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There will be some requirements to be fulfilled after online LLP incorporation. Some of the important requirements are opening a bank account in the name of the LLP, Income tax return, annual compliance of an LLP with MCA. Opening a current bank account is mandatory for every type of entity. It allows receipt or payment of money for business transactions.
Advantages of a Current
Account for an LLP
Advantages of the current account are as under:
Ease of carrying on business:
A current account makes banking easy.
It has more benefits than a saving account. Banks provide many facilities to
the current account holder. It also provides value-added services without any
additional cost. It provides 24*7 banking, internet banking, doorstep banking,
which are very important to run a business smoothly.
Easy to manage personal and business transaction:
A current account is for business
transactions. Hence, it segregates personal transactions and business
transactions. It is useful to record transactions and maintain books of accounts.
It will show the true position of the LLP in terms of profit or loss.
The lenders always check the credit
rating of the LLP before giving any loans. Hence the bank statement of pure
business transactions can denote the true rating. Often, a letter of credit or
guarantee is needed so getting it from a bank with a current account increases
In any business, professionalism is a
basic requirement. Having a current account shows that the business is operational.
Carrying out transactions through the current account increases goodwill of the
Every business needs some credit in
day to day transactions. In a current account, the bank easily provides
overdraft facilities. Hence in case of
shortage of funds, overdraft facility can be availed. Bank may charge some interest,
but short term requirements will be met.
While opening a current account all the terms and conditions
must be specified for operating the account. After opening a current account,
all the partners must deposit the agreed amount of capital in the bank account.
After this, business can be started.
The need for a current
A current account is a first step of post registration
compliance for an LLP. It is necessary for every type of firm. A business
involves huge transactions daily and with a current account, any number of
transactions can be done. It is a non-interest bearing account. Hence it is
helpful to carry out business smoothly without restrictions on the number of
Documents required to
open a current bank account for an LLP.
Certificate of incorporation of LLP
PAN of LLP
Registered office address proof
PAN and address proofs of all
partners of the LLP
Any other document as specified by bank
The process of opening a current account is easy and fast. Hence it must be opened as soon as the LLP is incorporated, to start the business quickly. A current account is also mandatory for other business registrations such as GST, IEC, etc. So one must open a current account in the name of the LLP to avail all the advantages. An LLP must also need to take care of mandatory post compliances for an LLP.
It is well known that all business
must protect their IPs in order to grow. A company may have multiple
intellectual properties i.e. Patents, Trademarks, Copyrights, Trade Secrets
etc. It is important to secure the IP ’s at the right time to earn maximum
profits. This article discusses the key benefits of
trademark registration that can help your brand prosper.
Before we dive straight to the point
its important know;
What is a trademark?
A trademark is something that helps
consumers distinguishes your business from other companies. It can be a logo,
slogan, word etc.
some reasons why trademark registration is
important for your business:
Trademark works like your PR
Trademark is a tool that puts your
company out in public. It becomes the brand’s identity. TM is the face of the
company. A company’s reputation, services/products are determined by its
presence in the market. For example, in
the fashion industry, a trademark / a brand name becomes an incentive for
people to choose that brand over the others. If your registered trademark can
strike a chord with customers and they believe in offered quality, your brand
is bound to grow.
It’s an asset for the company
Once the brand has made a niche in the business, its value propels. The brand’s value will increase with business reputation. Hence online trademark registration helps you to monetize that value in the future and secure it from possible infringement. However, trademark registration is possible only if the brand name is unique. hence getting a trademark search before applying for TM is a must
Helps you market your brand
The consumer markets have gone global,
and hence the need to be unique and distinct has increased. The recognition a
brand gets through the tradename or its unique trademarked design like the coca
cola bottle creates an impact on the consumer’s psyche. It helps to make a mark
and increase brands visibility.
Open avenues for business expansion
Once the registration is complete and
your trademark is safe. You have the flexibility to go forward with expansion
from one industry to another. In the future, if you plan on selling your
business to another corporation, having a registered trademark adds to the
company’s value. This allows you to enjoy the fruits of the hard work you have
put into building the brand.
