Legalities of Ventures

Xerxes V. Dastur
Xerxes V. DasturPartner, V. S. Dastur & Co. Chartered Accountants,Vice Chairman - Mumbai Chapter at World Zarthusti Chamber of Commerce en Rustam Baug Association
Legalities of VentureLegalities of Venture
Presented by: Xerxes V. DasturPresented by: Xerxes V. Dastur
PartnerPartner
V.S.DASTUR & CO.V.S.DASTUR & CO.
Chartered AccountantsChartered Accountants
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Are you an entrepreneur?Are you an entrepreneur?
1. Must have burning desire and discipline to1. Must have burning desire and discipline to
plan, work, and sacrifice in order toplan, work, and sacrifice in order to
successfully transform your idea into reality.successfully transform your idea into reality.
2. Are you ready, willing and able to work2. Are you ready, willing and able to work
harder than you have ever before?harder than you have ever before?
3. Do you have self-confidence and discipline?3. Do you have self-confidence and discipline?
If youIf you’ve answered “no” to any of these’ve answered “no” to any of these
questions, you may not be ready forquestions, you may not be ready for
entrepreneurship.entrepreneurship.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
 When you start a business, youWhen you start a business, you’’llll
have to decide upon the type ofhave to decide upon the type of
business entity you want to use.business entity you want to use.
There are a number of optionsThere are a number of options
available and each one has its ownavailable and each one has its own
advantages and disadvantages.advantages and disadvantages.
There's simply no one-size-fits-allThere's simply no one-size-fits-all
answer as to what type of entity isanswer as to what type of entity is
thethe ““bestbest””..
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Developing Your IdeaDeveloping Your Idea
So whatSo what’s your idea?’s your idea?
WhatWhat’s your product?’s your product?
What goods or services are you going to provide toWhat goods or services are you going to provide to
whom and whose needs are you going to meet?whom and whose needs are you going to meet?
For starters, you should ask yourselfFor starters, you should ask yourself “What are my“What are my
skills, what am I good at, and what do I love to do?”skills, what am I good at, and what do I love to do?”
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Choosing the Right BusinessChoosing the Right Business
1. Starting a New Business: Is your idea new or1. Starting a New Business: Is your idea new or
novel?novel?
2. Purchase an Existing Business: Many2. Purchase an Existing Business: Many
entrepreneurs start as franchisees in provenentrepreneurs start as franchisees in proven
businesses, thus avoiding some of the risks andbusinesses, thus avoiding some of the risks and
challenges inherent with starting a new businesschallenges inherent with starting a new business
from scratch.from scratch.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Sole
Proprietary
Concern
Partnership
Firm
Company
Joint
Venture
Limited
Liability
Partnership
BUSINESS
ENTITIES
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Business Entity: Sole ProprietaryBusiness Entity: Sole Proprietary
ConcernConcern
 An individual personAn individual person
 No formal organizational requirementNo formal organizational requirement
 There is no limit to liability - your personal assetsThere is no limit to liability - your personal assets
are at stake!are at stake!
 You can only transfer the interests in yourYou can only transfer the interests in your
business by selling the assets themselves whichbusiness by selling the assets themselves which
could mean more tax liabilitycould mean more tax liability..
 Access to capital can be limited.Access to capital can be limited.
 No distinction between the owner and the entity inNo distinction between the owner and the entity in
the eyes of Tax Authoritythe eyes of Tax Authority
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Business Entity: Partnership FirmBusiness Entity: Partnership Firm
 Two or more individuals (or entities) have sharedTwo or more individuals (or entities) have shared
ownership of the business.ownership of the business.
 Maximum of 20 partnersMaximum of 20 partners
 No formal organizational requirements.No formal organizational requirements.
 Any partner of the partnership can bind or obligateAny partner of the partnership can bind or obligate
the partnershipthe partnership
 There is no limit to liability for the partners. LiabilityThere is no limit to liability for the partners. Liability
is joint and several.is joint and several.
 Taxes are paid at Entity Level.Taxes are paid at Entity Level.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Business Entity: CompanyBusiness Entity: Company
What is a Company ?What is a Company ?
