I would like to confirm the benefits and liabilities between a sole proprietor firm, a private limited company and other types of licensed firms such as a Corporate firm. I would like to know since my son and daughter-in-law have shown interest in taking over my firm. I am wondering whether to keep it as a sole proprietorship and give them executive authority or make it a private limited firm with a certain number of directors including my wife and myself?

Furthermore, during a friendly chat, someone informed me that the liability of a private limited firm was much lower than of a sole proprietorship firm? Can someone please elaborate?

From India, Pune
Management Consultancy

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A sole proprietary firm would render the sole proprietor to be personally liable for the liabilities of the firm. There is no distinction between the firm and the proprietor, in other words, in such cases. The alternate is to have a registered partnership as per the Partnership Act 1932 wherein the inter-se liability between the partners will be determined based on the partnership deed. There is also an option to go for Limited Liability Partnership (LLP), governed by the Limited Liability Partnership Act 2008. In an LLP, the partners have limited liability, whereas in a partnership the liability of the partners is unlimited. The third alternative is to have a company registered as per the Companies Act 2013, either as public limited company or as private limited company. It is suggested to consider Limited liability Partnership or Private Limited Company, as the liability will be limited to the share holding held by the limited share holders. For more details you can contact a Company Secretary.
From India, Mumbai

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