startup - company formation and founders issue
TRANSCRIPT
Starting steps - Startups
Presented at: Startup Master Class at Pune on 3-Sep-2016Presented by: CA Jayesh [email protected]
What will we discuss?1. Comparison of structures of business entities2. Considerations for choosing structure of an entity3. Bumps in incorporation process4. Founders agreement
ComparisonFormation
informationSole
proprietorshipPartnership
FirmCompany
[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 DirectorsCan 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 PartnersName approval
from ROCLLP Agreement
Time required
2-8 Days 4-12 days 5-10 Days 5-10 days 5-10 Days
ComparisonFeatures Sole
proprietorshipPartnership 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
ComparisonFeatures Sole
proprietorshipPartnership 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
www.bandsindia.com
Consideration for the structure
1. Ownership Control2. Management Control3. Capital/ Investment4. Profits repatriation and Tax Issue5. Estimated life of a business6. Commercial considerations
Bumps in incorporation process1. Name of the Company2. Shareholders and shareholding3. Director – Resident Director4. Registered address5. Attestation of director’s documents6. Foreign Direct Investment 7. Where to incorporate?
What about Founders agreement? Is it essential?
Founders Agreement1. Equity2. Exit3. Employment