Right Legal Form For Your Start-up

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This is probably the first road block in any entrepreneur’s way who’s looking at a
possible start up. This dilemma is best answered if they ask themselves
the following questions.

Q. Is my idea a profit making one?

If NO, then income tax exemption should be on top of the priority list.

If YES, then a few more questions need to be answered.

Q. Are personal assets being held to cover losses?

If NO, a sole proprietorship or partnership concern is the right way to move forward. If YES, that is you do not want to put forward your personal assets to cover for losses, it is advisable to go for one of the three below mentioned.

  •  Limited liability partnership,
  •  Private limited company,
  •  Public limited company.

What are the number of promoters for your start-up?

The next step is the length of the promoters list. While a partnership may contain a minimum 2 promoters going up to 20+ promoters. A company, if private may ideally have between 2 to 50 promoters while a public limited company may have 7 or more.

Are there any restrictions on transfers of ownership imposed?

Now the issue of the ownership should be addressed. How can transfer of ownership be done? Public limited companies have no restrictions.Private limited companies restricts transfer of ownership to outsiders. In partnership companies, the partnership deeds must be amended for such situations.

What is my Initial capital?

Now the initial capital needs to be gathered. While proprietorship and partnership don’t have a fixed minimum amount, private and public limited companies may require an initial financial boost of 1 lakh and 5 lakhs respectively.

How fast do you want to kick-start?

Now comes the time required to kick start operations. While proprietorship and partnership need a day or two, the other companies may take between 7 to 30 days.

And lastly, after operations have started in full flow, 2 points need to be addressed with care.

Firstly the tax implications of the company and how to manage them efficiently. And secondly, the source of future funding once the expansion plans have been chalked out. Now that the major obstacles for a start up have been addressed, lets look at “the little things” which are equally important.

  1. The name, your brand, the idea that consumers will recognize you by. Once decided, it must be registers online at the registrar of companies with a payment of Rs 200.
  2. All directors, Indian or foreigners, must apply for their Directors Identification Number(DIN) from the ministry of corporate affairs.
  3. The company must also obtain their Digital Signature certificate and must follow it up by getting the company documents signed at the state treasury.
  4. The company must now obtain its Permanent Account Number (PAN) and Tax Account Number(TAN).
  5. And lastly the company must fill form 101 at the commercial tax office for Value Added Tax and follow that up by registering for professional tax at the professional tax office.

After following the above steps you will have fulfilled all the essential criteria for registering your company. These steps if done properly will ensure an efficient and smooth operation of the enterprise.