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A layman's primer into setting up Private Limited Company in India
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Setting up <YOUR OWN> Company
Vinodh Soundarajan7th August 2011
Introducing myself
• Co-founder, Colorsutra Retail Pvt Ltd• Advisor, Quadrivium Software Pvt Ltd• Partner, Futureshift Consulting Pte Ltd• VP Global Engineering, SumTotal systems• Director Product Development, JDA
http://in.linkedin.com/in/vinodhsoundarajan
Disclaimer
• These are my personal views and opinions based on the study/research I have conducted. Audience is encouraged to pursue their own research and discuss with CA’s/Legal Counsel before embarking on their venture
Your Choices are…
Type of
Company
• Sole Proprietor• Partnership (
http://www.mca.gov.in/Ministry/PS_act.html)
• Private Limited Company (http://www.mca.gov.in/Ministry/companies_act.html)
Starting Sole Proprietorship
• It starts when you are ready• Decide on the name and what its goal is. Define the value
it provides to customers. Ask the question “Why should the customer chose it over others”.
• Get a website.• Print Business Cards, Letterheads, brochures, sales receipts
(if applicable)• Line up past customers and testimonials. • If absolutely necessary, copyright your Trademark
• Maintain separate accounts - Bank and Credit Card• Income Tax – To be filed end of year (same as personal tax
filings). Work with CA to determine acceptable expenses for business
• VAT/CST/Excise/Service Taxes – Quarterly• Professional Tax and TDS filings - monthly
Sole Proprietorship - Pros/Cons
⁺ Minimal company/tax formalities to start⁺ Compliance, record-keeping is low⁺ Income Tax as an individual
⁻ Credibility, especially with big orders, customers⁻ Attracting investment, loans (personal property
collateral)
Pvt Ltd Company - I
Incorporation
• DIN• Name Search• Registration with Ministry of Company Affairs, Authorized vs Paid up Capital,
Stamp Duty• Form 1, MOA, AOA, Form 18, Form 32 -> Certificate of Incorporation (CIN)
PAN/TAN
• PAN – For all income tracking• TAN – Tax Deduction at Source
Sole Proprietorship1. Register the company with Registrar of Companies* under Shops &Establishment act2. Individual files Tax returns on his/her own PAN card, at the individual tax rates3. Yes. TDS is applicable
Registrar of CompaniesANDHRA PRADESH2ND FLOOR, CPWD BLDG.KENDRIYA SADAN, SULTAN BAZAR, KOTI,HYDERABAD - 500195PHONE 040-4657937,4652807FAX: [email protected]
Pvt Ltd Company - II
Board
Resolution
• Noting of MOA/AOA, Filing of Form 2 (Allotment of shares, Certificates, Letter of allotment), Selecting bankers, Appointment of Chairman/Secretary, Noting Company Registration and Registered Address, Appointment of Auditors, Declaration of Financial Year, Common Seal, Company and Director Stamps
Bank Account
• Selection of Bankers (Loan, Salary Account, Cash Transactions, Service)• Current Account, Signatories• Park unused funds in Debt Funds
VAT/CST/Prof Tax
• VAT – AP Commercial Taxes, Sales related• CST – Interstate buying of products/raw material• Professional Tax – Mandatory. 2500/- per company + 2500/- per Director• Service Tax Registration – As applicable
Sole Proprietorship1. No boards. You are your own King !!2. Yes, Bank account required. Will need proofs3. Yes, VAT and Service Tax must be registered
Pvt Ltd Company - III
Other Licens
es
• Shops and Establishment Registration• Municipality Registration• Central Excise, Customs (Import/Export), STPI/SEZ, SSI
Miscellaneous
(Board Resolut
ions)
• Payment Gateway• Courier signup• Partner sign up• Rental vs Owned property
Filings
• Annual filing for Income Tax Returns• Quarterly filing for VAT/CST• Monthly filing for TAN (TDS) and Professional Tax
Sole Proprietorship1. Shops and Establishment and other registrations required2. Income tax filing combined with Individual Tax returns3. Quarterly filing for VAT/CST/ST4. TDS and Professional Taxes need to be filed monthly
Advantages of Pvt Ltd Company
1. Scalability/lifetime of the company beyond one or two or handful of people
2. Institutionalization, formalization3. Preparing for external Infusion of Investment4. Tax benefits5. Liability limited to company assets -> compared
to personal property.
Managing Finances
• Have a budget and a plan• Keep separate Bank and Credit Card accounts for
business. Manage cash transactions carefully• Do monthly reviews on income vs expenses• Delay expenses to the latest possible time. Don’t
over-delay• Track Income like it is your life • File Tax returns on time
Summary
• Attention to Detail• Brace for a long journey – Mindset• Short cuts vs the Right way• Adjust lifestyle to avoid daily pressures