Registration makes your brand one of a
kind. Similar marks cannot be filed or used. If someone does, you have the
right to sue and claim for damages.
Hence it brings clarity and avoids any confusion among the consumers.
The consumers identify the products
and services through the trade name. This helps in creating a market reputation
and the trademark becomes the face of the company.
Rights and legal protection
Registration gives the owner the right
to sell, license, and make money out of the brand exclusively. The right to sue
the infringers is the most important right of a registered trademark
owner. one can be sure of the
infringement claims. Once the trademark is recorded, one may require proper
legal evidence in order to defend a trademark publicly.
Increases credibility and trust among the
Registration gives the client an idea
that the company is concerned about brand building and serving authentic,
Help you make your brand global
Trademark registration in India helps the domestic traders in getting exposed to the global market through the International Trademark System. Non-Resident Indians and foreigners are eligible to register a trademark in India. Once the notional phase is complete, one has option to go for international registration under Madrid protocol
Right to use the registered symbol
Registration allows using the
registered symbol beside your trademark for goods and services listed in the
Any company that wishes to prosper and
grow should invest in IPR. It helps the
company thrive in so many ways if its structured and managed aptly. Trademarks
are the most effective as they are the once’s the consumers are directly
connected to. The impact a trademark makes can help companies to create
goodwill and a reputation with the customers on a personal basis.
Are you such a company who are
planning to invest in their IP? Contact Legalwiz.in for any IPR related query. For online
registration of trademark call on 1800-313-4151, professionals at LW will be
happy to help you.
A Trademark helps to differentiate goods or services. It gives
an identity to products and services. It gives the right to ownership of such
products and services. The question is whether only a registered trademark
gives the ownership right? Or an unregistered trademark holder also owns such
rights and to what extent? The difference between unregistered and registered
trademark will help to clarify.
What is an unregistered
Any mark such as a word, symbol, logo, device that gives identity
to goods or services but is not registered with the Trademark Act is an
unregistered trademark. Unregistered trademarks have limited rights of
protection as compared to registered trademarks. It does not have infringement
rights but is protected under common law. They can prevent others from using a
similar trademark under the law of Passing off.
What is a registered
Any brand name or logo registered under the Trademark Act is a registered trademark. Registering a trademark will add value to products and services. Such trademark is an asset of the owner. It has a statutory right against infringement. It is always better to have a registered trademark. The validity of a registered trademark is 10 years from the date of application. The owner has to renew it every 10 years.
The difference can be further understood from the following:
A registered trademark is valid all
over India. There is no need to prove its existence or goodwill in the market.
But in unregistered trademark, one has to prove its noteworthy existence in the
market. It helps to claim the goodwill of the brand name. Also, they are
limited to a particular city or region only, since they are not well known
enough. Hence it is difficult to prove their valuable existence outside their
Both registered and unregistered trademark get different protection under a different law. One of the advantages of registered trademark is that it is protected under the Trademark Act. Further, the registration of a trademark is valid for a class or classes within which it is applied. Hence the protection is available in such a particular class or classes. So no one else can use a similar brand name for any goods or services of the same class. While in unregistered trademark the person is not protected for any particular products or services. Hence there is a possibility of usage of similar brand name for the same products or services. Hence the chances of taking illegal benefit of other’s brand name are higher.
C. Right to sue others
A registered trademark owner can sue
any person for using their trademark. It must be used in the ordinary course of
business. In unregistered trademark, the owner can take protection under common
law, where the burden of proof is more. The owner of an unregistered trademark has
to prove how the use of a trademark by the other person causes damage to the
goodwill of their products or services. If unable to prove it, then one cannot
claim such a trademark.
