Monday, August 3, 2020

How to register Startup in India

Start-up India is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Start-ups in the country that will drive sustainable economic growth and generate large scale employment opportunities. This articles explains how to register Startup in India. A startup is a new or existing business, usually small, started by one or a group of individuals.

What differentiates it from other businesses is that a startup is:
  • Innovative
  • Aims to improve products or services
  • Is a Scalable business model
  • Leads to employment generation or wealth creation
How to Register Startup in India

There are 7 Steps to Register Startup in India:
1. Register your Company: The business must be incorporated in any of the three forms: – Private Limited Company – Limited Liability Partnership – Partnership Firm
2. Check if you fulfill other conditions: If your business is already incorporated, then check if you fulfill all other conditions to be recognized as a Startup:
-Your business must be incorporated in India not before 7 years. (10 years for Biotechnology sector)
– The total turnover of your business must be less than Rupees 25 crores per year.
– Innovation is a must– the business must be working towards innovating something new or significantly improving the existing used technology.
– Your business must not be as a result of splitting up or reconstruction of an existing business.
3. Register in Startup India: Register your entity as a Startup after providing necessary details and documents such as:
– Name and Address of the business entity
– Registration Number of the business entity
– Name, Address, Mobile Number and Email Id of the Authorized Representative
– Name, Address, Mobile Number and Email Id of the Directors/Partners
4. Submit documents: The only mandatory document that needs to be submitted for registering as a Startup is the Incorporation Certificate or Registration Certificate of your entity. You may submit any document that adds value to your application and justifies how you are eligible to be recognized as a startup.
5. Provide Brief note on innovativeness/scalability of business model/ potential of employment generation/ wealth creation: This is the most important part of the application and should be carefully drafted with full details and justification of the innovativeness and scalability of your business model. Your idea should be communicated right across in brief and in simple terms.
6. Self Certification: After completing all the above steps, you need to self -certify the application stating that all the conditions stated by the government are fulfilled by your organization and therefore it may be considered as a business covered under the definition of Startup.
7. Submit the application: Submit the self-certified application form. The Certificate of Recognition for Startups will now be issued after examination of the application and documents submitted. If you application is selected, you will be issued a Startup Recognition Certificate issued by the Government of India on an online basis. The Certificate and then be used for availing all the benefits available to a recognized startup.
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We hope with the above steps you will be able to register your startup in India. If you need any help, please contact us at hello@ventureasy.com.
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Foreign Directors in Indian Company

Any public limited or Private Limited Company needs to have a board of directors constituted for the purpose of managing the day-to-day affairs of the Company. The reason for the existence of the board of directors is that there needs to be a body that is above the management and which can be accountable to the regulators and shareholders for the decisions taken by the management of the company.
Private Limited Company Registration - Ventureasy.com
Foreign Directors in Indian Company

Foreign Directors in Indian Company Directors in Indian company: The Companies Act 2013 states that there should be minimum 2 directors in a Private Limited Company and 3 in a public company. All the directors should be Individual Persons. All the Companies registered under the Act should have at least one Resident Directors (a person who has stayed in India for at least 182 days in the previous year.)

Foreign Directors in Indian Companies: The Companies Act 2013 doesn’t bar a foreign individual from being a director in an Indian company. However there are additional requirements to be fulfilled by the foreigner before he/she is appointed.

Every person should have a DSC in his name and a DIN allotted by the MCA before being appointed as a director. The list of documents required for DSC and DIN is an important factor to be kept in mind. Following are the documents that are required from a Foreign National –
  • Copy of Passport as ID Proof
  • Address proof- Bank statement, DL, Utility bill (not older than two months)
  • Employment/Business Visa (For foreign nationals residing in India)
  • Residence Permit (For foreign nationals residing in India)
  • Passport Size Photograph
All the above documents should be notarized by a Public Notary in the country of residence and should be Consularized /apostille by the concerned authority in the Foreign National’s home country.

