Stepping Stones for your Start up

Presented By CA Varun Gupta

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Requirement of start ups

Types of Business forms

Sole Proprietorship

Partnership Firms

Private Limited Company

Comparison of Business forms

Requirement of start ups

Types of Business forms

Sole Proprietorship

Partnership Firms

Private Limited Company

Comparison of Business forms

Requirements of Startups

Start-Ups

Business Idea

SWOT Analysis

Funds Arrangement

Business Formation

Marketing

Customer’s Feedback

Requirement of start ups

Types of Business forms

Sole Proprietorship

Partnership Firms

Private Limited Company

Comparison of Business forms

Business Formation deciding factor of Startups FateAmongst all the requisites that lay down the foundation layer of any startup business, formation of business entity plays the pivotal role in deciding its success factor in a major way.

Business Forms

Sole

Pro

prie

tors

hip

Part

ners

hip

Firm

Com

pany

Lim

ited

Liab

ility

Pa

rtne

rshi

p

New Startups most often chose the most convenient form of business assuming it the least concerned factor for success.

Types of Business FormsSole

ProprietorshipPartnership

Firms Company

What does these terms actually mean? What are they used for?

Will I need to bother? What are the merits/ demerits of them?

How are they differentiated from each other? How can I form a firm or proprietorship or a company?

Sole Proprietorship

Technical Definitions for Sole proprietorship can be from Wiki or Google; however, in layman language- Proprietorship is a business enterprise exclusively owned, managed & controlled by single person with all responsibility, authority and risk.

Characteristics of sole proprietorship• One man show• No profit/ risk sharing • No separate legal Existence• Ease in management• Prompt decision making• Ease in formation• Unlimited Liability• Easy to dissolve

Sole Proprietorship

Merits of Proprietorship

• Motivation to Work• Flexible to adapt

market changes

• No Profit/ risk sharing

• Generates employment for others

• Easy Formation• Limited Statutory

provisions• Easy to Dissolve

• Independent Control

• One man show• Quicker Decisions

Simple Management

Simple Statutory

Compliances

FlexibleSelf Employment

De-Merits of Proprietorship

One Man Show

Lack of Specialization

Limited Finance

Lack of Stabilit

y

Unlimited Liability

Higher Uncertainity

Higher Risk

Limited Expansion

Partnership Firms

A partnership is the relationship between two or more persons who join to carry on a trade or business with the intention of profit sharing. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.Each member of such a group is known as partner and collectively known as partnership firm. These firms are governed by the Indian Partnership Act, 1932.

Characteristics of Partnership Firms• Contractual relationship• Voluntary registration• Sharing of risk & rewards • Unlimited liability• No separate legal entity• Decentralized control• Restriction on transfer of interest• Mutual Cooperation

Partnership Firms

Merits of Partnership Firm

• Self- Motivation • Flexible to adapt

market changes• Flexible

Operations

• Division of risk • Abundant Capital • Better Scope of

Expansion & Growth

• Easy Formation• Limited

Government Regulations

• Easy to Dissolve• Tax Advantage

• Qualitative Decision making

• Favorable Credit Standing

• De-centralized Controls

Collaborative Management

Simple Statutory

Compliances

FlexibleSelf Employment

De-Merits of Partnership Firm

Instability

Lack of

Specializati

on

Higher

chances of confli

ct

Lack of

Public Confidence

Unlimited Liability

Higher Uncertainity

Higher Risk

Possible misuse of

funds

Company

A Company is an artificial person created by law, having separate legal entity with perpetual succession and a common seal. A company is a juristic person (in the eyes of law it is a person). The company can sue and it can be sued. It has its own name and a separate legal entity, distinct from its members who constitute it. A company has its own property, the members (shareholders) can not claim the property of the company as their own property.

Characteristics of Company• Contractual relationship• Perpetual Existence• Sharing of risk & rewards • Limited liability• Separate legal entity• Decentralized control• Management & Ownership are separate• Business Stability• Common Seal

Company

Merits of Company

• Abundant capital• Opportunity for

Foreign Direct Investment

• Flexible Capital Structure

• Division of risk • Perpetual

Succession• Favorable Credit

Standing• Better Scope of

Expansion & Growth

• Liability limited to share capital

• Taxation • Higher Public

Confidence

• Separate Legal Entity with common seal

• Qualitative Decision making

• De-centralized Controls

Separate Legal Entity

Limited Liability

No Capital ConstraintStability

De-Merits of Company

Non Transferability

Restriction

on Share

s Transf

er

Concentrtion of economic powe

r

Limited

Membersh

ip upto 50

Statutory Compliances

Higher Statutory compliances

Higher Taxation

Rate

Mandatory Audit

Requisites for a Private Limited Company

Minimum 2 Directors

Minimum 2 Shareholders

Minimum Share capital of Rs 100,000

Registered Office

Director Identification Number (DIN) for all the directors

Digital Signature Certificate (DSC) for one of the directors

Formation of Private Limited Company

Issue of Certificate of Incorporation

Payment of ROC Fees

Filing e-forms with ROC along-with Affidavit

Drafting of MOA & AOA

Approval for Company Name

Acquire/ Register DSC

Apply for DIN

Requirement of start ups

Types of Business forms

Sole Proprietorship

Partnership Firms

Private Limited Company

Comparison of Business forms

Distinction between all Business Forms

Point of Distinction

Sole Proprietor Partnership Company

Definition Business owned by one person

An association of two or more persons carrying on business in common with profit sharing motive

An artificial person created by law with perpetual succession and a common seal.

Governed By No Governing Body

Partnership Act, 1932 The Companies Act, 1956

Ownership One person Generally between 2 to 20 partners.

Upto 50 members

Legal Entity No Separate Legal Entity

No Separate Legal Entity

Separate legal entity from its members and directors

Liability Unlimited Unlimited Limited

Continued……….

Point of Distinction

Sole Proprietor Partnership Company

Property Ownership Rights

Can own property in proprietor’s Name

Cannot own property in firm’s name

Can own property in company’s name

Statutory Compliances

Quick and easy to set up

Quick and easy to set up in comparison to Companies

Numerous formalities & statutory procedures to comply with

Profits taxed at

PersonalIncome Tax Rates

Partners’ personal Income Tax Rates

Corporate Tax Rates

Continuity in Law

Exists as long as the owner is alive and desires to continue the business

Exists subject to partnership agreement

A company has perpetual succession until wound up or struck off

Services we offer

Company Formation Services

Partnership Firms/ LLP Registrations

Tax Advisory & Compliance

Auditing Services

Company Law Services

Corporate Financing Services

Accounting Services

Business Valuation

Business Advisory Services

VAT/ Service Tax Registrations

Fixed Asset Verification

FEMA & RBI related Services

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