D. Use of sign
If the trademark is registered then
the owner can use the “Ò” symbol on its brand name. It increases the authenticity of
products and services. Such products or services will be considered as products
or services with quality. The unregistered trademark can use the “Ô” symbol on its brand name. It shows that the brand is not registered and
it does not have any legal protection.
The differences mentioned above will ensure a proper decision
whether to register a trademark or not. An unregistered trademark does not have
any statutory right. Hence a registered trademark is always advantageous.
There’s a lot of buzz around startups for a decade and there are people turning to entrepreneurship overnight. Call it a fad or real passion, but it all boils down to how well you can implement your idea and be consistent about it. The general perception is that startups are glamorous and make you famous. But wait, there’s some reality checks to be done. Falling short on delivering on your own expectations is disappointing, but it is better to take precautions by making sure you know the realities.
have a brilliant idea and there’s a fair amount of tech stuff involved. There
are plenty of fundings made in this space so it won’t be that tough.
It is thrilling to merge technology with anything that you offer but that will not turn you into a millionaire overnight. Gone are the booming days of dotcom revolution and now with so much of competition around, the bankability of an idea can put investors at sixes and sevens. Starting and registering a new business is surely a step in the right direction but then expectations attached to it can be wrong. That is like building a house of cards which is bound to crumble. What matters more than just the idea is a resilience and staunch courage; be prepared to rack up occasional debts and still make your ends meet.
start thinking not to stay committed to a monotonous schedule that a day-time
job offered. It may start with thought to do all those little things you always
wanted to do in free time and probably visit a place or two that you would, by
taking paid leaves at work. So, no more taking leave approvals!
get it straight, you will be working more than you ever had. Ever. Period!
will be countless things left to do & finish and you may often feel running
out of time to check that list off.
of newbies entering the entrepreneurial arena find it difficult to establish a
suitable working ecosystem to free themselves from their own small involvement.
Initially, though, you can’t escape such situations because you know that the
business is built around you. It will require your unvarying attention and even
micro-management in some cases.
This happens if you commit a mistake initially by designing a business that is an extension of the founder and not an entity separate from the founder. And you’ll have plenty of operational errands to run; bill payments, keeping customers satisfied and even tapping on every possible opportunity that comes your way.
am like friends with my investors! They are my pals! They will understand me and
my business decisions because our relationship is beyond money. We share a
great rapport; drinks and hugs on weekends. We can’t have fights because our
friendship matters more than anything else.
sure, but with a twist. It’s more like friends with benefits; jolly when people
are around, morose when things get sour in terms of business.
You only love each other for the money that is involved in the business – both ways. For you will love them when their investments will help you grow business and they will reciprocate till your business helps their money grow. The answer lies in keeping them satisfied with timely returns and build trust. Trust is built over time and you’ll have to prove your worth and their trust in you as well. That’s when you will have a long term relationship – with trust.
traditional office spaces will be a thing of past and that human interaction is
a highly overrated thing. It just requires proper planning to get and control a
virtual team – just leverage the internet. That way I can get natural talent at
a cheaper rate from any corner of the world working exclusively for me.
a revolution in the form of the remote workplace is doing rounds since past
couple of years. There are already a few solutions available in the market that
makes the remote working experience smooth. Nonetheless, there’s an old saying
you can modify: “keep your friends close, your enemies closer, and your core
team the closest”.
Distilling it further, keeping offices least virtual during the initial days will really benefit the business. This is because the emergencies may arise anytime and you will have to take certain decisions on the floor. You might not always have the luxury of Skype calls. There is no way you can replace the physical presence of a team. Building your A-team is the essential part which plays a larger role to define the future of your startup.