 Voluntary association of personsVoluntary association of persons
 Distinct name & IdentityDistinct name & Identity
 Limited LiabilityLimited Liability
 Perpetual successionPerpetual succession
Types of CompaniesTypes of Companies
1. Private Limited Company1. Private Limited Company
2. Public Limited Company2. Public Limited Company
3. Section 25 – Not for Profit Company3. Section 25 – Not for Profit Company
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Business Entity:  CompanyBusiness Entity:  Company
Private Limited CompaniesPrivate Limited Companies
 Minimum 2 and Maximum 50 ShareholdersMinimum 2 and Maximum 50 Shareholders
 No invitation can be made to public forNo invitation can be made to public for
subscription of shares / debentures/ depositssubscription of shares / debentures/ deposits
 Rigorous management/governance structuresRigorous management/governance structures
 Liability of a director/manager of such a companyLiability of a director/manager of such a company
can be at times be Unlimited.can be at times be Unlimited.
V. S. Dastur & CoV. S. Dastur & Co
Chartered AccountantsChartered Accountants
Business Entity:  CompanyBusiness Entity:  Company
Public Limited CompaniesPublic Limited Companies
 Company which isCompany which is notnot a Private Limited Company.a Private Limited Company.
 Certificate of Commencement of Business to beCertificate of Commencement of Business to be
obtained.obtained.
 Minimum 7 and no bar on Maximum ShareholdersMinimum 7 and no bar on Maximum Shareholders
 Invitation can be made to public for subscription ofInvitation can be made to public for subscription of
shares / debentures/ depositsshares / debentures/ deposits
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Limited Liability PartnershipsLimited Liability Partnerships
 Hybrid business entity combining features of aHybrid business entity combining features of a
partnership firm and company.partnership firm and company.
 Limited liability of PartnersLimited liability of Partners
 No limit on maximum number of partnersNo limit on maximum number of partners
 Perpetual existence like a companyPerpetual existence like a company
 Non-applicability of The Indian PartnershipNon-applicability of The Indian Partnership
Act,1932.Act,1932.
 No requirement of minimum capitalNo requirement of minimum capital
contributioncontribution
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Joint VenturesJoint Ventures
 Business agreementBusiness agreement
 Capital contribution by partiesCapital contribution by parties
 Parties agree to develop a new entity for aParties agree to develop a new entity for a
finite timefinite time
 Share Revenues, expenses & assets.Share Revenues, expenses & assets.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Major ChallengesMajor Challenges
 Economic Challenges
 Regulatory Challenges
 Technological Challenges
 Human Resource Challenges
 Personal Challenges
V. S. Dastur & Co .V. S. Dastur & Co .
Chartered AccountantsChartered Accountants
Important Statutory RegistrationsImportant Statutory Registrations
 Basic Incorporation documentBasic Incorporation document
 Permanent Account NumberPermanent Account Number
 Tax Deduction Account NumberTax Deduction Account Number
 Service Tax RegistrationService Tax Registration
 Sales Tax RegistrationSales Tax Registration
 Social Security RegistrationSocial Security Registration
 Shops & EstablishmentShops & Establishment
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
ComparisionComparision
Sr.Sr.
NoNo
..
TopicTopic SoleSole
ProprietaryProprietary
ConcernConcern
PartnershipPartnership
FirmFirm
CompanyCompany LLPLLP
11 RegistrationRegistration Not RequiredNot Required OptionalOptional Yes, underYes, under
CompaniesCompanies
Act, 1956Act, 1956
Yes, underYes, under
LimitedLimited
LiabilityLiability
PartnershipPartnership
Act, 2008Act, 2008
22 SeparateSeparate
Legal EntityLegal Entity
NoNo NoNo YesYes YesYes
33 Law forLaw for
NameName
Choice of theChoice of the
ownerowner
Choice ofChoice of
PartnersPartners
Approval toApproval to
bebe
obtainedobtained
from ROCfrom ROC
Approval toApproval to
bebe
obtainedobtained
from ROCfrom ROC
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
ComparisionComparision
Sr.Sr.
NoNo
..
TopicTopic SoleSole
ProprietaryProprietary
ConcernConcern
PartnershipPartnership
FirmFirm
CompanyCompany LLPLLP
44 ForeignForeign
InvestmentsInvestments
-- Not allowedNot allowed
from Foreignfrom Foreign
NationalsNationals
AllowedAllowed AllowedAllowed
55 Minimum/MaMinimum/Ma
ximum No ofximum No of
Owners/PartOwners/Part
nersners
11 2 to 202 to 20 2 to 50 for2 to 50 for
PrivatePrivate
companiescompanies
& 7 to& 7 to
unlimitedunlimited
for publicfor public
companiescompanies
2 to2 to
unlimited.unlimited.
