Conversion of Partnership firm into Private Limited Company

As we already know, a partnership firm has various limitations and the scope of expanding is very less as compared to a private limited company. Many partnership firms nowadays convert into Private Limited Companies for the various benefits that it offers like Limited Liability, Transferability of shares, easy access to funds, Perpetual Succession etc.

Benefits of conversion :-

1. Goodwill: The goodwill of the Partnership firm is kept intact and continues to enjoy the same success story with the benefit of a better legal recognition.

2. Transfer of assets and liabilities:All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.

3. Capital Gain Tax: No Capital Gains tax shall be charged on transfer of property from firm to Company. (uponfulfillment of certain conditions)

4. Stamp Duty: No instrument of transfer is required to be executed (since all the property of the firm will vest in the company) and hence no stamp duty is required to be paid.

5. Carry Forward and Set off Losses and Unabsorbed Depreciation: The accumulated loss and any unabsorbed depreciation of Partnership firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Such loss can be carried for further eight years in the hands of the successor company.

Major Changes in Companies Act, 2013

A) The Concept of Joint Stock Company is Done Away.

B) Definition of Company has wider Meaning and implication. (Part I, Chapter XXI of CA, 2013). I.e. word “company” includes any partnership firm, limited liability partnership, cooperative society, society or any other business entity formed under any other law for the time being in force which applies for registration under this Part.

C) Section 565 to 581, Part IX of Companies Act, 1956 is have been omitted. The Concept was famously know as PART XI companies.

Requirements

a) Registered Partnership firm with minimum 7 Partners

b) Minimum Share Capital shall be Rs. 100,000 (INR One Lac) for conversion into a Private Limited Company

c) Minimum Share Capital shall be Rs. 500,000 (INR five Lac) for conversion into a Public Limited Co.

d) If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered

e) Minimum 7 Shareholders

f) Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)

g) The directors and shareholders can be same person

h) DIN (Director Identification Number) for all the Directors

i) DSC (Digital Signature Certificate) for two of the Directors

Mandatory conditions for Conversion :-

The partners shall become the shareholders of the newly formed company in the same proportions as their capital accounts stood in the book of the firm as on the date of conversion.
The only way by which partners receive consideration is by way of allotment of shares in company and the partners share holding in the company in aggregate shall be more or equal to 50% of its total voting power and continue to be as such for 5 years from the date of conversion.

Procedure of Conversion

1. Hold a meeting of the members

Assent of majority of its partners is required ( as are present for the purpose of registering the firm under the Companies Act, 2013). Since the liability of the members of the firm is unlimited, when a firm desires to register itself as a company as a limited company, the assent of the majority is required, not less than ¾ of the partners should be present in person (proxies are allowed).

2. Obtaining the Name Approval in INC 1 for Proposed Company

An application in Form needs to be filed with the Registrar of Companies (ROC) in Form INC-1 with various attachments stating the fact that the partnership firm is proposed to be converted under the Companies Act.

3. Publishing the Advertisement in Two Newspaper (English Daily and Vernacular)

For the purpose of clause (b) of section 374 of the Act, every ‘company’ seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration under the said Part, seeking objections, if any within twenty one clear days from the date of publication of notice and the said advertisement shall be in Form No. URC. 2, which shall be published in a newspaper, in English and in the principal vernacular language of the district in which Limited Liability Partnership is in existence and should be circulated in that district.

4. Affidavit

File an affidavit, duly notarised, from all the ] partners to provide that in the event of registration, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution as partnership firm, limited liability partnership, cooperative society, society or any other business entity, as the case may be.

5. Filing of E form URC 1 with ROC with Following Attachments:- (For Companies limited by Shares)

a) A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them respectively

b) A list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN , passport number(if any) with expiry date, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;

c) An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under sub section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;

d) A copy of the Act of Parliament or other Indian law, deed of partnership, bye laws or other instrument constituting or regulating the company and duly verified in the manner provided in sub-rule(4)

e) A statement specifying the following particulars:—

(i) the nominal share capital of the company and the number of shares into which it is divided;

(ii) the number of shares taken and the amount paid on each share;

(iii) the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may require, as the last word or words thereof;

g) Written consent or No Objection Certificate from all the secured creditors of the applicant.

h) Written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under this part.

6. Certificate of Incorporation

If the Registrar in fully satisfied on the basis of documents and information filed by the applicants and decides that the applicant should be registered, he shall issue a certificate of incorporation in Form No. INC.11

*Where a firm has obtained a certificate of registration under section 367, an intimation to this effect shall be given within fifteen days of such registration to the concerned Registrar of firms under which it was originally registered, along with papers for its dissolution as a firm.

Thus, with the need of the hour, more and more partnerships are expanding and turning into private limited companies for the purpose of corporisation for the various benefits that it offers.

