India is becoming a hub for entrepreneurs to set up their business entities. There could be many reasons behind it, one can think of, like laid-back government procedures, easy company set-up, and registrations, easy availability of the resources. But one thing the entrepreneur had to concern over the most is to decide what kind of entity he wants to set-up. There are many types of business, but one must choose it according to its potential. Let us learn various types of selection possible for entities in India:

LLP (Limited Liability Partnership)
LLP is a kind of business entity where the jurisdiction limits the liability of each member towards the business. The partners can mutually decide on the number of members the limited liability will have. The rules regarding LLP are different in different countries. In some countries, it is necessary for at least one member to have an unlimited country, whereas some countries allow each member to have limited liability.

Partnership
A partnership firm is when two or more people come together mutually for setting up a business. The liabilities of each partner is a partnership firm is unlimited. Having an unlimited liability means they will have to sell their personal property to pay off the debts. According to the Partnership Act of India, it is not necessary for a partnership firm to get itself registered. However, one should get themselves register to avoid future disputes.

Company
A company is a legal entity that the directors head, and it divides the capital into small parts called ‘shares.’ The shareholders purchase and own these shares. Legally, shareholders are the real owners of the company. Under the company law of India, a company must register itself, otherwise, it will be invalid. The procedure for registering a company can be a bit longer than other kinds of entities.

Sole proprietor
A sole proprietor is an entity which is owned and run by a single person. The capital invested is limited, but the owner’s liability is unlimited. The identity of the business is no different from that of its owner. Therefore, the owner’s property is sold off in case of debts to repay them. Also, the sole proprietors need not get themselves registered.

How to Select Which Is the Best Entity for Business?
When an entrepreneur in India is considering establishing a business, then considering only the types of business entities is not enough. Finalizing on what kind of entity you want to move forward with can a bit confusing. Also, the entity kind will go to decide the whole prospects of your business. Therefore, you need to decide it considering your resources and capital. So, we streamlined some major factors you need to consider while finalizing the type of entity you want.

Factors You Need to Consider:
1. Finance Required:
The most important aspect of a business is its capital or finances. All business operations directly depend on it. Therefore, this is the main factor to consider. Except for the company, all the other business entities require limited capital. Still, you need to manage that capital all by yourself. With a company, you need a large amount of capital. Still, if you opt for a public company, you invite for shares purchase from the public.

2. The scale of Business:
If you are going to start a small or medium-sized business, then you will need limited resources and capital. Your capital will decide the scale of your business. However, it is advised not to put all the capital altogether in the starting year. As an entrepreneur, you need to consider your personal skills, too, about how much you can handle and up to what extent.

3. Stakeholders:
Stakeholders are people who directly affect the functioning, policies, and reputation of a business entity. These include people who are directly or indirectly connected to the business like directors, employees, government, or even debtors and creditors. If your scale of business is small, it will also limit the number of stakeholders to a few heads, but as the business grows, the number of stakeholders increases.

4. The Expectation of Employees of Stock Options
Employees stock option is a kind of compensation companies provide to their employees. But unlike directly handing out stocks to them, they give them the right to buy these stocks at a specific price and during a specific time. As a newly established business, you will want your employees to work for the company’s goal. For this, ESOs work as a great way to motivate them to do the same. But then again, this too depends on you to decide whether or not you want to give this benefit.