66 OwnershipOwnership
of Assetsof Assets
OwnerOwner Jointly byJointly by
PartnersPartners
With theWith the
companycompany
With theWith the
LLPLLP
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
ComparisionComparision
Sr.Sr.
NoNo
..
TopicTopic SoleSole
ProprietaryProprietary
ConcernConcern
PartnershipPartnership
FirmFirm
CompanyCompany LLPLLP
77 ResponsibilitResponsibilit
ies /ies /
AuthoritiesAuthorities
NoneNone Governed byGoverned by
PartnershipPartnership
DeedDeed
GovernedGoverned
by the MOAby the MOA
& AOA of& AOA of
thethe
companycompany
GovernedGoverned
by LLPby LLP
AgreementAgreement
88 LiabilityLiability UnlimitedUnlimited
LiabilityLiability
Joint &Joint &
SeveralSeveral
Liability of theLiability of the
PartnersPartners
Limited toLimited to
the extentthe extent
of unpaidof unpaid
amount ofamount of
the sharesthe shares
heldheld
Limited toLimited to
the extentthe extent
of theof the
contributioncontribution
stipulated instipulated in
the LLPthe LLP
Agreement.Agreement.
99 TransferTransfer -- Not PossibleNot Possible LegallyLegally
allowedallowed
Depends onDepends on
LLPLLP
AgreementAgreement
V. S. Dastur & Co .V. S. Dastur & Co .
Chartered AccountantsChartered Accountants
ComparisionComparision
Sr.Sr.
NoNo
..
TopicTopic SoleSole
ProprietaryProprietary
ConcernConcern
PartnershipPartnership
FirmFirm
CompanyCompany LLPLLP
1010 Basic LegalBasic Legal
DocumentDocument
NoneNone PartnershipPartnership
DeedDeed
MOA &MOA &
AOAAOA
LLPLLP
AgreementAgreement
1111 Legal ActionLegal Action
for Businessfor Business
Owner can sueOwner can sue
and be suedand be sued
OnlyOnly
registeredregistered
partnershippartnership
firm can suefirm can sue
third partiesthird parties
CompanyCompany
can suecan sue
and beand be
suedsued
LLP canLLP can
sue and besue and be
suedsued
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Which entity do I choose?Which entity do I choose?
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Factors to considerFactors to consider
 Mindset/PersonalityMindset/Personality
 TimingTiming
 OwnershipOwnership
 FinancingFinancing
 CostsCosts
 Tax MattersTax Matters
Mindset/PersonalityMindset/Personality
 Entrepreneurship Spirit
 Leadership Skill
 Team Member
 Listening Skill
 Self-centric
 Team builder
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Timing IssuesTiming Issues
 How soon do you plan to start yourHow soon do you plan to start your
business? It is generally very easy tobusiness? It is generally very easy to
organize your business as a soleorganize your business as a sole
proprietorship, and you will spendproprietorship, and you will spend
less time preparing and filing theless time preparing and filing the
paperwork than with the other typespaperwork than with the other types
of entities.of entities.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Ownership issuesOwnership issues
 Will you own the business yourselfWill you own the business yourself
or with others? Certain businessor with others? Certain business
structures more easily accommodatestructures more easily accommodate
more than a single owner.more than a single owner.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
 Also keep in mind when you areAlso keep in mind when you are
preparing your organizational documentspreparing your organizational documents
that you should consider the possiblethat you should consider the possible
implications if one of the owner wants toimplications if one of the owner wants to
leave the business. It may seemleave the business. It may seem
uncomfortable (and seem unnecessary)uncomfortable (and seem unnecessary)
to think about this at the beginning, butto think about this at the beginning, but
it can save a lot of stress and expense ifit can save a lot of stress and expense if
these issues are worked out beforehand..these issues are worked out beforehand..