For help and assistance, visit us at www.gapeseedconsulting.com or call us at +919599444639.

INCREASE IN AUTHORIZED SHARE CAPITAL OF PRIVATE LIMITED COMPANY

The Companies Act 2013 defines that “Authorized capital” or “nominal capital” means such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company.

The Companies Act 2013 allows the companies to alter its authorized share capital with certain procedures which are governed by Section 61-64 of the Act along with Section 13 and 14 of the act which governs the alterations to the Chartered Documents being the Memorandum Of Association and Articles Of Association of the company.

PROCEDURE FOR INCREASING AUTHORIZED SHARE CAPITAL:

Check whether the company prima-facie authorized by the Articles of association to increase the share capital. If it does not authorize, the proceedings are to be completed with the objective of altering them.
To convene the board meeting for enabling the board to call for extraordinary general meeting (if not passed at Annual General Meeting) and to get approval from the shareholders for increasing the authorized share capital.
Call for an extraordinary general meeting of the shareholders of the company by sending a notice with clear agenda, explanatory statements and the resolutions to be passed to alter the Memorandum of Association and Articles of Association, which are to be altered for the purpose of increasing the authorized share capital.
Pass the resolutions for increasing the authorized share capital of the company and corresponding alterations in Memorandum of association and Articles of Association by special resolution.
Authorize the board to file necessary forms and resolutions with ROC having jurisdiction.
Filing the e- form SH7 with ROC by paying the requisite fee.

Altering the Memorandum of association and Articles of Association.

Section 61 of the Companies Act, 2013 states about Power of limited company to alter its share capital, sub-clause further states that a limited company having a share capital may, if so authorized by its articles, alter its memorandum in its general meeting to increase its authorized share capital by such amount as it thinks expedient.
A company can increase its authorized share capital by altering the Memorandum of association. Section 13 of the Companies Act deals with altering the memorandum of association and section 14 of the above-said act deals with altering the Articles of association.
Section 13 of the Act states that as provided in Section 61, a company may, by a special resolution and after complying with the procedure specified in this section, alter the provisions of its memorandum.
A company can alter its articles by passing a special resolution and every alteration of the articles under Section 14 and a copy of the order approving such alteration has to be filed with the registrar with a printed copy of altered articles within a period of fifteen days in a manner prescribed. Alteration of articles will be valid only if it’s originally in the articles.

List Of Documents Required As Attachments For Filing SH-7

Certified true copy of the resolution for alteration of capital is mandatory in case of increase in share capital independently by company.
Copy of order of central government is mandatory in case of increase in share capital with central Government order.
Copy of the order of the tribunal is mandatory in case of increase in share capital with Central Government.
Certified true copy of board resolution authorizing redemption of redeemable preference shares is displayed and mandatory in case of redemption of redeemable preference shares.
Altered Memorandum of association is mandatory in case of increase in share capital independently or by order of Central Government or increase in number of members.
Altered Articles of association are mandatory in case the same are altered.
Working for calculations of ratios (in case of conversions) is mandatory in case of increase in share capital with central government order.

For more information about Increase in Authorized Share Capital of Private Limited Company , feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

Activities to Be Performed after Incorporation Of Company

If you have recently incorporated your private limited company or under the process of incorporation then you must get yourself familiar to the new provisions of Companies act 2013.

The most important things that every promoter or director of a newly incorporated private limited company should know after getting certificate of incorporation or before getting into the process of incorporation.

Checking Company’s Master Data after Incorporation

Certificate of incorporation for a private limited company is the last step in the process of incorporation. Once you received the certificate of incorporation, it means, all legal formalities required for company registration are completed in India.

At Gapeseed Consulting, we have legal consultants like chartered accountants and Company Secratories who help us in the process of company incorporation and do all such things that are required to complete the registration process.

Now the question is how to cross check to know that the company is incorporated with correct details like authorized share capital, registered office, category, CIN, paid-up share capital, status and date of incorporation etc.

These are the most important thing that every company should keep it right.

We suggest you to check these details in company’s master data by visitingthe website of Ministry Of Corporate Affairs after getting certificate of incorporation.

If you find any changes or incorrect details then immediately inform to your chartered accountant or Company Secretary to take necessary actions for its correction.

You need to check following things in company’s master data;

Authorized share capital
Paid up share capital
Registered office address
Status i.e. Active or Inactive
Date of incorporation

File E-Form INC22 For Situation Of Registered Office

Situation of registered office has to be intimated within 30 days from the date of incorporation to the registrar of companies. This can also be filed at the time of incorporation along with other e-forms if registered office of the company is going to be the director’s residence or owned house.

