guiguide to start a business by companiesinnde to start a business by companiesinn

8/13/2019 GuiGuide to Start a Business by CompaniesInnde to Start a Business by CompaniesInn

1/28

Guide to Setup A Business

Limited Company

Limited Liability Partnership


2/28

CompaniesInn Business Setup Services .......................... 4

Oine and Online registraon

Business Organisations: An Introduction .......................... 6

Incorporated Structures

Benets of incorporated business structures

Company form of Business ............................................... 8

Private Limited Company

Public Limited Company

Company Registraon

Concept of limited liability

Management and administraon of a Company

Compliance requirements for a company

Table of Contents


3/28

LLP form of Business ......................................................... 14

LLP Registraon

Management and administraon of an LLP

Compliance requirements for an LLP

Why LLP is a more aracve structure to do Business?

Other registrations required for Company/ LLP ..................... 18

Accounts & Audit ................................................................. 20

Taxation .............................................................................. 22

Why choose Companiesinn.com to form your company/LLP? ..... 24


4/28

01

CompaniesInn has dedicated team of professionals with vast experience in the eld of

business incorporaon in India. Our onestop soluon brings together all the external

requirements and services required in the incorporaon process under one roof. We can

help you to incorporate your company or LLP or convert an exisng business into LLP from

the comfort of your home or oce.

Our registraon process has already helped many customers in achieving quicker turnaround

mes in incorporang their business without losing quality and that too at an aordableprice. Use of standardized processes and informaon technology enables us to oer the

incorporaon service at a fee much below the usual market rates. For detailed informaon

on our service charges (inclusive of Government Fees), please visit www.companiesinn.com.

CompaniesInn Business Setup Services


5/28

5

Offline and Online registration

If you prefer facetoface interacon in the registraon process, we have oces in major

cies all over India as detailed on the back cover page. Else you can avail our services through

phone or the internet from the comfort of your home or oce.

For online incorporaon, visit our website www.companiesinn.com. Fill in the parculars

about the Company/ LLP you want to register and proceed to place the order. The well

explained steps will help you complete your order in less than 5 minutes.

For oine registraon, ll the quesonnaire given along with this booklet and deliver the

same at any of our oces.

Our dedicated professionals will complete all the formalies to get your Company or LLP

registered anywhere in India. Apart from incorporaon we can also get your LLP agreement

customized at an aordable addional charge. We can also help you to obtain your business

Tax Numbers (PAN & TAN) and other Central and State Government registraons, to complywith the various laws governing business establishments in India.

This Guide developed by our research team is to help you to decide whether the Company

or LLP structure is the right form for your business. This guide will help you to understand

the benets of Company or LLP structure, the major dierences between Companies, LLPs

and other business structures, the tax benets and the basic requirements and compliance

requirements of a company or LLP before and aer its incorporaon.

For more details you can always write to us [email protected] or contact any of the

CompaniesInn oces menoned on the back cover.


6/28

Business is a legal organisaon designed to provide goods or services in exchange of money. In

India, we have several business organisaons such as Company, Limited Liability Partnership

(LLP), Partnership Firm and Sole Proprietorship. Basically these organisaons are classied

into incorporated and unincorporated structures. Company and LLP are the incorporated

business organisaons and Partnership Firm and Sole Proprietorship are the unincorporated

structures.

Till 2009, the only limited liability business organisaon available under law in India was

the Limited Company. In order to give small and medium enterprises greater exibility in

incorporang their businesses, the Government of India has introduced a new law for the

registraon of Limited Liability Partnerships in India.

Business Organisations: An Introduction02


7/28

7

Incorporated Structures or Limited Liability

Business Organisations

Organisaons registered under law and whose members enjoy limited liability protecon tothe extent of their contribuon; are very popular forms for doing business, all over the world.

As the documents of incorporaon and annual returns of these business enes are kept

in the public domain, the outsiders dealing with these organisaons are also able to know

about the owners and their capital contribuon before entering into a transacon.

