Tuesday 15 December 2015

Why your Startup should be an LLP (Limited Liability Partnership) - Incorporation of company in India



A Limited Liability Partnership (LLP) is a Partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from that of an unlimited partnership. In an LLP, some partners have a form of limited liability similar to that of the shareholders of a corporation. In some countries, an LLP must also have a form of limited liability similar to that of the shareholders of a corporation. In some countries, an LLP must also have at least one "General Partner" with unlimited liability. 

Salient features of an LLP 

An LLP is a body corporate and legal entity separate from its partners. It has perpetual succession. 

Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners. 

Every Limited Liability Partnership shall use the words "Limited Liability Partnership" or its acronym "LLP" as the last words of its name. 

Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India and all the partners shall be the agent of the Limited Liability Partnership but not of other partners. 

Need for LLP 

For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. The Limited Liability Partnership format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm. 

This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular. Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals. An LLP is similar in some ways to a standard Partnership, except that the individual members have lower liabilities to any debts which may arise from running the business. There are more administrative duties involved compared to the Partnership business structure. 

In fact, an LLP is more similar to operating a Limited Company. In terms of liability, the Limited Liability Partnership is itself liable for debts run up in running the business, rather that the individual members of the LLP. As a result, LLP's are only recommended for profit running businesses. The rights and responsibilities of all members would usually be laid out in a "Deed of Partnership". The LLP would typically select a "Designated Member" who would be responsible for maintaining communications with Companies House, preparing accounts and acting for the LLP if for some reason it is dissolved further down the line. 

For company Laws and company incorporation visit link  Company Incorporation in India



Sunday 29 November 2015

Tax implications of setting up overseas subsidiaries - subsidiary company in India

There is a rising trend that many start-ups incorporate their ultimate holding companies abroad, especially in Singapore for various reasons with tax being one of the top 3 factors for such decisions. 

Some of them have restructured the holding structures after few months of direct Indian holding to accommodate requests from investors and VCs. Apart from ease of regulatory environment in the case of overseas companies, the tax implications in such scenarios could be a grey area and potentially a serious cause of concern if not managed amicably. 

A typical overseas structure could be:





Let's now try and understand the tax implications of the above mentioned typical structure: 

- Capital gains on sale of shares of Singapore Holding Company (SHC): This seems to be one of the biggest reasons for such a structure especially where the funds investing are registered overseas. In the case of Singapore, Mauritius, Dubai or similar jurisdictions, there is no domestic tax on capital gains hence the shareholders may not be subject to tax on sale of shares in SHC. 
However consequent to recent amendments in Income tax law, if SHC derives more than 50% of its value from assets in India and that the sale value exceeds Rs. 10 crores, then proportionate capital gains shall still be subject to tax in India irrespective of domestic tax laws in the country of incorporation of SHC. 

The case for concern in this scenario is the conflict of interpretation between Double Taxation Avoidance Agreements (DTAA) and Income tax law - since as per DTAA this transaction would continue to be taxed only in Singapore (where capital gains is taxed @ 0%) and as far as Indian laws are concerned, DTAA always prevails over domestic taxation laws. 


- Royalty income of SHC: Royalty earned and received by SHC from Indian Selling Company (ISC) would be subject to withholding taxes in India @ 10% provided: 

o Tax residency certificates (TRC) of SHC is made available to ISC and o SHC has an Indian PAN 

Where one or both the above conditions are not fulfilled the withholding tax rates could be anywhere between 20-40%. 

Applicability of Transfer Pricing Rules: Any transaction with an Indian entity with its related person overseas shall fall within the ambit of transfer pricing rules. Accordingly all the transactions which are subject to transfer pricing shall be made at fair market values (technically known as arm's length price [ALP]). 

Hence royalties paid by ISC and software development charges received by ISD shall be subject to transfer pricing. Detailed commercial contracts and invoices need to be prepared for these transactions. There are elaborate rules and regulations provided for determining alp which need to be adhered. Non-compliance could lead to serious penalties and tax levies. It is noteworthy to mention that India is one of the popular jurisdictions globally for high value transfer pricing litigations.

- Taxability of Dividends distributed by ISC and ISD: Indian companies are subject to corporate tax @ 30% plus surcharge (7/12%) and cess @ 3% depending on their income levels. Post tax profits, when distributed are subject to 15% distribution plus surcharge and cess. However dividends distributed by ISC and ISD to SHC are not subject to any further tax in India since dividends from Indian companies are fully exempt in India. 