V. S. Dastur & Co .V. S. Dastur & Co .
Chartered AccountantsChartered Accountants
Financing issuesFinancing issues
 How do you intend to finance theHow do you intend to finance the
growth of your business – do yougrowth of your business – do you
anticipate seeking outsideanticipate seeking outside
investments? If so what kinds ofinvestments? If so what kinds of
investors will you target? Differentinvestors will you target? Different
types of business entities are bettertypes of business entities are better
suited to different types of investors.suited to different types of investors.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
CostsCosts
 In general, the simpler legalIn general, the simpler legal
structures are less expensive tostructures are less expensive to
form, and require less money toform, and require less money to
maintain. For example, in case ofmaintain. For example, in case of
companies there are a lot of ROCcompanies there are a lot of ROC
filings to be complied with.filings to be complied with.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
RecordkeepingRecordkeeping
 You may also wish to consider theYou may also wish to consider the
various recordkeeping requirementsvarious recordkeeping requirements
that are applicable to each type ofthat are applicable to each type of
business entity. Youbusiness entity. You’’ll need properll need proper
accounting records regardless of theaccounting records regardless of the
type of business entity, buttype of business entity, but
additional legal recordkeepingadditional legal recordkeeping
requirements may vary.requirements may vary.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
 For example, companies haveFor example, companies have
relatively stringent recordkeepingrelatively stringent recordkeeping
rules (compared to other entityrules (compared to other entity
types), and also have shareholdertypes), and also have shareholder
and annual meeting requirements.and annual meeting requirements.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Tax mattersTax matters
 Different entities are affected byDifferent entities are affected by
different tax provisions. In general,different tax provisions. In general,
in a sole proprietorship the profitsin a sole proprietorship the profits
and losses of the business will passand losses of the business will pass
through the ownerthrough the owner’’s individual taxs individual tax
return. This avoids additional layerreturn. This avoids additional layer
of taxation that occurs at theof taxation that occurs at the
corporation level.corporation level.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
Food for ThoughtFood for Thought
Decision on the type of entityDecision on the type of entity
to choose is a crucial decision havingto choose is a crucial decision having
far reaching impact and should befar reaching impact and should be
taken after due consultation.taken after due consultation.
Invest time today to saveInvest time today to save
heartburn tomorrow.heartburn tomorrow.
V. S. Dastur & Co.V. S. Dastur & Co.
Chartered AccountantsChartered Accountants
THANK YOU and QUESTIONSTHANK YOU and QUESTIONS
1 de 32

Recomendados

ACE accounts-miniguide v1 por
ACE accounts-miniguide v1ACE accounts-miniguide v1
ACE accounts-miniguide v1Akshay Shah
75 vistas21 diapositivas
Leadership In Tough Times por
Leadership In Tough TimesLeadership In Tough Times
Leadership In Tough TimesSelf Creation
1.8K vistas26 diapositivas
leaving_the_legacy_you_choose por
leaving_the_legacy_you_chooseleaving_the_legacy_you_choose
leaving_the_legacy_you_chooseElizabeth Catterall
189 vistas3 diapositivas
Astor Group por
Astor GroupAstor Group
Astor GroupArnon de Mello
334 vistas13 diapositivas
Astor Group - Corporate Brochure - English por
Astor Group - Corporate Brochure -  EnglishAstor Group - Corporate Brochure -  English
Astor Group - Corporate Brochure - EnglishAstor Group
379 vistas13 diapositivas
Allstate Ea Flipbook por
Allstate Ea FlipbookAllstate Ea Flipbook
Allstate Ea Flipbooktabarnett
476 vistas41 diapositivas

Más contenido relacionado

Similar a Legalities of Ventures

Biz Owner Guide to WM por
Biz Owner Guide to WMBiz Owner Guide to WM
Biz Owner Guide to WMChristopher O'Connor
157 vistas32 diapositivas
7 13 11legal structure presentation por
7 13 11legal structure presentation7 13 11legal structure presentation
7 13 11legal structure presentationpbeetem
356 vistas24 diapositivas
LLP vs PVT. LTD.. vs OPC vs Partnership vs Proprietorship por
LLP vs PVT. LTD.. vs OPC vs Partnership vs ProprietorshipLLP vs PVT. LTD.. vs OPC vs Partnership vs Proprietorship
LLP vs PVT. LTD.. vs OPC vs Partnership vs ProprietorshipLegal Raasta
661 vistas12 diapositivas
Wealth Management For Entrepreneurs (Client Journey) por
Wealth Management For Entrepreneurs (Client Journey)Wealth Management For Entrepreneurs (Client Journey)
Wealth Management For Entrepreneurs (Client Journey)Robert Wilcocks
328 vistas14 diapositivas
