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Mint
a day ago
- Business
- Mint
One-person companies, LLPs are driving the Indian economy's formalization
NEW DELHI : India is witnessing a rise in businesses with simplified compliance requirements—such as one-person companies and limited liability partnerships (LLPs)—indicating growing formalization of the economy, according to data from the ministry of corporate affairs. In the January-May period, 6,281 'one-person companies' were formed, 26% more than the number of such flexible business ownership structures created in the year-ago period. April and May saw the number of such businesses rise by 56% and 36% year-on-year, respectively. Also Read: Investments will help India become the third-largest economy globally: Minister Gadkari These are entities owned by one individual, which, unlike sole proprietorships, have the flexibility of limited liability of a company. This simpler company format gives solo entrepreneurs the flexibility to formalize their businesses, access funds, including bank loans, and keep compliance comparatively easy. A company, on the other hand, requires a minimum of two shareholders and has to comply with more detailed regulatory requirements. In 2021, the government removed a forced conversion requirement for one-person companies to public limited or private limited companies after crossing a paid-up capital and sales-based threshold to improve their appeal and make doing business easier for start-ups. The government also reduced the residency limit for an Indian citizen to set up a one-person company from 182 days to 120 days and also allowed non-resident Indians (NRIs) to set up such structures in the country. While the Companies Act of 2013 allowed one-person companies, LLPs have existed for a longer time. These hybrids between partnerships and companies were allowed in 2008 under a dedicated LLP law. Also Read: Mint Primer: China's economy beats the gloom. Can it do more? Incorporation of LLPs saw a 27% jump in the January-June period in 2025 to 43,489 from the year-ago period. Barring February, when LLP registrations moderated, LLP incorporation so far this year has improved between 18% and 62% annually, data showed. Getting formal The rise in one-person companies and LLP registrations reflects growing formalisation and entrepreneurial activity in the country, said Ritesh Prakash Adatiya, director, NPV Insolvency Professionals Pvt. Ltd. Simplified incorporation processes, lower compliance burdens, and tax incentives have made these structures attractive, especially for solo entrepreneurs and small businesses, he said. 'Also, the rise of the gig economy and digital services has encouraged more professionals to formalize their operations. This trend supports greater economic transparency, access to finance, and job creation," he added. LLPs have become a popular business vehicle for service sector enterprises, especially start-ups, because of the flexibility allowed in the way they can be structured and the benefit of limited liability—partners' personal wealth is not at risk if the firm fails, except in cases of fraud. To be sure, entities that get incorporated either as a company, LLP or as one-person company are far fewer than those that operate as sole proprietorships and other forms of unincorporated enterprises in the country, which are major job creators and are usually referred to as the informal sector. Mint reported on 24 December, citing the statistics ministry's estimates, that the number of non-farm firms comprising proprietorships, partnerships, and self-help groups increased 12.84% to 73.4 million between October 2023 and September 2024. Also Read: Indian economy weakens in May as air travel, PV sales falter, shows Mint tracker Compared to 73.4 million unincorporated enterprises, India has 18.9 million companies, over 401,000 LLPs and over 68,000 one-person companies.
Mint
26-06-2025
- Business
- Mint
Border states see fewer company registrations in May amid geopolitical tensions
NEW DELHI : Fewer new companies were registered in the border states of Rajasthan, Punjab, Himachal Pradesh, Gujarat, and the Union Territory of Jammu and Kashmir in May, compared to the steady rise seen since the beginning of the year, data from the ministry of corporate affairs showed. Tensions were high along the Line of Control in the first half of May, when India launched Operation Sindoor against Pakistan-based terror groups in response to the Pahalgam terror attack. Armed militants killed 26 people in Kashmir on 22 April. The Operation Sindoor lasted four days before the ceasefire on 10 May. Experts, however, believe the drop in new company registrations would be a temporary blip. Also Read: Indian companies' profit puzzle: When global turmoil meets economic theory Jammu and Kashmir saw 117 company registrations in May, down from 165 in April; Rajasthan reported 923 new business registrations, down from 990; Punjab registered 323 new companies, down from 364; Gujarat reported 1,247 new company registrations, down from 1,458; and company registration dropped from 106 to 89 in Himachal Pradesh. The dip remained limited, with major state economies like Maharashtra and Uttar Pradesh still witnessing strong business registrations, though the numbers were a tad below those in April. Nationwide trend Overall company registrations remained strong at 20,718 in May, though slightly down from 23,776 in April. Company incorporation has seen a steady improvement since January 2025, when over 16,700 companies were registered. Experts pointed out that broader global economic uncertainties and normalization from the surge in registration seen in the past may have contributed to this slight dip. 'The drop in new company registrations across the border states in May appears to be a temporary phenomenon, possibly influenced by regional tensions and broader geopolitical developments at the time," said Anisha Jhunjhunwala, senior consultant-IBC at NPV Insolvency Professionals Pvt. Ltd. 'Broadly, the registration of over 20,000 new firms nationwide in the month underscores the resilience of India's entrepreneurial activity and the ongoing formalization of its economy, despite regional setbacks," she said. The services sector continued to be strong, with nearly three-fourths of all new business registrations in this sector, accounting for slightly more than half of the ₹1,176 crore paid-up capital—the amount paid by investors for the shares subscribed. Also Read: When diversification backfires: Four Indian companies walking a fine line Experts said limited liability partnerships (LLPs) are gaining more popularity among entrepreneurs. The shift suggests a growing preference for LLPs, particularly among startups and professional firms, due to their lower compliance requirements and simpler operational structures, said Subodh Dandawate, associate director-regulatory services at Nexdigm, a business and professional services company. 'The decline in company incorporations (in May) may also reflect a normalization following the spike observed in the previous fiscal year. Additionally, global economic uncertainties could be contributing to the slowdown in new company formations," said Dandawate. At the end of May, there were 1.89 million active companies in the country, with nearly 20,000 companies getting added every month. Over 10,000 companies are under liquidation. Also Read: Why some Indian companies are paying dividends despite posting losses