Being on floor real-time will also help you supervise the team collaboration and impact. This motivates the team as well, enabling team to run smoothly and cohesively. You may well witness a few signs of things happening in a jiffy on a floor which you’d miss during a short Skype call.
came up with the idea and I helped to raise the fund as well. Then why should I
give up my share of equity to tech partner? I should be retaining the majority
stake in the company and he should be happy with whatever the company has to
offer as a part of the equity.
an interesting story about the idea:
was not Thomas Edison who invented the light bulb first. He actually worked to
make it commercially viable. There were many others chasing to be the 1st one
to create a commercial light bulb. But we all know who did it first.
though ideas are important…executing ideas is the key.
see themselves as valuable assets these days and they do have all the potential
to add significant value to the startup. A good, capable developer is easily
snapped up by other companies and therefore, the one whom you trust can be the
most valuable asset in your team. Giving even a bit more than 50% will have
your business reaping the best possible advantages. Or imagine giving less and
then seeing the app you just developed disappearing from the app store itself. An idea way out is to have a mutual agreement
at the beginning itself with all the clarifications put on paper.
If you are an entrepreneur now, I am sure you must have had a
few things in your head while starting up. What were those expectations? Were
you right expecting it? If no, what was your reality when you actually started
making money? Do share your thoughts in the comments.
MCA has come up with a new update which mandates every
specified company to file a new form INC-22 A –ACTIVE. Here is all about new
form ACTIVE- (Active Company Tagging Identities
Every company registered on or before 31st
December 2017 has to mandatorily file new eform INC-22 A with the particulars
of the company along with its registered office. The company who have filed the
form will be marked as “ACTIVE Compliant”.
The form must be filed on or before 25th April
2019. The fee for filing form is Nil if filed within the due date. If the form
is not filed within the due date, the Company will be marked as “ACTIVE-
non-compliant”. Further, MCA will charge late filing fees.
Requirements to file
To file such form the company must have fulfilled the following
requirements otherwise the company will not be able to file form INC-22 A.
Following companies are not required to file form.
If the form is not filed by the company then other than late
filing fees and change of the company’s status, the company will not be able to
carry on the following activity.
Be compliant with all the filing with MCA to avoid penalties.
Hence, file the form INC-22 A within the due date with MCA to keep the status
of the company as an “Active Compliant”.
This amendment will be applicable from 25th February 2019.
It is best to decide the ideal business structure before starting a new business. This decision is taken based on many factors like how many people start it. If it is two or more, then registering a Private Limited Company or a Partnership firm serves a better option. Consider the aspects that can impact your business and also the problems you wish to avoid before locking down on any of the options.
is an overview for both the business entities:
For a new business, the partnership structure is the simplest and most basic structure. To register a partnership firm is advisable but not a compulsion. It will have a partnership agreement with the objectives, responsibilities, and duties of partners written in it. This will also have an exit strategy for partners with clarity on the allocation of shares for each partner.
On the other hand, Private Company is a
little complex but has its own set of perks. Firstly, it creates a separate legal
identity which limits the liability of involved members. But then, it is
compulsory to register a Company to start a business.
a Partnership has over a Company:
A simple agreement between two or more people is the only pre-requisite to start a partnership firm. For the Company, there are a few procedural formalities to be fulfilled.
A company is managed by the directors and members with actions governed by organizations like RBI, MCA, SEBI etc. While it is only the partnership agreement that governs the partners. This is why the flexibility and freedom to take decisions is higher.
Termination of a partnership firm is easier than the Company. It is so because of the agreement which is valid only between the partners regarding the closure is enough. Company closure will require everyone to follow a proper winding up procedure has to be followed.
The company holds a greater amount of credibility compared to other business structure due to its high compliance requirement. Moreover, it is governed by statutory bodies like MCA and SEBI that keep a check upon the business from time to time it. Raising funds is easier internally and even from external sources.
This table will help you gauge and decide which structure is suitable for your business.
Private limited Company
Companies Act, 2013
Indian Partnership Act, 1932
2. Registration Requirement
Mandatory to set up business as a Private Limited Company to comply with the Act.
Both registered and
unregistered partnerships are
legal, but the registered
entity is preferred.
3. Number of members
minimum two and max 200 shareholders
formed with minimum 2 partners, but not exceeding 50
4. Separate Legal Entity
Company is a separate entity with an ability to own assets in its name.