For more information on tax implications You can consult any tax consultancy in Mumbai. They provide support from Company registration to filing e-returns. For company Laws and company incorporation visit link Company Incorporation in India steps






Wednesday 18 November 2015

Income Tax Department on Twitter - Company registration India


Income Tax Department launched its official handle on Twitter in order to make assure that all taxpayers remain updated regarding all activities of Income Tax Department. The handle is “incometaxindia_”.
"Follow us to stay updated on the latest taxpayer services," the first tweet by the department said.
Tax payers can access online all tax services at https://incometaxindiaefiling.gov.in.
The income tax department functions under the Central Board of Direct Taxes(CBDT) under the order of Union Finance Ministry.
For more information regarding payment of taxes you can consult these Chartered Accountant Firms.

For more info on income tax and company in corporation visit Company Formation of India

Sunday 26 July 2015

Procedure of Opening / Setup Subsidiary Company in India





In recent past Government of India has opened its doors for international companies to open their subsidiary company in India or branch in India. This move was highly welcomed by international business community and hence many international brand have started their subsidiary companies or branches in India.




Companies / Business having operations in countries other than India can set up wholly-owned subsidiary in India under those sectors where in 100% foreign direct investment is permitted under the Foreign Direct Investment Policy issued by Government of India. A foreign company or business can start their wholly-owned subsidiary in India may be either of the following business / company types like : Private Limited Company, Public Limited Company, Unlimited Company and under Sole Proprietorship. International business groups / companies can also set up their operations in India through the business entities: Liaison Office/Representative Office, Project Office, Branch Office. These companies have to register their subsidiary companies with Registrar of Companies which can undertake any permitted business activities.







It is vital to choose the right kind of business consultant who have expertise in starting a subsidiary company in india which best suits its purposes and takes care of liability issues and tax planning issues. We Signs and Marks having years of professional experience in providing assistace to Foreign Direct Investors can help you to starting or setting up your subsidiary company in India.

Foreign direct investors who are planning in setting up a subsidiary company or office in India are required to seek approvals from Government of India before investing in India. Our expert team can help in getting those approvals and perform those much need liasions and paper work in limited period of time.

With regard to Foreign Direct Investment in India we can provide professional assistance in How to form Subsidiary in India, Opening Branch in India, How to Incorporate in India, Forming Company in India, Incorporating in India, Forming Subsidiary in India, Starting Business in India, Types of Companies in India, Business Entities in India, Procedure for Formation of Company India, Forming Corporation in India, Forming Private Limited Company in India.















Monday 20 July 2015

Procedure for Limited Company Name Change

The name of a private limited company may have to be changed for a number of reasons including change of objective of the business, change of management, rebranding, etc., The name of a private limited company can be changed at anytime with the approval of the shareholders and Ministry of Corporate Affairs (MCA). In this article, we look at the procedure for private limited company name change.

Private Limited Company Name Change

The name adopted by a private limited company during incorporation can be changed later. To change the name of a private limited company, the consent of the shareholders through a special resolution and MCA approval are required. The change of name of a private limited company has no impact on its legal entity or its existence as a corporate entity. The change of name of a company will not create a new company or new entity. Therefore, the change of company name shall NOT:
1.  Affect any rights or obligations of the company
 2.. Render defective any legal proceedings by or against the company
3. Not affect any legal proceedings by or against the company and pending in the old name; they may continue in the old name.

Step 1: Board Resolution

A Board meeting must be convened to pass a resolution for change of name of the company and to authorize a Director or Company Secretary to make an application to the MCA for ascertaining availability of proposed name. At the same Board meeting, a resolution to convene an extraordinary general meeting for changing the name of the company, and altering the Memorandum of Association and Articles of Association can also be passed.

 

Step 2: Check Company Name Availability

Once a resolution is passed ascertaining availability of proposed company name, the authorized person can make a name application to the MCA. The procedure for name application is similar to that of the name application procedure followed during Company Incorporation in India. Therefore, the name must be as per the Companies Act 2013 Naming Guidelines.

 

Step 3: Pass Special Resolution for Company Name Change

Once a name is approved by the MCA, the Company must conduct an extraordinary general meeting and pass a special resolution for change of company name, and consequential changes to the Memorandum of Association and Articles of Association.

