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  Senthil Reply

  Its very Important to select an ideal structure for your Organisation. Common ways in which we can operate the Hospitals are as 1) Proprietorship 2) Partnership 3) LLP- Limited Liability Partnership 4) Pvt Ltd Company. The type of any organisation for carrying the Business proves to be very significant as it has a great impact on the day-to-day operations. The benefits enjoyed and claimed by the both the organisations are different. The type of organization depends on the size of your practice, nature of your practice, and also the requirements of your practice. For example if you are running a small part time evening clinic, It shall be in a Proprietorship firm, but if you are running a fairly large organization it has to be either an LLP or Pvt Ltd company. The selection can be done on the basis of various factors including, few of which are enumerated below: 1) Capital Requirements- If Sole Proprietor is able to fund the organization and its working capital- then he can continue as a Prop firm, However if there is requirement for large capital from financial institutions, Investors, etc, then a Pvt Ltd company is reqd. 2) Third Party Involvement- If there is going to be involvement of third party for Investment - then ownership has to be shared- Here a Pvt Ltd company is required. 3) Share in Ownership / Liabilities- In a proprietorship the Prop is 100% owner - but in other forms- ownership and liability is limited to the number of shares held by each person. 4)Risk Factor: Where the nature of business involves higher risk factors, one shall choose Private Limited Company referring its characteristic of Separate Legal Entity. 5)Control and Management: The Proprietor of a Business has whole and sole control over the operations of the Business, the decision-maker is the Proprietor. The control of the operations of the company is with the Directors of the company, hence the owner of the Business may have to abide by the Board of Directors for decision making and involve them. 6) Tax Benefits- A Pvt Ltd company has significant tax benefits compared to Proprietorship, which is taxed at the highest slab rate of 30 Percent , A pvt Ltd company is taxed as low as 22 percent. 7) Compliances- Pvt Ltd company has more regulatory compliances to be followed both in Auditing procedures , book keeping and ROC filings. This would involve a significant cost to the organisation every year. Conclusion- If your operations are smaller- have it as a Proprietorship. If you are able to generate profits of say more than 20 lakhs a year, then better to convert it into a Pvt Ltd company. however this is not a thumb rule and individual scenarios may be different, if you are looking at a long term vision of growing your organisation better to convert to a Pvt Ltd, when you have a reasonable profit margins.

  23 July 2020 03:41 AM