A partnership firm has no
separate identity from its partners.
5. Liability Protection
Liability of members is limited
to the extent of the unpaid value of shares subscribed.
are jointly and severally liable to pay the debts of the Partnership Firm
6. Statutory Audit
appointed within 30
audit not applicable. Tax audit may be applicable based on turnover
7. Ownership Transferability
Ownership can be transferred
through shares if shareholders give their consent
is not transferable easily, clause of partnership deed should be referred
8. Uninterrupted Existence
in members or directors does not affect the company’s existence.
Change in partner leads to dissolution or formation of another partnership firm.
9. Foreign Participation
nationals can invest under the Automatic Route
nationals cannot be made partner with
10. Tax Benefits
comparatively moderate Tax is levied as the tax rate for small companies is
reduced to 25%
levied is 30% of the business profit on which is on a higher side.
11. Statutory Compliances
compliance that includes annual filings. Also, it must comply with plenty of
other compliance requirements.
is much less except for filing a separate ITR there are no other mandatory
The above table and its preceding information
can help you take the right decision regarding choosing the right business
structure for your business. Prior to finalizing the structure, it is
recommended to render business professional services to take stay sure.
Internet, and you will definitely come across scores of business ideas. Each
one appears more tempting than the other. Thus, it is must to know when a
business idea is worth it. It would need some effort on your part.
If you want to
open a business and have enough resources such as money and skills, continue to
read. Here I will discuss how to know when a business idea is worth pursuing.
Why Should You Know?
It is important to know whether a business idea is
worth pursuing several reasons. Globally, between 60 per cent and 90 per cent
of businesses flounder and fail due to a variety of reasons. Shortage of money,
low demand for a product or service, and no market research can cause a business
businessperson, it is important to make
sure your business does not lose due to these reasons. So, here are some ways
to know when a business idea is worth pursuing.
Uniqueness of Business
Most startups or business ventures are copycats of successful enterprises in other countries. You cannot be sure about being successful in India by copying a foreign example.
serve Indians by understanding spending habits and other factors can succeed. A
great example is the RedBus, which is a brainchild
of four Indian entrepreneurs. RedBus became a runaway success due to its
You will know
when a business idea is worth pursuing when it is unique. Yet it can meet the
demands of several people, regardless of how much money they spend and where
Demand & Supply
Demand and supply in the local market is an excellent way to know when a business idea is worth pursuing. There are several great business ideas that require minimal investment. Yet, they are set to become great hits because there is ceaseless demand for the product or service.
In such instances,
your business idea could be a copycat. Yet, existing suppliers cannot suffice
market demands. In India, a food truck or snack stall or making herbal beauty
and skincare products can be successful. This is because the demand is far greater
than the supply.
Ability to Go Online
idea that provides you with the ability to go online is worth pursuing. The
reason is simple. Founder of Microsoft says: “If your business is not on the
Internet, then your business will be out of business.”
According to Statista, some 329.1 Indians are projected to buy goods and services online by 2020. These statistics show that your business has to be online too. That is if you wish to get any respectable slice of the proverbial market pie.
A business idea is worth pursuing when it can go online, due to several reasons. An online business enables you to spread into newer markets rather quickly. A sizeable part of sales and profits occur online. Brand development becomes easier when your business has the ability to go online.
Another way to
know when a business idea is worth pursuing is your own passion. Because your
success will also depend upon your relentless passion.
You may not have the necessary education or even expertise in some business.
Here, your passion can compensate for
There are several success stories where passion is the sole reason for success. Most such entrepreneurs began with little or negligible skills in that trade. Yet, they were passionate about the field that led to success.
business will also help you rise above the times when you feel the business can fail. Almost every successful
entrepreneur or businessperson has been through this phase of self-doubt. Yet,
if you are passionate about it, the business idea is worth pursuing.
whether you are able to turnaround your business swiftly. This means you can
innovate your business, its operations
and other functions rapidly. A business idea is worth pursuing only if it offers ease to innovate and
companies ran into huge losses or failed because they could not a turnaround.
