We are setting up a new line of business. I currently have a private limited company for an ecommerce platform. The new business is in food & beverages industry with different set of partners me being common in both these ventures. Pls let me know whether it is advisable to form a separate entity for the new line of business or it can be set up under existing private ltd company entity & what are the pros & cons.
regards,
Benefits of having single company:
- Lower cost of compaliances and administrative cost
- Loss, if any, of one business will be set off against profit of other business.
- Surplus of one business can be used for other business
- Balance Sheet will have consolidated figures.
Disadvantage of single company:
- In case of any dispute among partners of one business, it may affect whole business of company
Benefit of having different companies:
- In case of change of partner for one business in future, sharing of profit in other business will not be there
Disadvantages of having two companies:
- one company cannot give loan to another company u/s 185 of Companies Act 2013
- Higher administrative cost
- Loss, if any, of one company will not be set off against profit of another company
CAclubindia