If it’s not filed at the time of incorporation then within 30 days from the date of incorporation, then it is a Non-Compliance u/s 22 of the Companies Act,2013

As per section 12 of Companies act 2013, a company shall, on and from the 15th day of its incorporation and all times thereafter shall have a registered office. This means the company should enter into a rent or lease agreement within 15 days from the date of incorporation and within 30 days from the date of registration should file INC-22 with ROC.

Display Company’s Identity And Other Details

After incorporation, it’s the duty of the company to display following things outside the company’s registered office;

Name of the company
Registered office address of the company
Corporate identity number or CIN
Telephone number, email ID
Website address and fax number if any

These details are also required to be printed in all business letters, bill-heads and in all other official publications.

Putting CIN or corporate identity number in all official publications is a new requirement in Companies act 2013. This provision was not there in old Companies act 1956.

In case of failure to quote CIN number, penalty of Rs. 1,000 per day shall be imposed on the defaulting company and on every officer in default for every day during which such default continues up to a maximum limit of Rs. 1,00,000.

If company has changed its name in last two years then it shall paint or affix or print, as the case may be, along with its name, the former name or names so changed in all official publication including letter head and bill-heads.

Appointment Of Company Auditor

As per section 139(6) of Companies Act 2013, company has to appoint its first auditor within 30 days from the date of incorporation in a board meeting. If board of directors are not able to appoint then it has to be appointed within 90 days in a general meeting of members.

First auditor as appointed is required to hold office till the conclusion of first annual general meeting. Companies Act 2013 does not require any form to be filed with ROC but this is a requirement of law and it has to be complied within time.

Open A Bank Account And Issue Shares To Subscribers

Companies Act 2013 requires the company to allot and deliver share certificates within 2 monthsfrom the date of incorporation to all subscribers of MOA. It’s also mentioned that each subscriber will deposit subscription money as specified in MOA to company’s bank account by cheque or through net banking.

We suggest to open a bank account with the help of MOA, AOA and certificate of incorporation and then takecheque from each subscriber and deposit it in company’s bank account.

File Audit Report, Financial Statements And Annual Report Before Due Date

A private limited company is required to file its balance sheet, profit and loss account, auditor’s report and annual return every financial year before the due date with the registrar of companies. Non compliance to this provision will attract additional fee in addition to the normal fee that are charged while filing the e-Form.

Now you know mandatory things that promoter or directors of a private limited company should remember after incorporation of a private limited company. In case of any doubt or clarification please contact us by using our comment form.

For more information about Activities to Be Performed after Incorporation Of Company, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Procedures and Documentation For Startups,
Payroll Services for Startups.

Importance of Accounting for Startups

Significance of Accounting for Startups

Accounting must be given prime importance in any business entity as it is most required, especially for controlling and for providing financial reports at the end of the year. Accounting will help a Startup to determine its productivity and its profit from the initial stages of the company. This provides entrepreneurs a method for maintaining accounting information. The accountant hired by the company will keep track of the money spent for business use as well as for personal use, this will help in strategizing on how the money can be saved. In the initial stages of a Startup, the company must hire consultants or interim CFOs to maintain simple accounts rather than spending more on in-house professional resource.

Benefits of Accounting for Startups in Initial Stage

Forecasting Financial Estimates

Every Startup needs to provide information regarding its financial estimates to banks, investors or lenders to obtain funds in return from them. Accounting helps the business to make a business plan which includes estimated monthly expenditure, economic forecast, projected rate of growth of the Startup. This information is really important for a Startup to lure more and more investors to invest in their idea. The investors also ensure that the entrepreneur has a reliable projection of its company’s financial expectations.

Determine Profitability

Accounting helps an entrepreneur to determine its profitability in the future. It helps in monitoring the progress of the company and also to make necessary amendments where necessary. Through accounting, entrepreneurs will get to know where they need to use their assets to generate profit. An entrepreneur also needs to provide financial information to its investors to ensure them that they will be paid in a timely manner. A monthly statement such as a balance sheet and an income statement shows how if a business is blooming or not, these statements helps in determining a business general profitability.

Budget Expenses

Accounting helps an entrepreneur in setting up a Budget for expenditure on various aspects affecting a Startup. Accounting helps in maintaining records of the cashflow in the business, capital is used in hiring of employees, advertising, purchasing of inventory, petty items. Budget helps an entrepreneur is reducing expenditure on not so essential items and by saving the capital for future purposes.

Payroll Accounting

Accounting for startups help an entrepreneur to record its employees’ compensation such as salaries, bonuses, commissions and any other means earned by an employee. It also maintains employees’ portion of Health insurance premium, Social security taxes, paid holidays. This creates a database for the company consisting of all of its employees. Entrepreneurs must consult accounting professionals during the incorporation of its business. This is a must for an entrepreneur as outsourcing will help a company to grow much faster with the help of a trained professional. Outsourcing helps in many ways such as:

Tax Specialization

Taxation is a main aspect where a Startup may face some difficulties beyond the areas of fund raising and finance. This is where trained professionals like Chartered Accountants play a crucial role in the growth of the Startup. A trained professional who knows the tax laws whether it may be direct tax, indirect tax or any other tax involved will smoothen the working of the business. Well managed and transparent taxation is one of the most required aspect in Accounting for Startups.

