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Similar a Startup - Company Formation and Founders Issue
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Startup - Company Formation and Founders Issue
- 1. Starting steps - Startups Presented at: Startup Master Class at Pune on 3-Sep-2016 Presented by: CA Jayesh Baheti @jayeshbaheti www.bandsindia.com
- 2. What will we discuss? 1. Comparison of structures of business entities 2. Considerations for choosing structure of an entity 3. Bumps in incorporation process 4. Founders agreement
- 3. Comparison Formation information Sole proprietorship Partnership Firm Company [Private/Public] One Person Company LLP Minimum requirements One Proprietor Minimum 2 partners Minimum 2/7 Members Only one member Minimum 2 Designated Partners & 2 partners Formation Requirement Only shop act certificate is required. The Shop Act fees vary as per number of employees. Partnership deed is required DIN for Directors Can be incorporated through MCA integrated incorporation form MOA & AOA DIN for Directors Can be incorporated through MCA integrated incorporation form MOA & AOA DIN for the Designated Partners PAN for Partners Name approval from ROC LLP Agreement Time required 2-8 Days 4-12 days 5-10 Days 5-10 days 5-10 Days
- 4. Comparison Features Sole proprietorship Partnership Firm Company One Person Company LLP Foreign Investment NRI / PIO can invest NRI / PIO can invest FDI Under FEM rules - regulations Not Allowed FDI Under FEM rules – regulations is allowed Loan to/ from promoters No restriction No restriction Legal restrictions Legal restrictions No restriction Additional Annual Compliances/ Audit NO NO YES Yes Comparatively Less Winding up formalities -- Dissolution Deed Legal procedure Legal procedure Legal Process Liability of promoters Unlimited Unlimited Limited Limited Limited
- 5. Comparison Features Sole proprietorship Partnership Firm Company One Person Company LLP Separation of management from ownership NO NO YES YES NO Legal Identity separate from owners NO NO YES YES YES Tax on profits distribution [Dividend] NA NA As per DDT As per DDT NA Applicability of MAT/AMT No No Yes Yes Yes
- 6. www.bandsindia.com Consideration for the structure 1. Ownership Control 2. Management Control 3. Capital/ Investment 4. Profits repatriation and Tax Issue 5. Estimated life of a business 6. Commercial considerations
- 7. Bumps in incorporation process 1. Name of the Company 2. Shareholders and shareholding 3. Director – Resident Director 4. Registered address 5. Attestation of director’s documents 6. Foreign Direct Investment 7. Where to incorporate? What about Founders agreement? Is it essential?
- 8. Founders Agreement 1. Equity 2. Exit 3. Employment
Notas del editor
- 1. An Indian Citizen can invest only in operating companies outside India and not in holding company. Convenience of customers and preference of investors may be deciding factors. 2. Director – at least one resident director – stay in India for more than 182 days in previous year 3. Registered address – It is mandatory and supporting documents are necessary i.e. NOC of owner along with electricity bill
- Equity – Proxy holding should be avoided if possible they should be kept for as short duration as possible. Family holding typically should be kept in a way to reflect actual promoters should be holding majority stake. Exit – Lock in period What happens if one founders wants to exit? Should he continue to hold shares? Conditions to hold shares Employment – Full time or Part time, when full time? What if employment is terminated? Voluntary or involuntary reasons? Compensation at each phase. Seed/ Angel Round, Series A and further