So, their product and service offerings took a body blow from competitors. Regardless of whether a business is small or
large, rapid turnarounds are necessary.
Delegation of Authority
A business idea is only worth pursuing when you can delegate authority over who runs it. Opening a business where delegating responsibilities is impossible is not even worth considering. You are not a supernatural being to run a business round the clock. Find a business where duties and responsibilities can be easily given to staff or a relative.
responsibilities has its own inherent benefits. You are able to develop a
second line of command, should you need to
leave for any reason. Also, you are developing the core capabilities vital to
the success of your business. Highly centralized businesses, regardless of how small, usually exhibit retarded
growth. Decentralized ones flourish faster.
several other things to know when a business idea is worth pursuing. Any
business that can get excellent word-of-the-mouth publicity is worth pursuing.
So are business ideas that help to improve people’s lives rather than focusing
your gut instinct to know whether a business you are considering is worth following. A lot of great businesses were born when ordinary people
attempted to fill a much felt void. Unless you can do that, no business idea is
worthy to pour your money and efforts into.
When opening a business, your investments are much more than money. Hence, investing every resource needs to be done with astuteness. These suggestions will help know whether any business idea is worth pursuing or not.
Ministry of Corporate Affairs has taken a vital step to
safeguard the micro and small sector businesses. Such businesses were incurring
debts due to unpaid or delayed receipts of goods and services provided by them.
To find and reduce such debts MCA has introduced a new form in which all
specified companies have to file the return with MCA who has made delay in
payment to the Micro and small business.
What is MSME Form I?
It is the new form introduced by MCA. Such form is for the
filing of half yearly return for the outstanding payments to Micro or Small
Every specified company has to file details of all
outstanding dues to Micro or small enterprises suppliers existing on the date
of notification within 30 days from 22nd January 2019.
All companies including Public, Private and One Person Company who get supplies of goods or services from Micro or Small enterprises and whose payment is due or not paid for more than 45 days are included in the specified company. All such specified companies have to file this form.
Definition of Micro and
According to the MSME Act, the micro and small enterprises
include the following enterprises.
Manufacturing- Investment in plant & machinery
does not exceed
Rs. 25 Lakh
More than Rs. 25
Lakh but does not exceed Rs. 5 Crore
Investment in equipment
Does not exceed
Rs. 10 Lakh
More than Rs. 10
Lakh but does not exceed Rs. 2 Crore
Due Date for filing
form MSME I
The form MSME-I is to be filed twice every year. But the first time it is to be filed within 30 days from the date of notification which is 21st February 2019. After that half yearly return is to be filed every year. The due date is 31st October for the months April to September and 30th April for October to March of every year.
This form is
not to be filed in the following cases.
enterprise which falls under the definition of medium enterprises (Manufacturing
sector- Investment in plant & machinery is more than 5 crore but does not
exceed 10 crores and Service sector- Investment in equipment is more than 2
crore but does not exceed 5 crores).
the payment is made within 45 days and there are no pending dues to such
enterprises for more than 45 days.
case of pending dues for more than 45 days to enterprises other than Micro and
In case of non-filing of form or filing incorrect information, the MCA shall charge a penalty to both- the Company and Directors or Authorized person.
All such companies to whom this form is applicable shall file the form within the due dates to avoid hefty penalties. Hence, start finding your suppliers who are Micro or Small enterprises and registered under the MSME ACT and whose payment is due for more than 45 days.
LLP was introduced a decade ago.
But, it has not successfully received wide acceptance from targeted segments. Some
misconceptions are still prevailing in general about this structure. Today, I
am going to clear up many such misconceptions.
Myth 1: LLP has higher tax liability than Partnership
LLP is a corporate structure. So,
many assume that the tax liability is much higher compared to the general
partnership. This becomes a common reason for lending upon Partnership and not
Well, let me clear this up. LLP
is just another Partnership for tax authorities. Whether it is the tax on the
firm’s income or partners’ the provisions are the same for both structures.