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Sunday, August 2, 2020

Documents required for Private Limited Company Registration

For Directors/Shareholders

  •  One Photograph
  •  Copy of PAN Card
  •  Copy of Address proof - Aadhaar Card/Driving License/Passport/Voter ID
  •  Copy of Bank Statement/Mobile Phone/Landline Telephone Bill
  •  Copy of Aadhaar Card

For Company Address
  •  
  • Proof of Registered Address – Sale Deed/Rental Agreement
  • Copy of Utility bill - Electricity/Landline telephone/Gas Bill - not older than two months.
  • No Objection Certificate for use of premises, if required



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Saturday, August 1, 2020

Limited Liability Partnership (LLP) vs Partnership

Selection of the correct form of business entity is the most important decision taken by an entrepreneur. To make choices simpler and assist you in taking a well informed decision, here is a basic comparison chart of Limited Liability Partnership (LLP) vs Partnership
Limited Liability Partnership – A corporate form of Partnership
Limited Liability Partnership has been introduced in India by way of Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business organization that is simple to maintain while at the same time providing limited liability to the owners. It exhibits elements of both partnership and corporation. In LLP, one partner is not responsible or liable for another partner’s misconduct or negligence unlike a traditional partnership in which each partner has joint and several liabilities.

Partnership is governed by Indian Partnership Act, 1932. It is the relation between two or more partners who have agreed to share the profits of a Business carried on by all or any of them acting for all. The partners can enter into a verbal or written agreement between them as per their discretion. The Registration of partnership firm is not compulsory.
The Comparison chart will give you a clear distinction between all the three forms of business.
Factors of ComparisonLimited Liability PartnershipPartnership
Legal IdentityIt has separate Legal entity different from partnersNo separate legal entity
Minimum Members  Designated Partners – 2Minimum Partners – 2
Maximum MembersNo limit100
Minimum CapitalNo minimum requirementNo minimum requirement
RegulatorRegistrar of CompaniesRegistrar of Firms
Compliance RequirementsAnnual Return FilingNo mandatory compliances
TaxationTaxed at 30%Taxed at 30%
Cost of complianceAs there are no compulsory compliances for a partnership firm, there are no cost of compliance as such
LiabilityLimited to Capital contributionUnlimited liability of partners
CredibilityMediumLow
Investor PreferenceMediumLow
Statutory AuditMandatory if Contribution is above 25 lacs or, if Turnover is above Rs. 40 lacsNot Mandatory
ConversionCan be converted into a Company by following the procedures of Companies ActCan be converted into a Company by following the procedures of Companies Act
Procedure
  • Obtain DSC (Digital Signature Certificate)
  • Obtain DPIN (Designated Partner Identification Number)
  • Name Approval
  • Filing for Incorporation
  • File LLP Agreement
  • Preparation of Partnership Agreement
  • Stamping and Notarization of the partnership agreement.
  • Registration of Agreement with the Registrar of Firms – Not compulsory, very expensive and time consuming
Time Taken for Registration10 -15 Days7-10 days
Relation inter se partnersPartners are the agent of firm and the partners. One is responsible for the act of other(s)Partners are agents of the firm only.
Ease of closureAn LLP can be closed by meeting certain conditions and following the procedures of LLP Act 2008.A Partnership can be closed anytime as per the conditions laid down in the deed or agreement.
Conclusion:
– Partnership firm, even if registered, is not a separate legal entity.
– LLP is comparatively a more organized form of business, hence has more credibility.
– Partners of a partnership are agent of one another, which makes all the partners responsible for any fraudulent act of one of the partners.
– And partners are personally liable to the extent of dues of the partnership. But contrary to this, in LLP, partners are not liable for the act of one another. They are only responsible for their acts and liable to the extent of their contribution.

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How to close a private limited company

We come across various instances when small businesses are not able to sustain in this highly competitive era and prefer to get closed down, rather than running on losses. Many a times, startups prefer closing down a Company when the founder’s drop their business idea in view of an alternate lucrative opportunity.
The Companies Act 2013 provides various modes of closing of Companies. One of such ways is declaring the Company as “Defunct” and getting its name struck out from the records of Registrar. This is a hassle free and easy exit mode provided to Companies, which could not commence their business or are not in operations.