Focus on Business

An accountant helps an entrepreneur by letting them focus on their product rather than worrying about the finance. The entrepreneur can create partnerships, create relationships, market its product with the help of an accountant. It will provide valuable information to the business to make it grow and earn profits. An accountant will also help in covering the cost as well as reducing the expenses incurred by the company.

Secretarial Duties

A professional accountant can also perform duties of a company secretary as they are specialist in company law. They also see to it that the company is complying and adhering to the laws laid by the Company Act, 2013. Start-ups strictly need to follow these rules from the start as it may result in the dissolution of the company.

Valuable Business Partner

Outsourcing accounting gives a huge importance to start-ups as these outsourcing firms have wide range of expertise working under them. This support from such firms will be very valuable for the Startup as it has a lot more experience when it comes to raising funds, financial planning, financial reporting. It is better to get financial assistance from trained professionals at the early stages of a Startup as it makes the business develop and grow faster. Many entrepreneurs lack accounting skills and tend to make wrong decisions regarding accounting which acts as a negative aspect in accounting for startups.

For more information on Importance of Accounting for Startups, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Private Limited Company and its Incorporation

WHAT IS A PRIVATE LIMITED COMPANY?

A private limited company is a type of privately held business entity registered under the Companies Act, 2013. In this type of business entity, the owners are liable to their shares. Private companies issue stock and have shareholders, they cannot trade on public exchanges and shares are not issued through an initial public offering (IPO). A private limited company must have at least one shareholder and can have a maximum of fifty shareholders. This makes the entity to stand between partnership and a public company. It is widely acceptable among entrepreneurs as it is more convenient to start a Private Limited Company.

INCORPORATION OF A PRIVATE LIMITED COMPANY

A Private Limited Company can be incorporated as per the procedure explained below :

Director Identification Number (DIN) & Digital Signature Certificate (DSC)

A person intending to become a director of a company requires a unique identification number which is issued by the Ministry of Corporate Affairs. This number then is used to record the details of the director of the company. The Digital Signature Certificate is the digitalised version of all the paper certificates. This certificate can be used to prove the director’s identity, access information and sign documents digitally. Certain documents are required for DIR-3 application:

Identity Proof: A copy of PAN card is mandatory whereas a copy of the Driver’s license is optional.
Address Proof: A copy of the Passport / Election ID / AADHAR card / Driver’s License is sufficient.
Passport Size photo
Mobile Number
Education Qualification
Verification signed by the applicant.

Company Name Availability

The name of the company must not be pre-existing, applicants must first search for any existing Trademark and then decide on the company’s name. The Promoters of the company have to provide at least 6 names in the order of their preference to the Registrar of Companies for name availability.

Memorandum of Association (MOA) & Articles of Association (AOA)

When the name of the company has been approved by the Registrar of Companies then the Subscribers have to draft a MOA & AOA specifying their Names, Address, Occupation and the sign the subscription pages of the Memorandum and Articles of Association formed.

The Memorandum of Association is a document regarding the main objectives as well as the secondary objectives of a company. It covers all the necessary fundamental provisions of the company’s constitution.

Articles of Association is a contract based on mutual understanding between the company and its members defining their rights and duties.

Filing E-Forms with Registrar of Companies

After the drafting of Memorandum of Association and Articles of Association, an application has to be sent to the Registrar of Companies regarding the incorporation of the company. This Application must contain all the necessary documents of the Company and its Directors.

Verification of Documents

The company must pay the desired fees to the Registrar of Companies and must get Stamp Duty to get the documents verified.

Issue of Certificate of Incorporation

When all the documents are verified and duly approved by the Registrar of Companies, a digitalised ‘Certificate of Incorporation’ is mailed to the Directors of the company. Once the Incorporation Certificate is received , company can start with its operations .

ADVANTAGES OF A PRIVATE LIMITED COMPANY

Separate Legal Entity

A company is a legal entity and a juristic person under the law. The members (Shareholders/Directors) of a company have no liability to the creditors of the company. This form of organisation has wide legal capacity, acquire and hold property and also incur debts in its own name. As a juristic person, a company can sue in its own name and can be sued by others. A company’s common seal is considered as its signature but is not mandatory.

Limited Liability

Limited liability means the status of being legally responsible only to a limited amount of debts of a company. A company is a separate legal entity from its members. The liability for repayment of debts incurred by the company lies on the company itself and not on the owner. Unlike other business entities the liability of the members in respect of the company’s debts is limited.