So, if this reason is holding you
from LLP registration, let’s not stop. But, let’s not forget to consider the
Myth 2: There is no Compliance for LLP
This is completely untrue. It is
a corporate structure formed under the LLP Act, 2008. The same prescribes much
compliance at various events. LLP must file annual returns, even if it has no
transaction during the year. Also, Income Tax Return filing is a must for an
While few follow this understanding,
others believe in the next.
Myth 3: Compliance level is too high like a Company
No, that is not true. Yes, you
need to file a few forms regularly. But,
the level is much lesser than a company. Unlike a company, an LLP does not need
to maintain registers and conducts meetings. There is no procedural formality
like meetings or resolutions unless provided.
Further, Audit attracts yearly
fixed cost for the company. But in LLP, it applies after crossing any of the
Turnover – INR 40 Lakh
Capital Contribution – INR 25 Lakh
Myth 4: Partners get limited returns
I will again repeat point 2. It
is a Partnership. And Returns are not termed as the dividend here. Partners get
returns in following three heads:
Interest on capital
Share of profit
The partners can take home all
the profit in pre-decided ratio because there is no limit for distribution of
profit. LLP structure provides the flexibility to decide how and when a partner
is paid. However, you must consider what is allowable remuneration to partners
under Income Tax law.
While the dividend from the
company is double-taxed, it is not the case in LLP. Therefore, the distribution
of profit is quite cost-efficient here.
This does not fit to the definition
of myth. Funding needs have been observed as one of the primary reasons for
choosing a corporate structure. Therefore, I wanted to clear your thoughts on
funding in an LLP.
It is fairly observed that a
Private Company is preferred over an LLP for investments, even if both offer
limited liability and many similar features. I can outline the following
reasons why a company wins the race:
In a company, it is equity-based ownership and
Shares are more transferable compared to capital
Further, share can also be issued at a premium.
But an LLP does not stand chance for same. Therefore premium is a primary
reason for investors’ attraction to the company structure.
Myth 6: Profit sharing and the capital ratio is the same
Generally, while execution of LLP
Agreement, partners understand that the profit sharing ratio and capital
contribution ratio must be same. The fact is that the partners are free to
Profit sharing ratio is what a
partner takes home. And capital is what a partner contributes to business.
Further, capital decides the ownership. Both factors are independent of each
Myth 7: There is no distinction between partners
If you have carefully understood what an LLP is, you will
find two types of partners – Partner and Designated Partner. This distinction
is not provided in Partnership but in LLP. As LLP is a separate legal identity,
it needs to assign the responsibilities and obligations on a specific person.
Therefore, there are designated partners appointed. Apart from prescribed responsibilities,
such partners are responsible for the annual and other compliance of the LLP.
Understand here how
Designated Partners are different from other partners in an LLP.
Myth 8: All data is accessible to the public
This confusion is created as that
is the case in a Company. However, in LLP the data of partners is reserved.
Where name, DIN and other details of Designated Partners are available on the
MCA portal, it is reserved for general partners.
Further, the LLP agreement is
also a private document. The concern is raised because it also outlines the
internal agreement between partners.
The documents such as annual
returns, financial statement and other forms are made public. The banks, FIs
and other parties to a contract build the business credibility based on these
documents. Hence, if you find public documents as a demerit for you, you should
rather consider it as a plus point.
Myth 9: LLP registration is an expensive affair
Last, but not least. If you
believe that LLP is costly to set up as compared to a general partnership, it
is not true. The registration cost heavily depends on the professional’s
services and changes because the Government fee is fairly constant. While it is
up to you to choose a professional, we are taking into consideration the
Government fee for registration. The form filing fee is nearly 750-1000 INR at
present for online LLP registration.