Smith Cooper Brochure - 2015 por
Smith Cooper Brochure - 2015Smith Cooper Brochure - 2015
Smith Cooper Brochure - 2015Emma Gould
78 vistas28 diapositivas
Eco 01 2014-15 solved por
Eco 01 2014-15 solvedEco 01 2014-15 solved
Eco 01 2014-15 solvedHimanshu Upadhyay
676 vistas10 diapositivas

Similar a Legalities of Ventures(20)

7 13 11legal structure presentation por pbeetem
7 13 11legal structure presentation7 13 11legal structure presentation
7 13 11legal structure presentation
pbeetem356 vistas
LLP vs PVT. LTD.. vs OPC vs Partnership vs Proprietorship por Legal Raasta
LLP vs PVT. LTD.. vs OPC vs Partnership vs ProprietorshipLLP vs PVT. LTD.. vs OPC vs Partnership vs Proprietorship
LLP vs PVT. LTD.. vs OPC vs Partnership vs Proprietorship
Legal Raasta661 vistas
Wealth Management For Entrepreneurs (Client Journey) por Robert Wilcocks
Wealth Management For Entrepreneurs (Client Journey)Wealth Management For Entrepreneurs (Client Journey)
Wealth Management For Entrepreneurs (Client Journey)
Robert Wilcocks328 vistas
Smith Cooper Brochure - 2015 por Emma Gould
Smith Cooper Brochure - 2015Smith Cooper Brochure - 2015
Smith Cooper Brochure - 2015
Emma Gould78 vistas
How to register a Private Limited Company in India por Aapka Consultant
How to register a Private Limited Company in IndiaHow to register a Private Limited Company in India
How to register a Private Limited Company in India
Aapka Consultant288 vistas
Small business startup por laburun
Small business startupSmall business startup
Small business startup
laburun1.3K vistas
Guide to start a new business por Firoze Shaik
Guide to start a new businessGuide to start a new business
Guide to start a new business
Firoze Shaik64 vistas
Incorporation power point por kleinlaw
Incorporation power pointIncorporation power point
Incorporation power point
kleinlaw283 vistas
How to start a start up por swag2school
How to start a start upHow to start a start up
How to start a start up
swag2school702 vistas
Wilmer Hale At Highland Capital Partners 7 10 07 por Michael Gaiss
Wilmer Hale At Highland Capital Partners 7 10 07Wilmer Hale At Highland Capital Partners 7 10 07
Wilmer Hale At Highland Capital Partners 7 10 07
Michael Gaiss468 vistas
Business Structures in Australia por ND Accounting
Business Structures in AustraliaBusiness Structures in Australia
Business Structures in Australia
ND Accounting571 vistas
Forms of business organization por Shreyans Ranka
Forms of business organizationForms of business organization
Forms of business organization
Shreyans Ranka1.2K vistas
Incorporation powerpoint por kleinlaw
Incorporation powerpointIncorporation powerpoint
Incorporation powerpoint
kleinlaw272 vistas
Incorporation Powerpoint por markklein57
Incorporation PowerpointIncorporation Powerpoint
Incorporation Powerpoint
markklein573.7K vistas
Incorporation Powerpoint por markklein57
Incorporation PowerpointIncorporation Powerpoint
Incorporation Powerpoint
markklein57238 vistas
Doctor+buisness+credit+presentation 1 por vampiire
Doctor+buisness+credit+presentation 1Doctor+buisness+credit+presentation 1
Doctor+buisness+credit+presentation 1
vampiire561 vistas
An Overview Of Legal Isues For Small Business por hotspurboy
An Overview Of Legal Isues For Small BusinessAn Overview Of Legal Isues For Small Business
An Overview Of Legal Isues For Small Business
hotspurboy849 vistas

Legalities of Ventures

  • 1. Legalities of VentureLegalities of Venture Presented by: Xerxes V. DasturPresented by: Xerxes V. Dastur PartnerPartner V.S.DASTUR & CO.V.S.DASTUR & CO. Chartered AccountantsChartered Accountants
  • 2. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Are you an entrepreneur?Are you an entrepreneur? 1. Must have burning desire and discipline to1. Must have burning desire and discipline to plan, work, and sacrifice in order toplan, work, and sacrifice in order to successfully transform your idea into reality.successfully transform your idea into reality. 2. Are you ready, willing and able to work2. Are you ready, willing and able to work harder than you have ever before?harder than you have ever before? 3. Do you have self-confidence and discipline?3. Do you have self-confidence and discipline? If youIf you’ve answered “no” to any of these’ve answered “no” to any of these questions, you may not be ready forquestions, you may not be ready for entrepreneurship.entrepreneurship.
  • 3. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants  When you start a business, youWhen you start a business, you’’llll have to decide upon the type ofhave to decide upon the type of business entity you want to use.business entity you want to use. There are a number of optionsThere are a number of options available and each one has its ownavailable and each one has its own advantages and disadvantages.advantages and disadvantages. There's simply no one-size-fits-allThere's simply no one-size-fits-all answer as to what type of entity isanswer as to what type of entity is thethe ““bestbest””..
