It’s already difficult for each founder/entrepreneur to already battle the demands of finding product market fit, integrating payment gateways and then eventually stumbling upon the age old tradition of establishing a business entity. Yeah, cause mostly everything is regulated.

In India it helps to setup a business entity to accept payments from internation customers through well know payement gateways like stripe, paddle, lemonsqueezy.

In India for you to start your Saas startup there are primarily 4 well know options.

1. Sole Proprietorship
2. Partnership
3. Limited Liability Company
4. Private Limited Company

Now what the heck do they even mean ?

I didn’t know much when I was starting out. However this guide is there to share my understanding of these.

This table from IndiaFilings helped me clear a lot of my own doubts

Proprietorship vs Limited Liability Partnership (LLP) vs Company

Features	Proprietorship	Partnership	LLP	Company
Definition	Unregistered type of business entity managed by one single person	A formal agreement between two or more parties to manage and operate a business	A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company.	Registered type of entity with limited liability to the owners and shareholders
Ownership	Sole Ownership	Min 2 PartnersMax 50 Partners	Designated Partners	Min 2 DirectorsMin 2 ShareholdersMax 15 DirectorsMax 200 Shareholders**For One Person Company**1 Director1 Nominee Director
Registration Time	7-9 working days
Promoter Liability	Unlimited Liability	Limited Liability
Documentation	MSMEGST Registration	Partnership Deed	LLP DeedIncorporation Certificate	MOAAOAIncorporation Certificate
Governance	-	Under Partnership Act	LLP Act, 2008	Under Companies Act,2013
Transferability	Non Transferable	Transferable if registered under ROF	Transferable
Compliance Requirements	Income tax filing if turnover is more than Rs.2.5 lakhs	ITR 5	Form 11Form 8ITR 5	ITR 6MCA filingAuditor’sappointmentKnow More

Here’s my take anyways

Sole Proprietorship

This one is when

• If you want to start out solo or an understanding co-founder
• Want to get a payement gateway setup in minimal time to get started with a GSTIN number
• Are aware of the implications that that the Saas product you sell will not cause you any legal trouble down the lane.
• Want minimal legal paperwork
• You want to file ITR if you have turnover of more than 2.5 L INR
• Don’t want VC funding from angel investors
• Want to take your product bootstrapped to the market.

If all the points check out maybe you want to check more about it here in IndiaFilings

Partnership

• When you have a partner friend willing to be 50% stakeholder in your business entity.
• Are ready to bear the documentation and paperwork to start partnership
• Ready to bear any liability or legal issues being tied to your partner and your’s name.
• Still not much interested in VC funding.

LLP (limited liability partnership)

• Pros
  • Atleast 2 partners are there
  • Want your partnership to be a separate entity (limited liability)
  • Less paperwork than company and compliances to follow
• Cons
  • Still VC not much interested to fund you
  • Don’t want much broader scope of options as provided in private limited company.

Private limited company

• Pros
  • Has scope for investors (foreign direct investments)
  • VC’s are pro towards funding a PLC
  • Want to have employees, grant ESOP’s (employee stock options)
  • Want to have shares of company
  • Can transfer company
  • Many more benefits
• Cons
  • More compliances than a LLP
  • 4 annual meetings
  • Need to invest some upfront capital (10k to 1L +)
  • Need to have audits
  • Need to appoint a registered CA
  • Need to file more than just an ITR, submit audit reports

Takeaway

For me the takeaway was having this approach.

Don’t try to solve the problems you don’t have. Keep awareness of limitations that your decision provide, but don’t let it hinder or overburden you.

So for us the right option came out to be starting with a LLP apply for payment gateway on Paddle HQ. We wil be applying for the venture entity through India fillings.

Indiehackers

When i was searching for the problem to my solutions, I came upon ”Accepting payment as a individual in SaaS app” on IndieHackers and found a solution from this guy called Sachingk to be really nice and straightforward.

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Sachingk said,

“*No payment gateway company allow you to make international transactions without a company in place*

No foreign customer pay you on your personal account. They don’t feel safe.

Here is a no cost solution

• Udyog Aadhaar to register your business in next 10 minutes without any cost.

• All you need is your aadhar card number.

• Then take that registration number to any nationalized bank , they will allow you to open a bank account

• Then use the bank account details to register for RazorPay or Stripe. ✅

What if my company don’t work Just close the bank account. That’s it.

More over your are trying to be a entrepreneur. If this idea don’t work then you will find one more to work with”

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That was really amazing to read, will be trying that over in a week.

Will post the update on how it goes 😄!

All the best entrepreneuring!

Last updated: 14th Oct, 2023