Mind Your Business Finances, Accounting And Legal Basics For Startups In India
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www.bandsindia.com Mind your business!! Presented by CA Jayesh Baheti
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This presentation covers topics like: 1. Differences between sole proprietorship / partnership / pvt. ltd. and the new LLP. Which is appropriate in which circumstances. Licenses, costs, tax implications. 2. Understanding issues a young startup might face like: FBT, STPI registration, depreciation, PF, equity distribution 3. Tax planning, expenses and deduction.
Transcript of Mind Your Business Finances, Accounting And Legal Basics For Startups In India
www.bandsindia.com
Mind your business!!
Presented byCA Jayesh Baheti
www.bandsindia.com
Topic Summary
• Introduction to LLP
• Types of enterprises - formation & Features• How to choose which enterprise to form?
• Tax consideration• Common licenses and registrations
• STPI Registration• Handle with care!!
• Tax Planning
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Limited Liability Partnership
A hybrid between a Company and a Partnership Firm. Externally they have all features of a company and internally they are run and managed by members, hence they are like partnerships.
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LLP - Features
• At lease one partner should be an Indian resident• No requirement of AGM/BM• Partner is an agent of LLP as against agent of partners
in a partnership firm• Economic interest of the partners are assignable• Partnership agreement is not available for public
verification• Partnership firm and Company can be converted into
LLP however reverse in not possible currently• Taxation same as for partnership firms
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Formation requirements
* The costs have been estimated for an entity with a capital of Rs.1.00 Lac which is formed in the State of Maharashtra.
6000*13000*30001000Costs
8-20 Days8-20 Days4-12 days2-8 DaysTime required
�DPIN for the Partners�Name approval from ROC�Partnership Agreement
�DIN for the first directors�Name approval from ROC�MOA & AOA
Partnership deed is required
Only shop act certificate is required. The Shop Act fees vary as per number of employees.
Formation Requirement
�Minimum 2 partners & 2 designated partners�No minimum capital requirement
�Minimum 2 directors�Minimum share capital of Rs.1.00 Lac
Minimum 2 partners
One ProprietorMinimum requirements
LLPCompanyPartnership Firm
Sole proprietorshipFormation information
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Key Features
17.00%NILNILTax on profits distribution
YESYESNONOLegal Identity separate from owners
NOYESNONOSeparation of management from ownership
LimitedLimitedUnlimitedUnlimitedLiability of promoters
Lengthy legal procedure
Dissolution Deed
Winding up formalities
Not muchYESNONO Additional Annual Compliances/ Audit
No restriction
Legal restrictions
No restrictionNo restrictionLoan to/ from promoters
LLPCompanyPartnership Firm
Sole proprietorship
Features
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Consideration for the structure
• Ownership Control• Management Control• Capital/ Investment• Profits repatriation and Tax Issue• Estimated life of a business• Commercial considerations
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Tax consideration for structure
• The maximum tax saved per person by splitting the profit is Rs.0.99/1.02/1.08 Lacs.
• Dividend distribution tax is not applicable for sole proprietorship, partnership firm and LLP
• Surcharge on tax is not applicable to an individual, a firm and LLP whereas company it is applicable after Rs.100 Lacs
• Sole proprietorship is not liable to deduct TDS till it is liable for tax audit
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Incremental Tax on net profit Analysis
Company
Partnership - 4
Partnership - 3
Partnership - 2
Individual
100 + Lacs
34-100 Lacs
26-34 Lacs
17-26 Lacs
5-17 Lacs
Till 5 LacsSlabs
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Common Registrations
As applicableExcise Registration
Voluntary/ As applicableProvident Fund
Voluntary/ As applicableIEC Code
Voluntary/ As applicableService Tax
Voluntary/ As applicableVAT/ CST
Mandatory/ As applicableIncome Tax – TAN
MandatoryProfession Tax
Mandatory for existenceIncome Tax – PAN
Mandatory for existenceShop Act Certificate
When required?Registration
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STPI
How to set up?• Application STPI• Custom Bonding of premises
Benefits• Tax Exemption till FY 2010-11 (MAT Applicable
for the Companies)• Service Tax Refund• CST Refunds• Exemption on Excise or Import Duty on capital
goods
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Handle with care - Cash
�Disallowance of expenditure for payment for expenses exceeding Rs.20000
�100% Penalty on loans/ deposits taken in cash exceeding Rs.20000
�100% Penalty on loans/ deposits paid in cash exceeding Rs.20000
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Handle with care - TDS
• Non-Deduction and Non-Deposit of TDS in time shall make the expenses not deductible
• Delay in deposition of TDS attracts interest• If E-TDS return is not submitted by the
Deductor then it is very difficult to get the credit for the amount deducted from Income Tax Department
• In absence of PAN of deductee TDS to be deducted on eligible payment @ 20% irrespective of the purpose
• Quoting correct PAN is the most critical
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Tax Planning
• Make capital purchases before 30th Sep to claim depreciation for full year
• Split the profits in family and reduce average tax• Include clause of ‘salary to partners’ in partnership
agreement• Directors can take salary from the company• File your return of income always before due date• Plan advance tax and pay on time• Based on your business model choose appropriate
method of accounting – cash or mercantile (Companies have to follow mercantile method of accounting)
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THANK YOU!!!
Contact:CA Jayesh BahetiBaheti & Somani
Chartered AccountantsPhone: 020-2566 1440
