The document provides an overview of different business structures including sole proprietorships, partnerships, companies, and limited liability partnerships (LLPs). It discusses the key features, formation requirements, tax considerations, and common registrations for each structure. The document also provides tips for tax planning and handling cash transactions carefully to avoid penalties.

1. Mind your business!!
Presented by
CA Jayesh Baheti
www.bandsindia.com

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. www.bandsindia.com

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. THANK YOU!!!
Contact:
CA Jayesh Baheti
Baheti & Somani
Chartered Accountants
Phone: 020-2566 1440
jayesh.baheti@bandsindia.com
www.bandsindia.com