Benefits of Incorporated Business Structures

All over the world, incorporated business organisaons are popular structures for carrying

out business acvies. The main benets of these structures are given below

Personal Assets Protection

Liabilies of owners of incorporated business organisaons are limited to their agreed

contribuon. It means a shareholder of a Company or a partner in an LLP only need to

contribute his agreed share. Aer he contributes his share, he is not liable to contribute

addional amount even if the company or LLP creates further liability in its name.

Perpetual Succession

An incorporated business connues irrespecve of change in its owners. It is because, as

per the law an incorporated business is a legal person disnct from its owners. So change

in the owners will not aect the existence of an incorporated business. This is not the

case for a partnership or sole proprietorship. If a partner resigns or dies, it is the end of

the partnership rm. Same is the case of a sole proprietorship rm.

Credibility & Acceptance

Since informaon about the owners, the registered oce and capital contribuon etc are

available to public vericaon; incorporated businesses are more acceptable to generalpublic and prospecve trade partners.

Name Protection

An incorporated business is registered with a name and the same name will not be

available for registraon for any other rm.

Investment and Loan availability

Investors always prefer an incorporated business as the same is regulated under a law.

Its business scope and nancial informaon etc are available for vericaon at any me.


8/28

03 Company Form of Business

Company is an incorporated business form with the liability of its shareholders limited to the

amount of their contribuon to the share capital. A Company is managed by the Board of

Directors elected by the shareholders. In India we have two types of companies; i.e. Private

Limited and Public Limited Company. A company is a separate person under law and can hold

assets in its name, can sue and can be sued by others.


9/28

9

Private Limited Company

The main features of a Private Limited Company are;

Minimum number of shareholders required for formaon are 2 with maximum being 50

A Private company requires minimum 2 directors

Private Company can restrict the transfer of shares

Private Company cannot take deposits from public and neither can it issue shares to

public

Many of the restricve provisions of the Companies Act are not applicable to private

companies

Name of a private company should end with Private Limited

The minimum capital required for formaon is Rs.1 Lac

Public Limited Company

Usually public companies are big companies with many shareholders or owned by other

public companies. These companies are formed for pooling large resources from public,

banks and other nancial instuons. The main features of public companies are;

Minimum numbers of shareholders required to form a Public company are 7. There are

no restricons on the maximum limit.

A public company requires minimum 3 directors

All provisions of the Companies Act are applicable to these companies

Minimum capital required for the formaon of a public company is Rs.5 Lacs

A public company can issue shares aer complying with the requirements set by SEBI

(Securies and Exchange Board of India)

Company Registration

Any two persons (in the case of private company) or seven persons (in the case of public

company); by subscribing to the Memorandum of Associaon can form a Company. They also

need to comply with various provisions of the Companies Act for successful incorporaon.The process of company incorporaon is as given below,

Obtain DIN (Directors Idencaon Number) from Ministry of Corporate Aairs

Apply for a name for the company and get it alloed from the Registrar of Companies

(RoC)

Prepare the Memorandum & Arcles of Associaon of the proposed company

Apply for incorporaon with the RoC with the duly stamped Memorandum & Arcles and

other forms

Represent before the Registrar for correcon in the documents if required.

If all documents are in order, the Registrar registers these documents in his records and

issue the Cercate of Incorporaon.


10/28

Concept of Limited Liability

The concept of Limited Liability is oen misinterpreted. Limited liability means that the

personal nancial liability is limited to the extent of a xed amount that one has agreed

to invest in a company or a limited liability partnership. In other words, the investor is not

personally liable for the business debts and liabilies of the Limited Company or Limited

Liability Partnership. In the unfortunate event of winding up of the business, the investors

liability is limited to the unpaid amount of agreed contribuon by shares or otherwise. On

the contrary, the liability of sole proprietors and partners in general partnership are unlimited

and even their personal assets are exposed to pay o the business debts and other business

liabilies.

The Directors run the day to day business of a Company and are liable to comply with

the various requirements specied under law. In the case of an LLP, Designated Partner is

responsible for the legal compliances. Directors and Designated Partners are personally heldresponsible in case of any noncompliance.

