Tag Archives: MCA

Budget 2017, Income Tax, Start up

BUDGET 2017: HIGHLIGHTS FOR START-UPS

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The union budget 2017-18, laid down by Finance Minister Mr. Arun Jaitley, on the 1st of February, had several reforms for the growing sector of the economy i.e., the start-ups. After the launch of the Start-up India Project by the Prime Minister last year, the budget also introduced several relaxing norms for the start-ups. This year’s Budget has turned out to be in line with government’s vision and policies. It made several crucial announcements impacting start-ups directly and indirectly.The budget laid down measures that could provide relief to start-ups. The most significant points were:

 

  1. As a relief to start-ups, the Government proposed to extend the time period for availing tax benefit for three years in the first seven years of existence instead of three years out of first five years, a move that will allow new ventures to extract full benefit of the permitted deductions.

 

  1. For the purpose of carry forward of losses in start-ups, the condition of continuous holding of 51 per cent of voting rights has been relaxed. However, this is subject to the condition that the holding of the original promoter/promoters continues.

 

  1. In order to allow companies to use MAT(Minimum Alternate Tax) credit in future years, it was proposed to allow carry forward of MAT up to a period of 15 years instead of 10 years.

 

  1. Besides, the Budget proposed to reduce the income tax rate for smaller companies with annual turnover up to Rs. 50 crore to 25 per cent, in order to make micro, small and medium enterprises (MSMEs) more viable and also to encourage firms to migrate to company format and hence encouraging more start-ups to come forward.
Business Incorporation

LLP, PRIVATE LIMITED COMPANY & OPC

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Benefits of Incorporating a LIMITED LIABILITY PARTNERSHIP/PRIVATE LIMITED COMPANY/ONE PERSON COMPANY

 

A Limited Liability Partnership (LLP) is a partnership firm in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. Section 2(62) of the Act, defines a “One Person Company” as a company which has only one person as a member. OPC is a Private Limited Company with only 1 shareholder, similar to a Proprietorship firm, where firm is owned and managed by an individual. A private limited company, is a type of privately held business entity. This type of business entity limits owner liability to their shares, limits the number of shareholders to 200, and restricts shareholders from publicly trading shares. All three of the above are registered under the Ministry of Corporate Affairs. And all these entities are incorporated and registered under respective laws and are distinct from their shareholders/owners.

 

Raising Capital

Incorporate your business for investment opportunities. Whereas sole proprietorships and standard partnerships are limited as to how they can raise capital for their business, a corporation can raise capital through selling of corporate stock, or interest, in the company. Investors are more readily attracted to a business opportunity where their exposure to liability is at a minimum. Today, Angel Investors or Venture Capitalists or other investors prefer investing in an incorporated entity, to feel safe and assured while investing in any new business.

 

Credibility

Credibility is another benefit attached to an entity that is incorporated. Customers and other businesses usually feel more secure engaging in transactions with a corporate legal entity because it instills a feeling of confidence in the company. For investors and lenders to a business, it gives them knowledge that their investment assets are afforded better legal protections.

 

Perpetual Duration

The incorporated business has perpetual duration unless stated otherwise in the articles of incorporation. This unlimited life allows the entity to continue to exist and conduct business, even following the untimely death of an owner, or the decision by individual owners to discontinue their stake in the entity.

 

Liability Protection

In order to enjoy maximum liability protection from lawsuits, the company or corporation must be established, operated, and maintained properly, with all of the “operating formalities” properly implemented and adhered to. Since the shareholders are not personally responsible for the corporation’s obligations, they can be protected from corporate litigation. Thus, if the company is involved in a lawsuit, the shareholders’ personal homes or assets would not be at risk.

 

Tax Savings

Incorporate your business for tax benefits. There are substantial advantages, and savings, available to an incorporated business. One can also write off all his medical expenses, including prescriptions, through his corporation and one is able to write off 100% of his insurance premiums versus the mere 30% write-off available to partnerships or sole proprietorships. These are just a glimpse of the types of advantages available by establishing your company as a corporation.