{"id":67,"date":"2021-10-19T12:03:38","date_gmt":"2021-10-19T12:03:38","guid":{"rendered":"https:\/\/sgujar.com\/blog\/?p=67"},"modified":"2025-02-13T16:48:24","modified_gmt":"2025-02-13T11:18:24","slug":"understanding-benefits-and-misconceptions-of-company-formation","status":"publish","type":"post","link":"https:\/\/sgujar.com\/blog\/understanding-benefits-and-misconceptions-of-company-formation\/","title":{"rendered":"Understanding Benefits and Misconceptions of Company Formation"},"content":{"rendered":"<p style=\"font-weight: 100 !important; text-align: justify;\"><span style=\"font-style: inherit; font-weight: inherit;\">The nature of business is such that many times many disputes arise. Extensive business laws can sometimes lead to very strict penalties in such cases, even when non-compliance is inadvertent.<br \/>\nFor entrepreneurs, it is imperative to have a solid safeguard against such legal issues. Forming and registering a company is one of the best ways to achieve this.<br \/>\n<strong style=\"font-weight: 400;\">Besides,\u00a0<a style=\"font-weight: 100;\" href=\"https:\/\/sgujar.com\/start-up-services.html\">company formation<\/a>\u00a0has numerous other benefits. Let\ufffds look at some of them:<\/strong><\/span><\/p>\n<ul style=\"font-weight: 400; text-align: justify;\">\n<li style=\"list-style-type: none;\">\n<ul style=\"font-weight: 400;\">\n<li style=\"font-style: inherit; font-weight: inherit;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Limited Liability:<\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">\u00a0The concept of a \ufffdcorporate veil\ufffd is a safeguard for business owners that a registered company provides. A company by law is a \ufffdseparate entity\ufffd distinct from its owners. In case of any legal issues, an owner is only liable for any damages only to the extent of his undischarged liability. This is very robust protection against painful \ufffdunlimited personal liability\ufffd. This is one major advantage of company formation over running a business as proprietorship or partnership.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul style=\"font-weight: 400; text-align: justify;\">\n<li style=\"list-style-type: none;\">\n<ul style=\"font-weight: 400;\">\n<li style=\"font-style: inherit; font-weight: inherit;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Access to Capital:\u00a0<\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">A registered company enjoys a reputation of reliability and trust in the investing market. Hence, it has much better chances of procuring funding than an unregistered business. Company laws in India mandate a company to be registered for it to seek equity investment. Moreover, if such equity is raised from the public, the company needs to be listed on a registered stock exchange. All this entails more disclosures and close regulation of the company, thereby increasing the investors\ufffd faith in the business.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul style=\"font-weight: 400; text-align: justify;\">\n<li style=\"list-style-type: none;\">\n<ul style=\"font-weight: 400;\">\n<li style=\"font-style: inherit; font-weight: inherit;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Exit Option for Investors:<\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">\u00a0A registered company allows the transfer of shares to new buyers. This provides much-needed liquidity and exit mechanism for existing investors. Especially with public limited companies, this enables investors to allocate their funds efficiently to generate best-possible returns.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul style=\"font-weight: 400; text-align: justify;\">\n<li style=\"font-style: inherit; font-weight: inherit;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Expertise:<\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">\u00a0With a registered company, the owners can appoint separate professional managers as now owners are distinct from management. This leads to better business performance and output.<\/span><\/li>\n<\/ul>\n<p style=\"font-weight: 100 !important; text-align: justify;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Despite these many advantages, many businesses shy away from getting incorporated. Let\ufffds clear out some of the misconceptions behind this:<\/p>\n<p><\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">Tedious Compliance and Paperwork: This used to be true in the past. But now, the incorporation process has been made agile and easy. Moreover, numerous experts can get this done for you smoothly.<\/span><\/p>\n<ul style=\"font-weight: 400; text-align: justify;\">\n<li style=\"font-style: inherit; font-weight: inherit;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Incorporation is Costly:\u00a0<\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">Again, professionals now register your company at very affordable costs with online processes and increasing competition. Moreover,\u00a0<strong style=\"font-weight: 400;\"><a style=\"font-weight: 100;\" href=\"https:\/\/sgujar.com\/direct-tax-advisory-services.html\">Income Tax<\/a><\/strong>\u00a0Act allows you to amortize your pre-incorporation expenses in subsequent operation years.\n<p><\/span><\/li>\n<li style=\"font-style: inherit; font-weight: inherit;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Companies Are Taxed at Higher Rates:<\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">\u00a0This is a common misconception. Partnerships and Companies are all charged at the same 30% slab rate. Partnership are charged at 30% tax and Companies at 25% in General Category and at 18% &#8211; for manufacturing units.\n<p><\/span><\/li>\n<li style=\"font-style: inherit; font-weight: inherit;\"><strong style=\"font-weight: 400;\"><span style=\"font-style: inherit; font-weight: inherit;\">Threshold Turnover Needed:<\/span><\/strong><span style=\"font-style: inherit; font-weight: inherit;\">\u00a0Again, this is simply not true. Your business does not need to generate a minimum turnover to get registered. Company Act, 2013 has provisions for many different types of companies to allow any business size to enjoy the benefits of incorporation.<\/span><\/li>\n<\/ul>\n<p style=\"font-weight: 100 !important; text-align: justify;\"><span style=\"font-style: inherit; font-weight: inherit;\">Legal compliance is critical when you run a business. Any illegal action by your business, even if committed in innocence unintentionally, can lead to exorbitant legal costs and loss of reputation. A registered company also boosts customer confidence by convincing him of your bonafide business intent.<\/span><\/p>\n<p style=\"font-weight: 100 !important; text-align: justify;\"><span style=\"font-style: inherit; font-weight: inherit;\"><a style=\"font-weight: 100;\" href=\"https:\/\/sgujar.com\/contact-us.php\"><strong style=\"font-weight: 400;\">\u00a0For more enquiry\u00a0 get in touch with us.<\/strong><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The nature of business is such that many times many disputes arise. Extensive business laws can sometimes lead to very strict penalties in such cases, even when non-compliance is inadvertent. For entrepreneurs, it is imperative to have a solid safeguard against such legal issues. Forming and registering a company is one of the best ways [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":68,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":["post-67","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-company-formation"],"_links":{"self":[{"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/posts\/67","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/comments?post=67"}],"version-history":[{"count":1,"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/posts\/67\/revisions"}],"predecessor-version":[{"id":69,"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/posts\/67\/revisions\/69"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/media\/68"}],"wp:attachment":[{"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/media?parent=67"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/categories?post=67"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sgujar.com\/blog\/wp-json\/wp\/v2\/tags?post=67"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}