Usually in a small Company, the shareholders are the Directors and in an LLP, the Partners

become designated partners. In their role as a Director or Designated partner, their liability

is unlimited, as they are exposed to penal provisions under the law for the noncompliance

of respecve regulaons.


11/28


12/28

Compliance requirements for a Company

The management of a company is vested with the Board of Directors. The Board of Directors

manages the day to day aairs of the company subject to the provisions of the Companies

Act and as per the Memorandum and Arcles of Associaon. The decisions at the meengof directors are carried by way of resoluons. There are certain decisions that require the

approval of shareholders.

The Board has to meet least once in every 3 months and at least 4 meengs shall be held in

every year. Every year, the company has to convene an Annual General Meeng (AGM) of

the shareholders for adopng the Annual accounts and the Appointment of auditors for the

following year. As per the Company Law, minutes of the Board and General Meengs should

be kept in the company records and the same need to be signed by the Chairman of the

meengs.

Every company having a paid up capital of Rs.5 Crore or more shall appoint a whole me

Company Secretary and every company having a paidup share capital of Rs.10 Lacs to Rs.5

Crore shall obtain the Secretarial Compliance Cercate from a Company Secretary in whole

me pracce. The same also need to be led with the Registrar of Companies.

Compliance mechanism under Companies Act mandates ling of Returns / Forms to Registrar

of Companies (RoC) within prescribed me limits. Compliance related ling of returns /documents with the oce of RoC can be broadly classied into two categories;

A. Annual Statutory Compliances

B. Event Based Compliances

Annual Statutory Compliances

Filing of Annual Accounts:

Every company has to prepare nancial accounts consisng of Balance Sheet and Prot

and Loss account on a yearly basis and the same has to be placed before the AnnualGeneral Meeng of the company. Copy of the Annual Accounts duly audited by a

Chartered Accountant has to be led with the Registrar of Companies.

Filing of Annual Return:

Every year a company shall le a return with the Registrar of Companies within 60 days

of AGM containing the parculars such as address of registered oce, register of its

members, register of its debenture holders, shares and debentures, indebtedness,

members and debenture holders past and present, and directors and managing directors

past and present.

12


13/28

Event Based Compliances

Event Based Compliances The following are few instances that require a ling of documents

with the Registrar of Companies.

1. Change of Name of the Company

2. Increase in Authorised Capital / Issue of Shares

3. Creaon / Modicaon / Sasfacon of Charges on the Assets of Company

4. Change in Registered Oce of the company

5. Statutory Meeng of a Public Limited Company

6. Resoluons passed by the Board / General Meengs and Agreements entered by the

company

7. Appointment of Directors / Managing Director and changes among them

Minutes / Registers / Records and Common SealA company is required to maintain and preserve a set of records as required under Companies

Act as follows:

1. Statutory Registers such as Register of Members, Register of Directors, Register of

Directors Shareholding, Register of Charges etc.

2. Share Cercate

3. Minutes Book

4. Common Seal

13


14/28

04 LLP form of Business

Limited Liability Partnership or LLP is a limited liability organisaon (body corporate) like

Limited Company. The major dierence of it from company is in its management and

administraon. LLP is managed like a partnership rm based on the terms and condions

detailed in the LLP agreement, giving partners the freedom to manage their business with

minimum outside interference. It also gives more exibility as external compliances are less

compared to a company. LLP can be formed by individuals and body corporate (Company,

LLP or other limited liability organisaons). Though LLP is a new concept in India, this type of

organisaon is very popular all over the world. In USA and Middle East countries, this type of

business (known as LLC) stared funconing as early as year 1977.


15/28

LLP Registration

An LLP can be formed by two persons (natural or legal persons) by subscribing to the

incorporaon document aer complying with other legal requirements. The process of

registraon is given below;

1. Obtain Director Idencaon Number (DIN) For Each Designated Partners

(Minimum Two)

2. Apply for a name for the LLP

3. File Executed Incorporaon Document

4. If all documents are in order, Registrar registers these documents in his records and

issues the Cercate of Incorporaon.

