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Mind your business!!

                                   Presented by
                                   CA Jayesh Baheti
...
Topic Summary
•   Introduction to LLP
•   Types of enterprises - formation & Features
•   How to choose which enterprise t...
Limited Liability Partnership
 A hybrid between a Company and a
 Partnership Firm. Externally they have all
 features of a...
LLP - Features
• At lease one partner should be an Indian resident
• No requirement of AGM/BM
• Partner is an agent of LLP...
Formation requirements
Formation           Sole proprietorship          Partnership         Company                       ...
Key Features
Features                  Sole             Partnership         Company         LLP
                          ...
Consideration for the structure

•   Ownership Control
•   Management Control
•   Capital/ Investment
•   Profits repatria...
Tax consideration for structure
• The maximum tax saved per person by splitting
  the profit is Rs.0.99/1.02/1.08 Lacs.
• ...
Incremental Tax on net profit Analysis

                  Till 5   5-17   17-26         26-34          34-100   100 +
Slab...
Common Registrations
Registration           When required?
Shop Act Certificate   Mandatory for existence
Income Tax – PAN...
STPI
How to set up?
• Application STPI
• Custom Bonding of premises
Benefits
• Tax Exemption till FY 2010-11 (MAT Applicab...
Handle with care - Cash
 Disallowance of expenditure for payment
 for expenses exceeding Rs.20000
 100% Penalty on loans/ ...
Handle with care - TDS
• Non-Deduction and Non-Deposit of TDS in time
  shall make the expenses not deductible
• Delay in ...
www.bandsindia.com
Tax Planning
• Make capital purchases before 30th Sep to claim
  depreciation for full year
• Split the profits in family ...
THANK YOU!!!
            Contact:
      CA Jayesh Baheti
        Baheti & Somani
     Chartered Accountants
     Phone: 02...
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Mind Your Business Finances, Accounting And Legal Basics For Startups In India

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.

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Mind Your Business Finances, Accounting And Legal Basics For Startups In India

  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 • 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 • 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 www.bandsindia.com
  5. 5. Formation requirements Formation Sole proprietorship Partnership Company LLP information Firm Minimum One Proprietor Minimum 2 Minimum 2 directors Minimum 2 requirements partners Minimum share partners & 2 capital of Rs.1.00 Lac designated partners No minimum capital requirement Formation Only shop act Partnership DIN for the first DPIN for the Requirement certificate is deed is directors Partners required. The Shop required Name approval from Name approval Act fees vary as ROC from ROC per number of MOA & AOA Partnership employees. Agreement Time 2-8 Days 4-12 days 8-20 Days 8-20 Days required Costs 1000 3000 13000* 6000* * The costs have been estimated for an entity with a capital of Rs.1.00 Lac which is formed in the State of Maharashtra. 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 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.0.99/1.02/1.08 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 www.bandsindia.com
  9. 9. Incremental Tax on net profit Analysis Till 5 5-17 17-26 26-34 34-100 100 + Slabs 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 2010-11 (MAT Applicable for the Companies) • Service Tax Refund • CST Refunds • Exemption on Excise or Import Duty on capital goods www.bandsindia.com
  12. 12. 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
  13. 13. 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 www.bandsindia.com
  14. 14. www.bandsindia.com
  15. 15. 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) www.bandsindia.com
  16. 16. 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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    Jan. 5, 2021

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.

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