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CS Executive · Setting Up of Business, Industrial and Labour Laws · Startups and its Registration

Neha and Imran in Kochi are launching a fintech startup and expect to raise equity from venture investors and issue ESOPs soon. Which entity is generally the most suitable for this plan?

A private limited company is most suitable because it can issue equity shares and employee stock options and is the structure venture investors normally prefer. Proprietorships, partnership firms and unregistered associations cannot issue shares to raise equity capital in this manner.

  1. ASole proprietorship
  2. BRegistered partnership firm
  3. CPrivate limited companyCorrect
  4. DUnregistered association of persons

Explanation

A private limited company can issue equity shares and ESOPs and is the structure usually preferred by venture investors. A partnership firm and proprietorship cannot issue shares, and an unregistered association lacks legal standing for such fundraising.

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