5. Finalise LLP Agreement

6. Aer ling the other forms and agreement with the Registrar, the LLP can start its

operaon.

Management and administration of LLP

Management of an LLP is done by the partners subject to LLP agreement. Unlike company,

they have the freedom to manage the LLP and can delegate powers to any parcular partner.

It is advisable for an LLP to take all decision in their meeng or by wrien consent.

LLP is a legal enty created by law and thus is disnct from its partners. It is required to

keep a separate bank account for all its business transacons. All payments and receipts

shall be in the name of the LLP. An LLP needs to keep proper books of accounts for recording

business transacons. It is also advisable to keep records of major business decisions taken

by partners, either in the form of minutes or in the form of wrien consent.

Compliance requirements for LLP

Compliance mechanism under LLP Act mandates to le Returns / Forms to Ministry of

Corporate Aairs (MCA) within prescribed me limits. Compliance related to ling of returns

/ documents can be broadly classied into two categories,1. Annual Statutory Compliances

2. Event Based Compliances

Annual Statutory Compliances

Filing of Annual Return:

Every LLP that is registered before Sept 30th of a year shall le a return with the Registrar

of LLP within 60 days of closure of its nancial year containing the parculars such as

address of registered oce, details of partners, designated partners etc.

15


16/28

Filing of Annual Accounts.

Every LLP has to le a Statement of Accounts and Solvency with the Registrar of LLP

within 30 days from the end of six months of the nancial year.

Event Based Compliances

Following are the few instances that require lling of documents with the registrar of LLP

1. Change in the LLP Agreement

2. Change in the Name of the LLP

3. Change in Registered oce address of the LLP

4. Admission of Partners

5. Resignaon/ Death etc of Partners

Why LLP is a more attractive structure to do Business?

The main benets of LLP form are;

Limited liability protection

Liabilies of Partners In An LLP is limited to the agreed contribuon. If X is a partner

in XYZ LLP and if X agreed to contribute Rs 10000 into the capital of LLP, his liability is

limited to Rs.10000. He is not personally responsible for the liabilies of XYZ LLP. So doing

business through LLP structure provides safety to his personal assets as the liability of LLP

shall not be extended to his personal properes.

Efficient tax saving business form:

In the eyes of tax laws, LLP is a rm and hence rm taxaon is applicable to LLP. Various

taxes levied on a Company like Dividend Distribuon tax and surcharges are not applicable

to an LLP. The prot aer tax from LLPs operaon will be reected in the personal income

of partners. It is esmated that the approximate tax savings of an LLP will be around 17%

compared to that of a company.

Management:

In companies, the management is vested with its Board of Directors. They are responsible

for taking the day to day decisions and management of a company. Shareholders have

limited powers in the aairs of a company. In LLP, management of LLP is vested with

partners unless specically menoned in the LLP agreement. It is possible for an LLP to

delegate all powers of management to a single person except compliance requirements

under the LLP act, which are the responsibilies of Designated Partners.

16


17/28

Less compliance requirements:

Compared to a company, the legal compliance requirements are lesser for LLPs. For a

company, it is mandatory to maintain various registers, minutes etc, but there is no such

requirement for an LLP.

Audit of accounts:

All companies are required to appoint a Chartered Accountant as auditors for auding

accounts, irrespecve of the size and operaon of the company. In case of an LLP, the

audit requirement starts only if the turnover exceeds Rs.40 Lacs or contribuon exceeds

Rs.25 Lacs.

Less cost of maintenance:Statutory ling fees payable by an LLP are much less compared to a company. So even

small business can think of incorporang their rm as running cost are very low.

Flexible ownership:

It is possible for a partner in an LLP to resign subject to the terms of LLP agreement. Aer

resignaon, usually the partner can take back his share of contribuon from the LLP.