Uninterrupted Existence

A private limited company has perpetual succession. A perpetual succession means the company has uninterrupted existence until it is legally dissolved or voluntarily. A company, being a separate legal person will continue to exist even if a member dies or ceases irrespective of the changes in the membership.

Easy Transferability

Shares of a Private Limited company which is limited by the number of shares can be transferred by a shareholder to any other person. The shares and other interest of any member in the company is dealt as a movable property and can be transferred in the manner provided by the Company. Shares can be transferred by filing and signing a share transfer form and handing it over to the buyer of the shares along with the share certificate. It is easier for a member to leave the membership of the company and also to transfer its share of ownership.

Owning Property

A company as a legal entity is capable of owning its funds and properties. No shareholder can make any claim upon the property of the company as the owner of the company and the company itself are two separate entities.

If you are looking for incorporating a private limited company or still perplexed as to what is most appropriate for your kind of business, feel free to get in touch with us. You can visit us for consultation and speak to our CS to ascertain the right direction.

For more information on Incorporation of a Private LTD company , feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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One Person Company and its Incorporation

ONE PERSON COMPANY

One Person Company (OPC) is a form of business entity that is owned and managed by a single entrepreneur. This concept was introduced in India through the Companies Act, 2013 supporting entrepreneurs who are capable of starting a venture by creating a single person economic entity. A One Person Company is also a separate legal entity from its members just like a Private Limited Company or a Limited Liability Company. In this type of business entity, only one person is required who can be the Director and as well as the shareholder of the company. This venture of One Person Company is still in its emerging stages which makes it much more difficult for entrepreneurs to adopt, it is mainly suitable for people starting an unregistered Proprietorship. The entrepreneur can set up their company without sharing their profits as One Person Company does not need a middleman to target the markets.

Features of One Person Company (OPC)

One Shareholder

One Person Company is a business entity which is owned and managed by a single person. The Company Incorporation Rule states that only a resident and also a citizen of India can form a One Person Company. The entrepreneur hold all the shares of the company as it has only one member. The people who are Foreign citizens and are Non-Resident citizens cannot indulge in the formation of a One Person Company. A shareholder can only have shares in a single One Person Company and not in various companies.

Director

A One Person Company can be managed by a Single Person. In this type of business entity, the Sole Shareholder can become the Sole Director of the business. A One Person Company can have a maximum number of 15 directors even if it may be having a Sole Shareholder.

Nominee

This states that the Shareholder of the company has to nominate a person who in the event of death or inability to continue the work in the company will come forward to take the charge of the One Person Company. The present shareholder will issue a written consent in the name of the nominee, the nominee must also be a resident and a citizen of Indian. The person nominated must not have any other One Person Company under control.

Incorporation of a One Person Company (OPC) in India

A One person Company can be incorporated as per the procedure explained below :

Director Identification Number (DIN) & Digital Signature Certificate (DSC)

1. Identity Proof: A copy of PAN card is mandatory whereas a copy of the Driver’s license is optional.

2. Address Proof: A copy of the Passport / Election ID / AADHAR card / Driver’s License is sufficient.

3. Passport Size photo

4. Mobile Number

5. Education Qualification

6. Verification signed by the applicant.

Company Name Availability

The name of the company must not be pre-existing, applicants must first search for any existing Trademark and then decide on the company’s name. The Promoter of the company have to provide at least 6 names in the order of their preference to the Registrar of Companies for name availability.

Memorandum of Association (MOA) & Articles of Association (AOA)

When the name of the company has been approved by the Registrar of Companies then the Subscriber have to draft a MOA & AOA specifying their Names, Address, Occupation and the sign the subscription pages of the Memorandum and Articles of Association formed.

Articles of Association is a contract based on mutual understanding between the company and its members defining their rights and duties.

Filing E-Forms with Registrar of Companies

Verification of Documents

The company must pay the desired fees to the Registrar of Companies and must get Stamp Duty to get the documents verified.

Issue of Certificate of Incorporation

Post Incorporation

After the Incorporation of a One Person company some necessary formalities are required immediately, such formalities are:

 Opening a Current Bank account in the name of the Company

 The Company must apply for the Shop Act License

 The Shareholder must be issued a Share certificate by the Company

 The subscription money must be payed through the Current Bank account

of the Company

BENEFITS

1. A One Person Company is a separate business entity and have Limited liability to its members.

2. This type of Company helps an entrepreneur to establish its own business without depending upon a second person.

3. A Legal Auditor is not required in this business unlike any other business enterprise.

4. A One Person Company being a separate legal entity can own property in the Company’s name and the shareholder cannot make any claim upon the property.

