THINGS TO KNOW FOR BUSINESS STARTUPS
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THINGS TO KNOW FOR BUSINESS STARTUPS
As per Section 9(3) of the CGST Act, tax shall be paid on reverse charge basis by the recipient of such service. The Central Government vide Central Tax (Rate) Notification No. 13/2017 dated 28th June 2017 notified few services on which tax has to be paid on reverse charge basis. Under Entry 6 of the said Notification it is mentioned that services supplied by a director of a company or a body corporate to the said company or the body corporate (located in the taxable territory) this will fall under Reverse Charge Mechanism, i.e. the company have to pay tax on the consideration paid to director and is eligible for Input Tax Credit.
- RIGHT FORM OF BUSINESS
- RIGHT ACCOUNTANT
- RIGHT BANKER
Choosing the right form of business is like laying the groundwork. On this decision depends the entire maintenance of your business from compliance point of view. Thus, making an appropriate choice of Form of Business is inevitable.
Keeping the present scenario in mind we currently recommend the start up ventures to register themselves as private limited companies. Most of the newly startup ventures have finance as a hurdle and being a private limited company one can easily procure funds from friends or relatives by issuing them shares without loosing control over the business.
Sole proprietorship
The sole proprietorship is the simplest business form for operation. The sole proprietorship concern does not require registration as a separate legal entity but it refers to the person who owns the business (the proprietor) and hence the proprietor is personally responsible for its debts. It is easiest to form where all we need to have is to have a Trade License and get applicable local registrations wherever required. Sole proprietorship is a form of business entity where a single individual handles the entire business organization. He is the sole recipient of all profits and bearer of all loses. There is no separate law that governs sole proprietorship. When: However, after introduction of the concept of One Person Company (OPC), it is not recommended to form a proprietorship in India. Mostly suitable for retail traders, small entities having limited area of operation.
Partnership
A business organization in which two or more individuals manage and operate the business. The owners are jointly and severally liable for the debts of the business. Partnerships are easy to form. There is no minimum capital requirement. You can start your partnership with a minimum of two people. The profits and losses are shared among the partners as per pre decided ratios. This form of business requires separate registration. When: Partnerships are basically like proprietorship with only difference that it involves two or more persons. It is suitable for people who want to immediately start their business as registration of Partnership Firm is very simple and comparatively a faster process to execute. You can always change the form of business to Private Limited Company as and when you wish to!We assess your business activity and guide you on required registrations such as PAN, TAN, GST, IEC, and other regulatory compliances. You get a defined compliance roadmap from day one.
LLP: Limited Liability Partnership
In the recent times of growth, LLP i.e. Limited Liability Partnerships have gained a lot of importance. Where, at one place it gives you the benefits of Limited Liability of a Company, at the same time it also gives you the flexibility of organizing your internal structure as a Partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct. Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity. LLP form is a form of business model which enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner When: LLP enjoys the benefits of private limited company and traditional partnerships, therefore, because of increasing compliances in private limited company, it is recommended for start-ups to incorporate LLP if they are not planning to raise heavy funds in near future.