  • 4. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Developing Your IdeaDeveloping Your Idea So whatSo what’s your idea?’s your idea? WhatWhat’s your product?’s your product? What goods or services are you going to provide toWhat goods or services are you going to provide to whom and whose needs are you going to meet?whom and whose needs are you going to meet? For starters, you should ask yourselfFor starters, you should ask yourself “What are my“What are my skills, what am I good at, and what do I love to do?”skills, what am I good at, and what do I love to do?”
  • 5. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Choosing the Right BusinessChoosing the Right Business 1. Starting a New Business: Is your idea new or1. Starting a New Business: Is your idea new or novel?novel? 2. Purchase an Existing Business: Many2. Purchase an Existing Business: Many entrepreneurs start as franchisees in provenentrepreneurs start as franchisees in proven businesses, thus avoiding some of the risks andbusinesses, thus avoiding some of the risks and challenges inherent with starting a new businesschallenges inherent with starting a new business from scratch.from scratch.
  • 6. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Sole Proprietary Concern Partnership Firm Company Joint Venture Limited Liability Partnership BUSINESS ENTITIES
  • 7. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Business Entity: Sole ProprietaryBusiness Entity: Sole Proprietary ConcernConcern  An individual personAn individual person  No formal organizational requirementNo formal organizational requirement  There is no limit to liability - your personal assetsThere is no limit to liability - your personal assets are at stake!are at stake!  You can only transfer the interests in yourYou can only transfer the interests in your business by selling the assets themselves whichbusiness by selling the assets themselves which could mean more tax liabilitycould mean more tax liability..  Access to capital can be limited.Access to capital can be limited.  No distinction between the owner and the entity inNo distinction between the owner and the entity in the eyes of Tax Authoritythe eyes of Tax Authority
  • 8. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Business Entity: Partnership FirmBusiness Entity: Partnership Firm  Two or more individuals (or entities) have sharedTwo or more individuals (or entities) have shared ownership of the business.ownership of the business.  Maximum of 20 partnersMaximum of 20 partners  No formal organizational requirements.No formal organizational requirements.  Any partner of the partnership can bind or obligateAny partner of the partnership can bind or obligate the partnershipthe partnership  There is no limit to liability for the partners. LiabilityThere is no limit to liability for the partners. Liability is joint and several.is joint and several.  Taxes are paid at Entity Level.Taxes are paid at Entity Level.
  • 9. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Business Entity: CompanyBusiness Entity: Company What is a Company ?What is a Company ?  Voluntary association of personsVoluntary association of persons  Distinct name & IdentityDistinct name & Identity  Limited LiabilityLimited Liability  Perpetual successionPerpetual succession Types of CompaniesTypes of Companies 1. Private Limited Company1. Private Limited Company 2. Public Limited Company2. Public Limited Company 3. Section 25 – Not for Profit Company3. Section 25 – Not for Profit Company
  • 10. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Business Entity:  CompanyBusiness Entity:  Company Private Limited CompaniesPrivate Limited Companies  Minimum 2 and Maximum 50 ShareholdersMinimum 2 and Maximum 50 Shareholders  No invitation can be made to public forNo invitation can be made to public for subscription of shares / debentures/ depositssubscription of shares / debentures/ deposits  Rigorous management/governance structuresRigorous management/governance structures  Liability of a director/manager of such a companyLiability of a director/manager of such a company can be at times be Unlimited.can be at times be Unlimited.
  • 11. V. S. Dastur & CoV. S. Dastur & Co Chartered AccountantsChartered Accountants Business Entity:  CompanyBusiness Entity:  Company Public Limited CompaniesPublic Limited Companies  Company which isCompany which is notnot a Private Limited Company.a Private Limited Company.  Certificate of Commencement of Business to beCertificate of Commencement of Business to be obtained.obtained.  Minimum 7 and no bar on Maximum ShareholdersMinimum 7 and no bar on Maximum Shareholders  Invitation can be made to public for subscription ofInvitation can be made to public for subscription of shares / debentures/ depositsshares / debentures/ deposits
  • 12. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Limited Liability PartnershipsLimited Liability Partnerships  Hybrid business entity combining features of aHybrid business entity combining features of a partnership firm and company.partnership firm and company.  Limited liability of PartnersLimited liability of Partners  No limit on maximum number of partnersNo limit on maximum number of partners  Perpetual existence like a companyPerpetual existence like a company  Non-applicability of The Indian PartnershipNon-applicability of The Indian Partnership Act,1932.Act,1932.  No requirement of minimum capitalNo requirement of minimum capital contributioncontribution
  • 13. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Joint VenturesJoint Ventures  Business agreementBusiness agreement  Capital contribution by partiesCapital contribution by parties  Parties agree to develop a new entity for aParties agree to develop a new entity for a finite timefinite time  Share Revenues, expenses & assets.Share Revenues, expenses & assets.
