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: 040-4652807roc.hyderabad@mca.gov.in

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