Step 4: Application for approval of Company Name Change

Once the special resolution for change of company name is passed, the special resolution and application for approval of company name change must be filed with the Registrar of Companies. An application for company name change must be made in Form 1B along with the requisite fee.

Step 5: Issuance of New Certificate of Incorporation

If the Registrar of Companies is satisfied with the company name change application, the Registrar would issue a new certificate of incorporation. It is important to note that the company name change is said to be complete and effective on issuance of new incorporation certificate by the Registrar of Companies.

Step 6: Make Changes to MOA and AOA

Subsequent to the issuance of the new incorporation certificate, steps must be taken to incorporate the new company name in all the copies of Memorandum of Association, Articles of Association and Certificate of Incorporation issued by the Registrar.



Thursday 16 July 2015

New Simplified Process of Incorporation of Company in India


Applicable Sections governing INC-29 : 4, 7, 12, 152 and 153 of the Companies Act, 2013 along with relevant rules

The Government of India has notified on 1st May 2015, a new system of incorporation of Private or Public limited company. It has introduced easy method of incorporating a company without waiting for making name application for reservation of name by the Registrar of Companies (RoC). It is possible now by filing e-form INC-29 (single form) with the Registrar of Companies, within whose jurisdiction the registered office of the company is proposed to be situated.
In this article, i would like to mention only the Key Points and the attachments to forms for this new system and not the complete procedure.  Reader comments are most welcome as always!!
Main points of new form INC-29
1.       No need to apply for DIN of 2’nd director
2.      Particulars of maximum three directors can be filed
3.      No need to apply for name application (filing of INC-1) separately
4.      The promoter or applicant can propose only one name hence name search of proposed name shall be taken very carefully on MCA site and trade mark site, to avoid rejection or re-submission of e-form. Only one chance will be given for re- submission of form.
5.       No need to file forms 7 (incorporation), DIR-12 (appointment of first directors of proposed company) and INC-22 situation of registered office of company.
6.      In case Directors/Shareholders have DIN(Director IdentificationNumber), then no need to attach separate address proof/ID proof.
7.       Registration fees Rupees 2000 with additional fees depending upon the capital of the company.
8.      The Promoter or applicant may prepare Memorandum of Association (MoA) as per template in Form 30 and Articles of Association (AoA) as per template in form 31.
8.      All attachments/declaration/proof will be required for Form No.29.
8.      Two re-submissions will be permitted. The Registrar of Companies shall give intimation to the applicant to remove the defects and resubmit the form within 15 days from the date of intimation by Registrar of Companies.
8.      Re-submission requires changes in affidavit or declaration including MoA/AoA, hence applicant or promoter should take utmost care.
8.      The form shall be scrutinized by the Registrar of Companies and will not be approved through Straight Through Process (i.e. STP).
8.      The facility to file INC-29 is optional. One can follow the procedure of application for DIN, DSC, name application (INC-1) and INC-7, DIR-12 and INC-22.
8.      The Certificate of incorporation shall be issued in INC-11.
8.      Facility for using ‘integrated form’ is not available for incorporating Section 8 companies.
Attachments or documents to e-form INC-29
1.       Memorandum of Association
2.      Articles of Association
3.      Affidavit and declaration by first subscriber(s) and director(s)
4.      Proof of office address
5.       Copies of utility bills that are not older than two months.
6.      Approval of the owner of the trademark or the applicant of such trademark for registration of Trademark (If the proposed name is based on a registered trademark or is subject matter of an application pending for registration under the Trade Marks Act)
7.       Proof of relation of the relative with promoter (If the name of the proposed company includes the name of relative(s) of the promoter)
8.      NOC from the sole proprietor/ partners/other associates/ existing company (If the promoters are carrying on any Partnership firm, sole proprietary or unregistered entity in the name as applied for)
9.      NOC from any other person (In case the proposed name contains name of any person other than the promoter(s) or their close blood relative(s)
10.   Copy of certificate of incorporation of the foreign body corporate and resolution passed (If any subscriber to the proposed company is Foreign company and/or subsidiarycompany in India) Note: It is optional to attach Copy of certificate of incorporation, in case the subscriber to the proposed company is a Body Corporate.
11.    Resolution passed by promoter of company if any subscriber to the proposed company is a Company itself.
12.   A certified true copy of No objection certificate by way of board resolution (In case the name is similar to any existing company, then it is mandatory to attach)
13.   Interest of first director(s) in entities (In case any of the director has any interest in the proposed company)
In case of an OPC, it is mandatory to attach following:
15.                Consent of nominee
16.   Proof of identity and residential address of the nominee
16.   Proof of identity and residential address of the subscribers if any one of the subscriber does not have a DIN
Proof of identity and residential address of such director if any one of the director (including subscriber cum director) does not have DIN, then it is mandatory to attach proof of ID and address proof of such director.