Management flexibility:

LLP is free to take any business decisions subject to the LLP agreement. It can enterinto a contract with its partner or relaves of partners and borrow and make loans

to outsiders. But in a company structure, many of these decisions need either the

permission of the shareholders or approval of government authories, for which the

process is cumbersome.

No ownership restrictions:

In a private company, the number of shareholders is limited to 50. There is no such

restricon in the case of an LLP. An LLP can have any number of partners and thus can

secure more capital for its business operaons.

Greater credibility:

By virtue of being a registered enty under Government laws, registering your business

as an LLP, will gain your business beer legimacy and greater credibility when dealing

with other companies, banks and potenal business partners.

17


18/28

05

Based on the nature of its business, a company or LLP need to take several other registraons

and comply with respecve laws of the Central and State Governments.

Other Registrations Required for a Company/LLP


19/28

Permanent Account Number (PAN).This is a unique number issued by Income Tax department for tax ling. This number is

mandatory for all incorporated business.

Tax Account Number (TAN)

This number is issued by Income tax department for ling Tax Deducted at Source (TDS).

Many of the transacons require deducon at source and this number is required for

proper compliance.

Service Tax RegistrationIf the company/LLP provides taxable services, and if the taxable turnover exceeds

Rs 10 lacs, collecon of service tax is compulsory. Such service providers need to register

and obtain Service Tax Registraon.

Value Added Tax (VAT)

Value Added Tax and Central Sales tax registraon is compulsory for companies/LLPs

dealing in taxable goods. It is a state maer and if the companies/LLPs operate locally in

dierent states, separate registraons are required for each state.

Import Export Code (IEC)

Import and Export Code number is compulsory for the companies/LLPs planning for

import and export of goods.

Shop & Establishment Registration

All the oces of a company or LLP has to be registered with the local labour authories

under the relevant shops and establishment Regulaons. Generally this registraon is

required to be done within 30 days of opening the respecve oces.

19


20/28

06 Accounts & Audit

Accounng is the lifeblood of any company or LLP as business decisions are made based

on accounng informaon. Company and LLP law mandates keeping books of accounts and

records in accordance with the Indian accounng standards. These requirements ensure

systemac presentaon of accounts, public disclosure and fulll taxaon requirements.


21/28

20

Company: Accounts & Audit

Every company needs to keep its books of accounts with all supporng documents at theregistered oce of the company. The books kept shall be closed at the end of nancial year

and a prot and loss account and balance sheet shall be prepared.

Aer closing of accounts, the books and documents need to be audited and shall be led

with the Registrar of Companies. The requirement of audit is applicable to all companies

irrespecve of size and turnover.

LLP: Accounts & Audit

Like company, an LLP also need to keep the books of accounts and papers at its registered

oce. An LLP is required to close its accounts on 31st March every year. The auding of

accounts is only applicable if the turnover of the LLP exceeds Rs.40 Lacs or if the contribuon

exceeds Rs.25 Lacs. The accounts prepared every year shall be led with Registrar on or

before 30th October of that year.


22/28

07

The taxaon requirements spulated under law is dierent for a Company and an LLP. Fewbrief points regarding the major dierences are explained in the paragraphs below.

Taxation


23/28

For Company

Every company need to pay income tax on prot and surcharges if applicable. The prot

aer tax can be used to declare dividend to shareholders aer paying the dividend

distribuon tax. In simple terms, the company is liable to pay tax on prot and again on

prot distributed to shareholders.

For LLP

Income of an LLP, aer meeng the business expenses and partners remuneraon is

taxed at such rates as applicable for each nancial year. The prot aer tax belongs to

partners and the same is tax free in the hands of partners. Various tax levied on company

like Dividend distribuon Tax and surcharges are not applicable to an LLP.

Compliance requirements under Tax law

The compliance requirements under tax laws encompass both the regular payment of

tax on the earnings and ling the necessary records with the tax authories as per the

prescribed nocaons every year.