The process also requires paying stamp duty for execution of the agreement. Payable
stamp duty is decided based on the capital contribution and the concerned
State. The basic amount payable is INR 500, however, varies based on these
factors. The formation is affordable with LegalWiz.in services. Further, our
customised offerings help to choose the right package in a cost-efficient
While starting a business you need to understand the structure from basics. The business structure primarily affects the manner of operations, taxability and many other matters. Therefore, choose the business structure wisely and clear up any misconception you have. I have tried to address the misconceptions, which we have come across frequently. If you still don’t find your answer, LegalWiz.in expert is just a call away.
When one wants to own a business single-handedly then there are limited options as to the form of business. One can start by registering a Sole proprietorship firm or One Person Company. One cannot change the structure of business in a short span as and when required. So it is a major decision selecting the right structure of business right at the start. Here is the guide which helps to select the right form of business in case of single ownership.
One Person Company
The Companies Act, 2013 introduced the concept of One Person Company. It is a form of business with dual benefit. One is the benefit of single ownership and the other is the corporate structure. One Person Company means a company with a single member or a single shareholder. OPC can be started with 1 director – which is not possible with a Private or Public company. Yet, the incorporation process of OPC is similar to the process of other company.
Sole Proprietorship Firm
A Proprietorship firm means firm run
single-handedly. It is not a separate legal entity. Hence the proprietor is
liable for each decision. The proprietor is the sole controller of the
business. A proprietorship firm is
registered in different ways as there is no specific ACT to register it.
Given below are the differences between One Person
Company and Sole Proprietorship
One Person Company
Separate Legal Entity
OPC is a separate legal entity and it can sue &
can be sued.
Proprietorship firm has no separate legal
Liability of owner
The liability is limited up to the paid-up share
capital of the company.
The liability is not limited up to the fund
invested in the firm. If needed, personal assets can also be used to repay
Number of directors
Minimum 1 director is required and a maximum of
15 directors can be there in OPC.
There is no concept of a director in a
proprietorship firm. The sole owner is the only person involved.
The nominee of the OPC will become the member in
case of death of the member.
There is no perpetual succession. The firm will
dissolve in case of death of the sole owner.
Registration of OPC is done with Registrar of companies. It is an online process managed by the Ministry of Corporate Affairs.
It can be registered under MSME, Shop &
Establishment, GST, Professional Tax, IEC, etc. Because there is no specific
Act for it.
It is a company and the tax rates of companies
are applicable to OPC.
As there is no separate existence the income will
add to the income of proprietor. The proprietor is liable for tax as per the
tax slab of an Individual.
As it is governed by the Companies Act, the compliance’s
are more as compared to proprietorship firm. But there is less compliance as
compared to other types of companies.
There is no mandatory compliance other than
filing an income tax return. However one has to comply with other Acts as
applicable, such as GST.
The data of the OPC are available on the MCA
portal. The constitutional documents such as MOA and AOA are also available
in the public domain.
One cannot find the data of the firm anywhere.
The creditability of OPC is more due to its
transparent business structure and data is easily verifiable due to free
access. Funds from banks and the financial institution can be raised easily.
The creditability is very low in this type of
firm. Creditability depends on the experience and performance of the
OPC will have a unique name. It is different from any other entity. And any other person cannot use a similar name for its business. One can check it online through the MCA portal.
One can start firm with any name. It can create
confusion for the customer if the names of firms are similar.
The Company will function according to its
constitutional documents. The Memorandum of Association and Articles of
Association are considered its constitutional documents.
It is managed single-handedly and not governed by
any ACT so it will not require any such document.
To convert OPC into a Private limited company or
Public limited company, a minimum 2 years must pass except in specified case
as given in Act.
No minimum lock-in period to convert a
proprietorship firm to any other entity.
The differences listed above between
the two forms of businesses will help to select the correct form of business.
The concept of One Person Company is new in India. Hence it will take some time to gain acceptance amongst entrepreneurs. For a single owner, it is the best form of business with a corporate structure. OPC also has more compliances than a proprietorship firm. The nature of business can help to decide the structure of a business.