For more information on Incorporation, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Limited Liability Partnership and its Incorporation (LLP)

It is an association of 2 or more persons who have set up this business structure for carrying on a lawful business with a view to profit, with the partners having a limited state of liability. LLPs are governed under the Limited liability Partnership Act, 2008. It can be said that LLP is a combination of Partnership and Private Limited Company as it encompasses features of both. Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses in which all investors wish to take an active role in management.

How to Incorporate a New Limited Liability Partnership

A Limited Liability Partnership may be incorporated as per the procedure explained below :

Registration

Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services . Fill in the registration form then select your user name and password. Therein, upload digital signature certificate.

Designated Partners Identification Number (DPIN)

All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN) / Director Identification Number (DIN)”.

Digital Signature Certificate

Partners/Designated partners whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorised certifying agency.

Name reservation

Log on to the LLP portal. After login, click “E-Forms” link. Open Form-1 for reservation of name and fill in the details. Choose the name of the proposed LLP (upto 6 choices can be indicated). After this attach the digital signatures and submit the e-form and pay the necessary fee.

Details of minimum two designated partners of the proposed LLP, (at least one of them must be a resident of India) is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners.

Incorporation of LLP

Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement”.
Pay the prescribed registration fee as per the slab given in LLP Rules, 2009, based on the total monetary value of contribution of partners in the proposed LLP. Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP . On submission of complete documents, the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act can register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.

Incorporation documents must be filed with the following attachments.

1. Copy of authorisation where the partner is a limited liability partnership, or company, or a limited liability partnership incorporated outside India or a company incorporated outside India.
2. Proof of address of registered office of limited liability partnership.
3. Details in respect of names of partners/witnesses and their signatures.
4. Attachments in respect of details of individuals/bodies corporate where the number exceeds five.
5. Optional attachments as may be required.

LLP agreement must be filed in (E-Form 3) with the Registrar within 30 days of incorporation.
The LLP Agreement must be stamped in accordance with the stamp Act.

CHARACTERSTICS

Separate legal entity : Like a company LLP also has a separate legal entity. So the partners and the LLP are distinct from each other.

No requirement of minimum capital : In case of companies there should be a minimum amount of capital that should be brought by the members or owners who want to form it. But to start an LLP there is no requirement of minimum capital.

Minimum number of members : To start a limited liability partnership at least two members are required initially. However, there is no mentioned limit on the maximum number of partners.

No requirement of compulsory audit : All the companiesare required to get their accounts audited. But in case of LLP, there is no such mandatory requirement.

BENEFITS

• It is flexible to organise the internal structure of an LLP
• There is no maximum limit for the no. of partners in LLP
• Raising and utilisation of funds depends on the partners will
• LLP is exempted of Dividend Distribution Tax (DDT)
• The partners have limited liability
• There is no requirement of minimum capital
• One can easily become a Partner or leave the LLP
• An LLP can easily attract finance from PE Investors, financial institutions, etc.

DEMERITS

• Any act of the Partner without the other partner , may blind the LLP
• LLP cannot raise money from public, unlike a company.
• Angel investor or venture capital firm does not prefer LLP

E-FORM INC-32

EVERYTHING ABOUT E-FORM INC-32

The Ministry of Corporate Affairs has introduced E – Form INC-32 under SPICe (Simplified Proforma for Incorporating Company Electronically) scheme vide MCA’s notification dated 01/10/2016 notifying Companies fourth amendment Rules,2016. This is a very significant initiative for technological advancement. The basic aim is to simplify the incorporation of a company by filling up an e-form INC-32.

EarlierMCA had come with the integrated process of incorporation by filing E-form INC-29. This was a major reform brought by MCA for incorporation of a company which required filing of only one E-form i.e. INC-29 as against the 5 forms filed earlier. As the entire process is in single form, correct filing would mean approval in 48 hours.

For further simplification, MCA has facilitated the process of incorporation by introducing SPICe E-form INC-32 which provides the same facilities as were provided in Form INC-29 with facilitating the process by introducing filing of Memorandum and Article of Association electronically. As against the earlier process, it has the potential to save lots of time and energy, if properly implemented. However, further clarification with regard to incorporation under SPICe is to be provided by Ministry of Corporate Affairs.

THE FORM CAN BE FILED EVEN AFTER INC-1
As against the facility provided by the e-form INC-29, e-form INC 32 has the facility to fill the form of incorporation of a company even after filing for the INC-1. That is, even if you’ve already filed the INC-1, you can apply for the name of the company INC-32.

IN DEPTH INFORMATION AS COMPARED TO INC-29
The five purposes for company registration, which are application for DIN allotment, reservation of name, incorporation and even PAN and TAN, are fulfilled by both INC-32 and INC-29, but INC-32 has in depth information as compared to INC-29 with an additional introduction of filing of MOA and AOA of the company electronically.

