Mind Your Business

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This presentation will help you understand what are different kind of enterprises which you can form to start your business. What are the requirements and consideration to set up any kind of enterprise.
Further it throws light on issues which can take a start-up by surprise i.e. TDS, FBT and Cash Transactions.

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Mind Your Business

  1. 1. Mind your business!! Presented by CA Jayesh Baheti www.bandsindia.com
  2. 2. 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 www.bandsindia.com
  3. 3. 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. www.bandsindia.com
  4. 4. 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. www.bandsindia.com
  5. 5. Formation requirements Formation Sole Partnership Company LLP information proprietorship Firm Minimum One Minimum 2 Minimum 2 Minimum 2 requirements Proprietor partners directors partners & 2 Minimum share designated capital of Rs.1.00 partners Lac No minimum capital requirement Formation Only shop act Partnership DIN for the first DPIN Partners Requirement certificate is deed is directors Name approval required required Name approval from ROC from ROC Partnership MOA & AOA Agreement Time required 2-8 Days 4-12 days 8-20 Days 8-20 Days Costs 1000 3000 13000 www.bandsindia.com
  6. 6. Key Features Features Sole Partnership Company LLP proprietorship Firm Loan to/ from No restriction No restriction Legal No promoters restrictions restriction FBT Not applicable Applicable Applicable Applicable Additional Annual NO NO YES Not much Compliances/ Audit Winding up formalities Dissolution Lengthy legal Deed procedure Liability of promoters Unlimited Unlimited Limited Limited Separation of NO NO YES NO management from ownership Legal Identity separate NO NO YES YES from owners Tax on profits NIL NIL 17.00% distribution www.bandsindia.com
  7. 7. Consideration for the structure • Ownership Control • Management Control • Capital/ Investment • Profits repatriation and Tax Issue • Estimated life of a business • Commercial considerations www.bandsindia.com
  8. 8. 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 www.bandsindia.com
  9. 9. Incremental Tax on net profit Analysis Till 5 5-10 10-23 23-36 36-49 49-100 100 + Slabs Lacs Lacs Lacs Lacs Lacs Lacs Lacs Individual Partnership - 2 Partnership - 3 Partnership - 4 Company www.bandsindia.com
  10. 10. Common Registrations Registration When required? Shop Act Certificate Mandatory for existence Income Tax – PAN Mandatory for existence Profession Tax Mandatory Income Tax – TAN Mandatory/ As applicable VAT/ CST Voluntary/ As applicable Service Tax Voluntary/ As applicable IEC Code Voluntary/ As applicable Provident Fund Voluntary/ As applicable Excise Registration As applicable www.bandsindia.com
  11. 11. 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 www.bandsindia.com
  12. 12. 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. www.bandsindia.com
  13. 13. 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 www.bandsindia.com
  14. 14. 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 www.bandsindia.com
  15. 15. www.bandsindia.com
  16. 16. 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) www.bandsindia.com
  17. 17. THANK YOU!!! Contact: CA Jayesh Baheti Baheti & Somani Chartered Accountants Phone: 020-2566 1440 jayesh.baheti@bandsindia.com www.bandsindia.com

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