  • 14. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Major ChallengesMajor Challenges  Economic Challenges  Regulatory Challenges  Technological Challenges  Human Resource Challenges  Personal Challenges
  • 15. V. S. Dastur & Co .V. S. Dastur & Co . Chartered AccountantsChartered Accountants Important Statutory RegistrationsImportant Statutory Registrations  Basic Incorporation documentBasic Incorporation document  Permanent Account NumberPermanent Account Number  Tax Deduction Account NumberTax Deduction Account Number  Service Tax RegistrationService Tax Registration  Sales Tax RegistrationSales Tax Registration  Social Security RegistrationSocial Security Registration  Shops & EstablishmentShops & Establishment
  • 16. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants ComparisionComparision Sr.Sr. NoNo .. TopicTopic SoleSole ProprietaryProprietary ConcernConcern PartnershipPartnership FirmFirm CompanyCompany LLPLLP 11 RegistrationRegistration Not RequiredNot Required OptionalOptional Yes, underYes, under CompaniesCompanies Act, 1956Act, 1956 Yes, underYes, under LimitedLimited LiabilityLiability PartnershipPartnership Act, 2008Act, 2008 22 SeparateSeparate Legal EntityLegal Entity NoNo NoNo YesYes YesYes 33 Law forLaw for NameName Choice of theChoice of the ownerowner Choice ofChoice of PartnersPartners Approval toApproval to bebe obtainedobtained from ROCfrom ROC Approval toApproval to bebe obtainedobtained from ROCfrom ROC
  • 17. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants ComparisionComparision Sr.Sr. NoNo .. TopicTopic SoleSole ProprietaryProprietary ConcernConcern PartnershipPartnership FirmFirm CompanyCompany LLPLLP 44 ForeignForeign InvestmentsInvestments -- Not allowedNot allowed from Foreignfrom Foreign NationalsNationals AllowedAllowed AllowedAllowed 55 Minimum/MaMinimum/Ma ximum No ofximum No of Owners/PartOwners/Part nersners 11 2 to 202 to 20 2 to 50 for2 to 50 for PrivatePrivate companiescompanies & 7 to& 7 to unlimitedunlimited for publicfor public companiescompanies 2 to2 to unlimited.unlimited. 66 OwnershipOwnership of Assetsof Assets OwnerOwner Jointly byJointly by PartnersPartners With theWith the companycompany With theWith the LLPLLP
  • 18. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants ComparisionComparision Sr.Sr. NoNo .. TopicTopic SoleSole ProprietaryProprietary ConcernConcern PartnershipPartnership FirmFirm CompanyCompany LLPLLP 77 ResponsibilitResponsibilit ies /ies / AuthoritiesAuthorities NoneNone Governed byGoverned by PartnershipPartnership DeedDeed GovernedGoverned by the MOAby the MOA & AOA of& AOA of thethe companycompany GovernedGoverned by LLPby LLP AgreementAgreement 88 LiabilityLiability UnlimitedUnlimited LiabilityLiability Joint &Joint & SeveralSeveral Liability of theLiability of the PartnersPartners Limited toLimited to the extentthe extent of unpaidof unpaid amount ofamount of the sharesthe shares heldheld Limited toLimited to the extentthe extent of theof the contributioncontribution stipulated instipulated in the LLPthe LLP Agreement.Agreement. 99 TransferTransfer -- Not PossibleNot Possible LegallyLegally allowedallowed Depends onDepends on LLPLLP AgreementAgreement
  • 19. V. S. Dastur & Co .V. S. Dastur & Co . Chartered AccountantsChartered Accountants ComparisionComparision Sr.Sr. NoNo .. TopicTopic SoleSole ProprietaryProprietary ConcernConcern PartnershipPartnership FirmFirm CompanyCompany LLPLLP 1010 Basic LegalBasic Legal DocumentDocument NoneNone PartnershipPartnership DeedDeed MOA &MOA & AOAAOA LLPLLP AgreementAgreement 1111 Legal ActionLegal Action for Businessfor Business Owner can sueOwner can sue and be suedand be sued OnlyOnly registeredregistered partnershippartnership firm can suefirm can sue third partiesthird parties CompanyCompany can suecan sue and beand be suedsued LLP canLLP can sue and besue and be suedsued
  • 20. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Which entity do I choose?Which entity do I choose?