ELECTRONIC FILING OF MOA AND AOA
Now under SPICe, Memorandum and Articles of Association should be filed electronically, simplifying the whole process. In E-form INC-33 a copy paste of the objects of the company has to be done and in E-Form INC-34 a choice has to be made amongst the pre-drafted clauses of Articles of Association.
This has made the task of drafting Memorandum and Article of Association much easier for professionals.

DIGITAL SIGNATURES OF SUBSCRIBERS AND WITNESS
With the introduction of the new electronic Memorandum and Article of Association of the company, there is no need of signatures of subscribers and witness. Only the digital signatures of subscribers and witness on the E-Form INC-33 and E-form INC-34 would be enough for the specific purpose!

SHORTCOMINGS OF INC 32

Obtaining digital signatures is a costly affair.
The maximum limit for initial subscribers is 7, exceeding to which, the normal procedure of incorporation must be followed.
One single name can be proposed in the form as there is no provision for entering multiple names.

Further to this if you seek any further clarity, feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.

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PROCEDURES and DOCUMENTATION FOR STARTUPS

Now that you have an understanding about the launch procedure and also in ascertaining the best
suitable option for your start-up idea. This post will help you understand the procedure for Formation/Registration/Incorporation of Private and Public Company in India. Also Detailed Documents required for the same can be found here.

Whether you are just starting a business or incorporating a business already in existence, it is helpful to know and understand the formation and ongoing requirements each state places on corporations and limited liability companies. Incorporation / Formation of company involve a number of steps. We have tried to simplify the procedure to the maximum extent possible in the following steps

Step 1: Digital Signature

The basic step to company incorporation is to get DSC made of all directors. The Information
Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in
electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance programme are required to be filed with the use of Digital Signatures by the person authorised to sign the documents. To know the names of Certification Agency (CA) from where DSC can be acquired refer to our Free Guide.

Step 2: Acquire Director Identification Number

INCOME TAX PAN IS MANDATORY, so before applying of DIN a person must have his PAN number.
Details on PAN and DIN must be same. Step by step process to be followed by the applicant can be found in our resource section.

Step 3: Register DSC

Third step is to register DSC of the person authorized to sign E-forms on MCA21 or if you want us to do it for you drop us a line here.

Step 4: Apply for Reservation of Name [S.4(4)]

As per section 4(4) of Companies Act, 2013 read with rule 9 of Companies Incorporation Rules, 2014, application is to be made to registrar for reservation of name. 6 names can be proposed after checking its availability at MCA21 and as per guidelines given in the said rules and the procedures & documents required to be attached to INC – 1 are also available in the resource section.

Step 5: Drafting and Printing of Memorandum and Articles of Association

A public company limited by shares may adopt all or any of the regulations contained in model
articles of association registered along with its memorandum of association. The memorandum and articles shall be in conformity with the provisions of Section 4 and 5 of the Companies Act 2013. Read more here.

Step 6: Filing of Company Incorporation form – eform INC 7, DIR 12 & INC 22

As per Rule-12 of Companies (Incorporation) Rules, 2014, application for incorporation of a private and Public company, with the Registrar, within whose jurisdiction the registered office of the company is proposed to be situated, shall be filed in Form no. INC 7 [Rule 12 to 18] along with Form no. INC.22 for situation of registered office of the Company, (as the case selected in form no. INC 7) and DIR -12. There is a list of documents to be filled for Filing of company incorporation form get in touch with us to know it all.

Step 7: Filing of Commencement of Business – eform INC 21

On registration, a company cannot commence business or exercise any borrowing powers until it
files a declaration by directors in Form INC – 21 to the effect that every subscriber to the
memorandum has paid the value of the shares agreed to be taken by them as specified in section
1(1)(a).

E-form INC.21 is required to be filed with concerned Registrar of Companies for obtaining approval for commencement of Business and exercise of borrowing powers. This E-form is required to be filed by all companies incorporated under Companies Act 2013.

To know about the Procedure for commencement of Business under Companies Act, 2013 check out
our resources.

We hope that this post helped in understanding the procedures and documentations requirement
for your start-up. In case if you have any query about our startup series or services that we offer, please send in an email to info@gapeseedconsulting.com

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Basics For Incorporating A Startup

E-FORM INC-32

5 Steps for Setting up a Business in India

Start Up India Stand Up India Scheme

Basics For Incorporating A Startup

Now that you have understood the basics of CFO Services for Startups and the Payroll Services and the advantages of payroll for startups, our blog 3 in the series is all about Incorporating a startup, the options and categorization as sanctioned by the Ministry of Corporate Affairs.

To help you understand the requirements, following are the types of Incorporation as laid down by the Ministry of Corporate Affairs and other government authorities in some cases. Anyone who is interested in Incorporating a Startup can choose to launch business from the following categories:

1. One person Company

Anyone can incorporate “one person company” as a corporate body. He or she is only one entitled shareholder and Director of the company. The pre-conditions for one person company include:

Shareholder and Director Must be citizen or resident in India
Only One Director at a time
Nominee for shareholder is must

If you are planning of incorporating a startup which is home run, family run or service oriented you can probably begin with one person company and once you get established you can think of expansion.

