legal formalities. It is flexible.
However, Sole Proprietor will be solely and legally responsible for any for any fraud that may occur during the course of business. Risk levels are extremely high.
Tax liability might be very high as income earned from the sole proprietorship business is clubbed with proprietor's personal income.
Sole Proprietorship is ideal for setting-up a small business if improvement of business will take 3-5 years.. - Company:- Company can be formed by individuals, or by a corporate body (promoters), as prescribed by Companies Act, 1956. It can be Public, Private or non-Profit Company.
Private Ltd. Company can invite deposits and its shares are non-transferable whereas Public Limited Company can transfer its securities and has to fully comply with the provisions of The Companies Act 1956.
Promoters who wish to set-up a Public Limited Company should register all documents relating formation of the company with Registrar of Companies (ROC) along with a registration fee which depends upon the capital of the company.
Setting up a Public Limited company is a complex process.. - Franchise Business:- Franchise Business involves two parties, the Franchiser & the
Franchisee.
Franchiser Provides business know-how, training, system and his brand for marketing. Franchisee is fully responsible for managing and expanding franchiser's business.
Franchisees should be optimistic and be realistic about their financial capacity to invest in to Franchise's business. There is a very little scope for innovation because of its business structure nature.
The investment for Franchise might start from Rs.5 Lac which will include franchise fee, refundable security deposit, setting up infrastructure, employees' wages. The franchisee will have to shell out a royalty ranging from 5-30 percent. Roytal is an important aspect of a franchise model as it has an impact on the profits franchisee earns.
Before starting a Franchise Business, Franchisee should keep in mind the following:- (i) he has to visit as many as franchisers to know about each business model and choose the best among them. (ii) he should not skip the Franchise Consultants often which might to confusion in selecting the franchiser & (iii) he should have thorough analysis of franchiser's previous performance and record. - Trust:- Forming a trust is not a complicated process. A trust is created by a majority of its shareholders for the management of its assets and business for its benefits.
Trust Deed which enlists the terms and conditions on which the trust should function and also the powers and duties of the trustees.
The main advantage of trust is that even if the family or private business incurs losses, the assets put in the trust will be safe.
Most important part of trust is that, company should choose right type of trustees, failing which, the very purpose of setting up a trust will be defeated. And the company cannot pull out any assets put in to the trust.