Month: March 2023

India has been recognized as one of the fastest-growing economies in the world. The Indian economy now encourages a lot of foreign direct investment in the country. This has been a major factor for MNCs to expand their territories to the Indian market.

Every business entity in India is governed by various commercial laws. Choosing the kind of entity that an entrepreneur wants to run is a crucial first step. This decision has legal and financial implications, owner liability, and a compliance burden for business.

Due to the massive and diverse market of the Indian economy, it is necessary for a variety of business entities to operate differently within the country. The business entities carry various rights and authorities based on the legal entity type it chooses.

India has the following options for business entities that can be legally incorporated;

Sole proprietorship – This is a kind of entity that is owned and run by a single owner or proprietor. This single owner is the only bearer to all profits and losses of the organization. This kind of entity fails to attract people because of the absence of vast growing capital and limited labour.
Private limited company – This is a type of company that is considered as a separate legal entity under the companies law. These companies consist of a minimum of 1 to 50 shareholders. Such companies are given a tax waiver for the first 3 years of operation seeing the growth prospect of the entity. spyhunter 4 activation email and password
Public limited company – This is an entity that is registered under the companies act which says that it is a voluntary association of people who have limited liability and offer an interest to be seen as general. The shares of a public limited company are generally vast in number and are offered to the general public.
One-person company – These are similar to a private limited company, where the business is owned and managed by a person. This concept of one person company was not allowed to incorporate as a company in the earlier companies act of 1956, but in the 2013 act, this got the license of getting incorporated.
Partnership firms– A partnership is an association of two or more people to run a lawful business in the capacity of co-workers. The members of a partnership firm are called partners and they are liable for all the debts and income of the company. The profit and loss of a partnership firm are divided on the basis of a pre-agreed ratio which is mentioned in the partnership deed.
Joint venture company – This is a business arrangement involving two or more companies to accomplish a certain task. Each participant in a joint venture is responsible for the debts and losses. Most of the time a joint venture is just a temporary arrangement till a task is accomplished.
Societies, Trusts, and other Non-government organizations – These are non-profit organizations that function independently of any government for a social purpose or need.

It is imperative for the businesses to choose the right entity type to suit the business model, future expansion plans, etc.

SMEs make up over 60 million units across India. It contributes to nearly one-quarter of India’s $3 trillion economies while employing more than 500 million workers. Many of these small businesses are now in the midst of an unprecedented financial crisis which has led to the closure of thousands of factories and shops. These cash-starved enterprises do not have adequate money to pay rent, utility bills, or bank loans. Most importantly, they lack funds to pay wages to employees and settle the creditors.

Small businesses can overcome this financial setback by taking advantage of government initiatives, digitising services to enhance customer experience, and being prepared for reduced sales and managing cash flow.

Government Aid

• Government should provide loans and interest waivers
• Make concessions for municipality taxes, power bills, water, other facilities, etc.
• They could also provide guarantees to specific sectors like agriculture, small manufacturers, etc.
• Thereby, promoting setting up new local and wider ecosystems for businesses to survive.

Co-operative unions as a Solution

• Forward and backward integration of independent business units is a critical need at this point of time. olive video editor download
• Forming a network of the entire value chain will work as an ecosystem rather than the units dying without support by working in silos.
• Businesses should take initiative to formally or informally form co-operative unions.

Digitization

As the traditional way of doing business has changed, the digital route is becoming the solution.

Businesses must adopt digital modes of business execution, marketing and client service deliveries.

Managing workforce

• The changing business structure or working hours due to the lockdown is a hindrance which needs to be tackled.
• With changing working hours, the output patterns see a change too. Distance and potability must be redefined now.
• Jobs that require travel have become redundant and digitization call for different type of resources, leading to change in workforce type.

Change in customer behavior and purchase power

• Market necessities have shifted post covid and customer expectations has changed leading to a shift in buying patterns and consumer behaviour.
• Early birds who succeed to recognise the shift in this space will surely have an advantage.
  Digitization has opened up wider alternatives for businesses leading to many pre-covid requirements becoming obsolete.

New way ahead

Support needs to come from innovative and new-age setups like fintech lenders, technology providers, channel integrators along with the government and their timely intervention policies.

The right steps and policies are crucial to ensure the survival of SMEs. Our team at Leap can help nurture a positive, resilient and sustainable future that helps in your growth and success.

Joy John is a Chartered Accountant and a Certified Information System Auditor with more than 20 years of experience in Governance, business and IT risk and controls, financial optimization, and audits. He works closely with the industry and is an expert in practical entrepreneurship.