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Mind your business!!
Presented byCA Jayesh Baheti
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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• Fringe Benefit Tax (FBT)• 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
• Can form LLP from 1-Apr-2009• 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.
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Formation requirements
1300030001000Costs
8-20 Days8-20 Days4-12 days2-8 DaysTime required
�DPIN 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
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 Proprietor
Minimum requirements
LLPCompanyPartnership Firm
Sole proprietorship
Formation 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
ApplicableApplicableApplicableNot applicableFBT
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.0.98/1.01/1.06 Lacs.
• Dividend distribution tax is not applicable for sole proprietorship and partnership firm
• Surcharge is applicable to an individual on income above Rs.10 Lacs whereas to firm and company it is applicable after Rs.100 Lacs
• Due to surcharge a sole proprietorship shall pay extra tax of 3.09% in the range of income Rs.41-100 Lacs
• FBT is not applicable to sole proprietorship• 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
49-100 Lacs
36-49 Lacs
23-36 Lacs
10-23 Lacs
5-10 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 2009-10 (MAT Applicable
for the Companies)• Service Tax Refund• CST Refunds• Exemption on Excise or Import Duty on capital
goods
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Fringe Benefit Tax - FBT
• Not applicable to sole proprietorship• Must have employees in India• Fringe Benefit
> Value of Fringe Benefit e.g. ESOPs, concessional travel etc. > Deemed value of fringe benefit e.g. entertainment, sales promotion, staff welfare, conveyance, telephone, tour and travel etc.
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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
• 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/ FBT and pay on time• Accelerated depreciation on commercial vehicles
purchased during 1st Jan till 31st Mar 2009• 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
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