Wednesday 8 July 2015

Legal Advice on Company Registration and Firm Registration


The Companies Act 1956 lays down the guidelines for the formation and registration of a Company in India. This Act applies to the whole of India and to all types of Company’s thus making it an important legislative body governing all registrations and closures.
The start of a company means a lot of work. It’s like giving birth to a child. It’s an exciting phase with a lot of anxiety and hope. Every new business requires company registration by law of the land. One should follow the state law as well when registering a Company.
The offices of the registry of the records have all the information regarding all the companies registered in India and the Registrar of Companies has all the authority and responsibility of registering a company in various states and union territories. It is to be noted that all the companies registered have to comply with all the statutory compliances falling under this Company Act.
Some points should be kept in mind when getting registering for the new business is done.
Legal advice:
The first and foremost important step is to ensure that the legal angle is taken care of. One should get the Director Identification Number for the business. Then is the chance of Company registration and then submitting the necessary documents to the government. Some basic documents are mandatory for company registration like, address proof, PAN card, photographs.
One should remember to select at least four suitable names for the new company. It should not be a copied one and should not violate the copyrights and patents.
Once the name is approved by the Registrar of companies, one can move ahead for company registration.

The Memorandum of Association and Articles of Association are legal documents which should be drafted by legal experts, different opinions sought and finally printed.
The application for registering a company has to be forwarded to the Registrar of Companies and should be accompanied with names, Memorandum of Association and Articles of Association besides other requisite documents.This has to be filed with theRegistrar of companies of the state where the company is being set up.
Under the Companies Act 1956, one can form two types of Companies, Private Company or a public company and get them registered as per the procedures laid down in the statute of the Companies Act.
Once the company is registered, one can patent a product or get a copyright to protect your company.

20 Types of Taxes in India


Types of taxes

Ever since I started working full time & earning at age of 23 years, I have started complaining to my father see how much I paid in taxes, my father always use to say “if you have started paying taxes its good thing that you earned an income.”
How many of you actually love to pay tax & how many of you know that government ask us to pay tax via 20 different manners?  In this article I will provide you brief information about these 20 taxes in India.
Also Read – 20 Tax Free Incomes in India


Tax is imposing financial charges on individual or company by central government or state government. Collected Tax amount is used for building nation (infrastructure & other development), to increase arms and ammunition for defense of country and for other welfare related work. That’s why it is said that “Taxes are paid nation are made”.
Type of Taxes in India:-
Direct Taxes:-
These types of taxes are directly imposed & paid to Government of India. There has been a steady rise in the net Direct Tax collections in India over the years, which is healthy signal. Direct taxes, which are imposed by the Government of India, are:
(1)   Income Tax:-
Income tax, this tax is mostly known to everyone. Every individual whose total income exceeds taxable limit has to pay income tax based on prevailing rates applicable time to time.
By doing investment in certain scheme you can save Income Tax.

(2)   Capital Gains Tax:-
Capital Gain tax as name suggests it is tax on gain in capital. If you sale property, shares, bonds & precious material etc. and earn profit on it within predefined time frame you are supposed to pay capital gain tax. The capital gain is the difference between the money received from selling the asset and the price paid for it.
Capital gain tax is categorized into short-term gains and long-term gains. The Long-term Capital Gains Tax is charged if the capital assets are kept for more than certain period 1 year in case of share and 3 years in case of property. Short-term Capital Gains Tax is applicable if these assets are held for less than the above-mentioned period.
Rate at which this tax is applied varies based on investment class.
Example:-
If you purchase share at say 1000 Rs/- (per share) and after two months this price increased to 1200 Rs/-(per share) you decide to sale this stock and earn profit of 200 Rs/- per share. If you do so you have to pay Short term CGT (capital gain tax) @ 10% +Education cess on profit as it is short term capital gain. If you hold same share for 1 year or above it is considered as long term capital gain and you need not to pay capital gain tax.it is considered as tax free.
Similarly if you purchase property after two year if you find that property price in which you invested has increased and you decide to sale it you need to pay short term capital gain tax.
For property it is considered as long term capital gain if you hold property for 3 years or above.