Annual tax Return filing

The Company or LLP has to le Income Tax return to the Income Tax authories every

year. The meline for ling the return is July 31st(incase where tax audit is not required)

and September 30th(incase where tax audit is required)

Tax Deducted at source (TDS)

If any Company or LLP makes any payments which requires tax deducons, the same

shall be deducted and paid to the Government. The company or LLP is also required to

le returns regarding deducons.

Advance tax paymentsThe company and LLP shall forecast its tax liability based on its income forecasted and

pay the tax to the government in periodic intervals.

Indirect Tax

Based on the nature of its business, a company or LLP is required to pay various indirect

taxes. For service industries this is in the form of service tax and for product based

industries this is the form of central excise and Value Added Tax.

23


24/28

08

CompaniesInn through its experienced business setup services and incorporaon consulng

professionals has advised over 5000 companies and LLPs in the last 3 years in seng up

of their businesses. Our vast experience in the legal domain coupled with the eecve use

of informaon technology ensures the mely delivery of services with high professional

standards at an aordable price. This new method of company/LLP incorporaon evolved

by our research team helps an entrepreneur to navigate easily through the various steps

required by law. The following factors contribute to our excellent and highly acclaimed

incorporaon and compliance services:.

Experienced team:

Our experienced team have the experse to handle any assignment for seng up a

Company/ LLP in India. This includes incorporaon of a new enterprise or converng anexisng business (i.e. sole proprietorship, partnership etc) into a Company/ LLP.

Why choose Companiesinn.com to form yourCompany/LLP?


25/28

Low cost:

CompaniesInn business setup services are priced aracvely to meet the requirements

of entrepreneurs and business start ups . Use of standardised processes and informaon

technology enables us to provide the service at compeve costs, oen at the rates

charged by others. Moreover our prices are predened with no hidden charges. The

online price calculator allows you to get itemised service charges including the standard

Government fee.

All services available under one roof:

To comply with the various laws governing business establishments in India, a Company

or LLP needs to apply for PAN and TAN Numbers (Income Tax Dept.), Shops/ Establishment

Registraon (Dept. of Labour), Service Tax (Central Excise Dept.), VAT (State Commercial

Tax Dept.) etc depending on the nature of its acvity. We can help you to obtain all these

cercates so that you can focus your me and energies on operang the business which

otherwise might be ill spent in followups with various Government departments.

Continued support:

Our associate rm CN Partners Consultants LLP has experience in corporate law

compliance and will ensure mely compliance of your Company/LLPs legal requirements

at an aordable price.

Tax compliance and accounting services:

Our sister concern CN Business Solutons LLP, is a book keeping and tax law compliance

rm. This rm can help you maintain your Company/ LLPs accounts and le the variousreturns as required under law at an aordable charge.

Companiesinn Help Desk:

Running a business as company or LLP need professional help and advise, to cater this

we have our helpdesk for all our clients. Aer incorporaon, you can call any me during

business hours or mail to [email protected] any help or assistance.

CompaniesInn is the ideal partner for your business incorporaon and regulatory

compliance services. When youre ready to form your Company/LLP, visit us online at

www.companiesInn.com. Fill in the parculars about the Company/LLP you want to

register and proceed to complete your order. Alternavely call us at any of the any of the

CompaniesInn IncorporatonKiosk menoned on the back page to incorporate your

Company/LLP.

Aer reading this booklet, if any of your doubts regarding Company or LLP incorporaon

remain unanswered; call us or mail to [email protected]. We would be delighted to

provide any addional informaon regarding business incorporaon in India.

25


26/28

NOTES:

Help Desk:+91 80 3025 5900

Email: [email protected]


27/28

NOTES:

Help Desk:+91 80 3025 5900

Email: [email protected]


28/28

delhi

bangalore

mumbai

chennai

kochi

CompaniesInn.com LLP#48, 100Ft Road, Opp to Kendriya Sadan, Koramangala, Bangalore - 560034

Phone: +91 80 3025 5900Email: [email protected]:www.companiesinn.com

hyderabad

pune

guiguide to start a business by companiesinnde to start a business by companiesinn

Documents