  • 21. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Factors to considerFactors to consider  Mindset/PersonalityMindset/Personality  TimingTiming  OwnershipOwnership  FinancingFinancing  CostsCosts  Tax MattersTax Matters
  • 22. Mindset/PersonalityMindset/Personality  Entrepreneurship Spirit  Leadership Skill  Team Member  Listening Skill  Self-centric  Team builder
  • 23. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Timing IssuesTiming Issues  How soon do you plan to start yourHow soon do you plan to start your business? It is generally very easy tobusiness? It is generally very easy to organize your business as a soleorganize your business as a sole proprietorship, and you will spendproprietorship, and you will spend less time preparing and filing theless time preparing and filing the paperwork than with the other typespaperwork than with the other types of entities.of entities.
  • 24. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Ownership issuesOwnership issues  Will you own the business yourselfWill you own the business yourself or with others? Certain businessor with others? Certain business structures more easily accommodatestructures more easily accommodate more than a single owner.more than a single owner.
  • 25. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants  Also keep in mind when you areAlso keep in mind when you are preparing your organizational documentspreparing your organizational documents that you should consider the possiblethat you should consider the possible implications if one of the owner wants toimplications if one of the owner wants to leave the business. It may seemleave the business. It may seem uncomfortable (and seem unnecessary)uncomfortable (and seem unnecessary) to think about this at the beginning, butto think about this at the beginning, but it can save a lot of stress and expense ifit can save a lot of stress and expense if these issues are worked out beforehand..these issues are worked out beforehand..
  • 26. V. S. Dastur & Co .V. S. Dastur & Co . Chartered AccountantsChartered Accountants Financing issuesFinancing issues  How do you intend to finance theHow do you intend to finance the growth of your business – do yougrowth of your business – do you anticipate seeking outsideanticipate seeking outside investments? If so what kinds ofinvestments? If so what kinds of investors will you target? Differentinvestors will you target? Different types of business entities are bettertypes of business entities are better suited to different types of investors.suited to different types of investors.
  • 27. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants CostsCosts  In general, the simpler legalIn general, the simpler legal structures are less expensive tostructures are less expensive to form, and require less money toform, and require less money to maintain. For example, in case ofmaintain. For example, in case of companies there are a lot of ROCcompanies there are a lot of ROC filings to be complied with.filings to be complied with.
  • 28. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants RecordkeepingRecordkeeping  You may also wish to consider theYou may also wish to consider the various recordkeeping requirementsvarious recordkeeping requirements that are applicable to each type ofthat are applicable to each type of business entity. Youbusiness entity. You’’ll need properll need proper accounting records regardless of theaccounting records regardless of the type of business entity, buttype of business entity, but additional legal recordkeepingadditional legal recordkeeping requirements may vary.requirements may vary.
  • 29. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants  For example, companies haveFor example, companies have relatively stringent recordkeepingrelatively stringent recordkeeping rules (compared to other entityrules (compared to other entity types), and also have shareholdertypes), and also have shareholder and annual meeting requirements.and annual meeting requirements.
  • 30. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Tax mattersTax matters  Different entities are affected byDifferent entities are affected by different tax provisions. In general,different tax provisions. In general, in a sole proprietorship the profitsin a sole proprietorship the profits and losses of the business will passand losses of the business will pass through the ownerthrough the owner’’s individual taxs individual tax return. This avoids additional layerreturn. This avoids additional layer of taxation that occurs at theof taxation that occurs at the corporation level.corporation level.
  • 31. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants Food for ThoughtFood for Thought Decision on the type of entityDecision on the type of entity to choose is a crucial decision havingto choose is a crucial decision having far reaching impact and should befar reaching impact and should be taken after due consultation.taken after due consultation. Invest time today to saveInvest time today to save heartburn tomorrow.heartburn tomorrow.
  • 32. V. S. Dastur & Co.V. S. Dastur & Co. Chartered AccountantsChartered Accountants THANK YOU and QUESTIONSTHANK YOU and QUESTIONS