2. Private Limited Company

A private limited company is the one with two directors and two shareholders. This is the basic requisite to incorporate private limited company. The maximum number of members in a private limited company can be 200. Company cannot invite general public to subscribe its shares or debentures. A private limited company can

Register with MCA as body corporate
Business governed by board of directors
Limited liability of members
Can not accept deposit from Public

People incorporating a startup which involves product, delivery and revolves around mass consumption or even which involves a number of stakeholders involved from the beginning should go for private limited company. This adds credibility to your idea at the launch stage itself.

3. Limited Liability Partnership (LLP)

LLP is a corporate structure that combines the flexibility of a partnership and the advantage of limited liability. Owing to flexibility in structure and operation, it would be useful for small and medium enterprises, in general and for the enterprises in service sector professionals.

It is body corporate and legal entity separate from its partners
Limited liability of partner.
Minimum two partners
On LLP, the Partnership Act 1932 not applicable.

There are pros and cons attached but entrepreneurs who are in the process of incorporating a startup which involves further licensing and compliances with other government authorities opt for LLPs. This is mostly a preferred option for startups entering the BFSI sector.

How we can help as an Agency for Setting Up a Business in India

Gapeseed Consulting Pvt Ltd is a financial services company with a team of experts coming from the Accounting and Legal backgrounds. Startups usually have reservations with the set of services, registration protocols etc and they find it complex to execute. We are here to simplify business functions and thereby multiplying the possibilities.

Our set of services include, Incorporation, Accounting, Tax and Company Law compliance, consulting, drafting agreements, Payroll and CFO Services.

Financial Services for Startups

The challenge to startups is not just to manage and grow business, it is also about managing in the right way. Entrepreneurs need advice on regular basis so that all compliances are met right from the day of incorporation of business.
We at Gapeseed Consulting provide virtual CFO Services to support your business. We understand that Startups usually do not hire a senior Chartered Accountant or Finance Professional at initial stage because it is very difficult situation for entrepreneur and Senior Financial Professional to do full time job in Startup. Therefore Virtual CFO Services is win-win situation for both.

Virtual CFO or Interim CFO Services in Delhi from Gapeseed Consulting can offer the follow-ing solutions:

Business Plan
Investor Relations
Financial Analytics
Budgeting and forecasting.
Cash Flow Management
Board & Management Reporting
Accounting Team Search
Transaction Accounting

Gapeseed Consulting has also launched Financial Services Startup Packages to make it more suitable for the startup requisites.

Allied Services

One of our startup client who will be soon celebrating their first anniversary felt dramatically low at a point when they realized about the compliances and regular taxation norms. Apparently those were nor considered at the planning stage and hence they felt the pressure to perform as per law & guidelines.

Since we had helped them with the Registration process, they asked for our help and Gapeseed Consulting readily deputed our in-house chartered accountant Mr.Jain as the Interim CFO to manage the Liquor Import Compliances for Incorporating a Business in India while setting up a business.

Some of our basic allied services include the management of compliance, taxation and other procedures that include:

Tax Deducted at Source- TDS is to be deducted by company at the time of booking or making payment exceeding prescribed limits. TDS to be deposited every month before 7th day of next month. TDS return is to be filed quarterly before 15th of each quarter.
Service Tax- Presently Service tax rate is 14%. Service Tax is to be deposited before 6th day of every month by company and before 6th of every quarter in case of individuals. Return is to be filed half yearly.
Advance Tax- Advance tax is to be calculated every quarter and to be deposited by company before due date. It is payable before 15th June, 15th Sep, 15th Dec and 15th March.
Income Tax Return- Income Tax Return is to be filed annually after accounts are adopted by Board and Audited by Chartered Accountant” – we provide help to startup prepare complete accounts so that auditor can audit without any problem. We provide all information, details required for audit.
Transaction structuring/ Opinion – Our experts give opinion on transaction structuring on any matter of accounting, taxation, debt or equity.
MCA Filings- Returns to be filed with MCA for shifting of registered office, change in directors, increase in share capital, filing of Board and EGM/AGM Resolutions.
RBI matters for filing FCGPR, or any other matter.
Drafting Shareholders Agreement and Debenture Agreement for Private Limited Companies.
Drafting of contracts, patent and trad mark registration and other services

We hope that this post helped in understanding the launch procedure and also in ascertaining the best suitable option for your startup idea. Our next post will be around the documentation that is required to complete the registration process for a startup or new business.

In case of any query pertaining to startup series or services that we offer, please send in an email to info@gapeseedconsulting.com

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