(3)   Securities Transaction Tax:-
A lot of people do not declare their profit and avoid paying capital gain tax, as government can only tax those profits, which have been declared by people. To fight with this situation Government has introduced STT (Securities Transaction Tax ) which is applicable on every transaction done at stock exchange. That means if you buy or sell equity shares, derivative instruments, equity oriented Mutual Funds this tax is applicable.
This tax is added to the price of security during the transaction itself, hence you cannot avoid (save) it. As this tax amount is very low people do not notice it much.
Current STT Rates are:-
Tax Rates
(4)   Perquisite Tax:-
Earlier to Perquisite Tax we had tax called FBT (Fringe Benefit Tax) which was abolished in 2009, this tax is on benefit given by employer to employee. E.g If your company provides you non-monetary benefits like car with driver, club membership, ESOP etc. All this benefit is taxable under perquisite Tax.
In case of ESOP The employee will have to pay tax on the difference between the Fair Market Value (FMV) of the shares on the date of exercise and the price paid by him/her.
(5)   Corporate Tax:-
Corporate Taxes are annual taxes payable on the income of a corporate operating in India. For the purpose of taxation companies in India are broadly classified into domestic companies and foreign companies.
corporate tax
In addition to above other taxes are also applicable on corporates.
 Indirect Taxes:-
 (6)   Sales Tax :-
Sales tax charged on the sales of movable goods. Sale tax on Inter State sale is charged by Union Government, while sales tax on intra-State sale (sale within State) (now termed as VAT) is charged by State Government.
Sales can be broadly classified in three categories. (a) Inter-State Sale (b) Sale during import/export (c) Intra-State (i.e. within the State) sale. State Government can impose sales tax only on sale within the State.
CST is payable on inter-State sales is @ 2%, if C form is obtained. Even if CST is charged by Union Government, the revenue goes to State Government. State from which movement of goods commences gets revenue. CST Act is administered by State Government.

(7)   Service Tax:-
Most of the paid services you take you have to pay service tax on those services. This tax is called service tax.  Over the past few years, service tax been expanded to cover new services.
Few of the major service which comes under vicinity of service tax are telephone, tour operator, architect, interior decorator, advertising, beauty parlor, health center, banking and financial service, event management, maintenance service, consultancy service
Current rate of interest on service tax is 14%. This tax is passed on to us by service provider.


(8)   Value Added Tax:-
The Sales Tax is the most important source of revenue of the state governments; every state has their respective Sales Tax Act. The tax rates are also different for respective states.
Tax imposed by Central government on sale of goods is called as Sales tax same is called as Value added tax by state government.VAT is additional to the price of goods and passed on to us as buyer (end user). Around 220+ Items are covered with VAT.VAT rates vary based on nature of item and state.
Government is planning to merge service tax and sales tax in form of Goods service tax (GST).
Also Read:- Download new 15G/15H Forms
(9)   Custom duty &Octroi (On Goods):-
Custom Duty is a type of indirect tax charged on goods imported into India. One has to pay this duty , on goods that are imported from a foreign country into India. This duty is often payable at the port of entry (like the airport). This duty rate varies based on nature of items.
Octroi is tax applicable on goods entering in to municipality or any other jurisdiction for use, consumption or sale. In simple terms one can call it as Entry Tax.
(10) Excise Duty:-
An excise or excise duty is a type of tax charged on goods produced within the country. This is opposite to custom duty which is charged on bringing goods from outside of country. Another name of this tax is CENVAT (Central Value Added Tax).
If you are producer / manufacturer of goods or you hire labor to manufacture goods you are liable to pay excise duty.
At some of places you need to pay tax in order to use infrastructure (road, bridge etc.) build from your money given to government as Tax. This tax is called as toll tax. This tax amount is very small amount but, to be paid for maintenance work and good up keeping.
So in total you pay 20 different taxes in direct or indirect way. At the end in order to make you laugh i will tell you one small joke on tax.