How to Close a Private Limited Company
Eligibility to close down a private limited company:
  • A company which has failed to commence business within one year of Incorporation.
  • A company which is not carrying on any business or operation for a period of two immediately preceding financial years, and has not made any application for obtaining the status of a dormant company.
Conditions to be fulfilled before making the application:
  • The Company should have Nil assets and liabilities at the time of making the closure application
  • Consent of 75% of the members to be obtained by way of Special Resolution for this purpose.
Procedure:
  • An application should be made to Registrar for removal of name in form STK 2 along with fee of Rupees 5000 and the supporting documents.
  • On receipt of the application, the Registrar issues a notice to be published in the official gazette. The same notice should be placed in the website of the company, if any.
  • Form STK 2 shall be digitally signed by director authorized by the board or a physical copy of the form may be signed and provided as an attachment with the form.
  • The form should be duly certified by a CS, CA or CMA in Practice.
Documents Required:
  • Indemnity bond duly notarized by every director in Form STK 3
  • Statement of accounts containing assets and liabilities of the company made up to a day, not exceeding thirty days before the date of application and certified by a Chartered Accountant;
  • An affidavit in Form STK 4 provided by every director of the private limited company;
  • Copy of Board Resolution authorizing the filing of the Application.
  • A copy of the special resolution accordingly certified by each of the directors of the company or consent of seventy five per cent of the members of the company as on the date of application
  • A statement regarding pending litigations involving the company, (if any)
  • Copy of order of the concerned regulatory authority, if any, approving the filing of the application
  • Copy of relevant order for delisting, if any, from the concerned Stock Exchange (for listed entities)
Note: The indemnity bond and declaration as mentioned above shall be duly notarized/consularised/apostilled (as the case may be) if the director is a foreign National or a non-Resident.
Fraudulent application for removal of name: If the application in this section is made with the intention to fraud creditors or any other person, then all responsible persons shall be held liable for the loss, and be punishable for fraud and may also be prosecuted.
Appeal to Tribunal: If any person is aggrieved by an order made under this section, then he has an option of making an appeal to the tribunal. But the appeal should be made within three years from the date of order.
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Friday, July 31, 2020

How to convert Proprietorship to a Private Limited Company

Many small business owners start out as sole proprietors of their firms. Sole proprietorship is the most common and simplest form of business structure. This form of business has its own advantages: easy formation, limited paperwork, small capital requirement, and minimum compliance requirements.
As the business starts spreading its roots, the next logical move would be to expand operations to accommodate large business needs. The experience acquired as a sole proprietor helps the entrepreneur to build a stronger foundation for his business when he chooses to transform it into a Private Limited Company.
Private Limited Company Registration - Ventureasy.com
convert Proprietorship to a Private Limited Company
As the revenues increase, many sole proprietors perceive the need to differentiate their personal accounts and tax filings from that of the business. There are several reasons why converting your sole proprietorship into a private limited company is a good idea.
The conversion allows you to enjoy the double benefits of keeping your goodwill and brand value intact while enjoying a legal existence. You are not only exempted from paying any stamp duty, but also from any capital gains tax on the property thus transferred.
Other key benefits include:
  • Business expansion
  • Better financing options
  • Greater public visibility and acceptance
  • Asset protection
  • Managing risks
  • Corporate tax benefits
The conversion process
The first step to converting your sole proprietorship firm into a private limited company is to incorporate a new private limited company.
At the time of the new Private Limited Company, it is appropriate to mention in the Memorandum of Association (MOA) that the company is a “takeover of a sole proprietorship concern.”
After the Company Formation, an agreement needs to be executed between the Company and the Proprietor for the takeover of the assets and liabilities of the proprietorship by the Company. The details of assets, liabilities and the consideration in exchange of such assets need to be specified in the agreement.
The agreement should be executed in a Stamp Paper of requisite value to make it a valid legal document.
As per the Income Tax Act, 1961, capital gains on such transfers are exempted if:
  • All the assets and liabilities of the sole proprietorship, immediately before the conversion, are transferred to the company
  • The proprietor’s shareholding is more than 50% of the total voting rights of the new company for a continuous period of not less than 5 years from the date of succession
  • The proprietor receives shares in the Company only in exchange of the net assets of the business.
  • In case any of these conditions are not complied with, the profits or transfer of assets shall attract capital gains tax.
Once the new private limited company comes into existence, the sole proprietorship can be duly terminated. The bank accounts in the name of the proprietary firm need to be formally closed and a new corporate account is to be opened for the Company.
Any contracts/ leases/ agreements signed by the proprietor need to be re-signed under the name of the newly incorporated company.
All tax and other registrations in the name of the Proprietorship need to be surrendered and new registrations should be obtained in the name of the Private Limited Company.
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