How To Choose Your Business Setup

Starting a new business needs some decision making at a very initial stage. But they have bearing on the overall success of the business. The first question we need to answer is to choose the Business setup. There are various options. Indian law provides many options for a business set up. It contains a small business entity like a proprietor and can go to a complex one like a public limited company or further a listed company.

In this article you will understand all these setups.

Business Setup

Different Types of Business Setup to Choose

1. Proprietorship

a). How to set up a proprietorship?

It is the simplest form of business setup. There is no need to apply for a separate PAN for starting a business as an individual. You can have different names for the business. No extra compliances are required.

b). How the income of a proprietor will be taxed in income tax?

The income of a proprietor is taxed on the normal tax rates of an individual. The income is shown in the income tax return of the proprietor as an income from business or profession. The tax rates of individuals are applicable on a proprietorship business.

2. HUF

a). How to set up an HUF?

A HUF is automatically formed at the time of marriage & includes women such as wives & unmarried persons/daughters. There must be one common ancestor to continue the lineage/descendants. Gifts, wills, property sale or inheritance are all collectively shared as assets & so not repeatedly subject to tax.

Upon being established, a HUF needs to be officially registered in its name. It should have a legal deed, containing details of members and the business nature of the HUF. A PAN number and bank account should be opened in the name of the HUF.

b). How to tax income of an HUF?

A Hindu Undivided family unit can save taxes by creating & pooling in assets to form an overall entity. This is taxed separately from its individual members.Hindus, Buddhists, Jains, and Sikhs can also form a HUF. This unit has its own PAN and files tax returns independently of its members.

The main advantage of this is that each family member can claim their own respective exemption as a deduction or tax rebate. Additionally, insurance can be undertaken for the entire family unit, whilst internal functional member salaries can be disbursed & later deducted from the total income (treated as an expense). Investment returns are again taxable overall, however HUF tax rates are the same as for individuals. This saves money for the family.

3. Partnership firm

a). How to set up a partnership firm?

A formal partnership deed on a stamp paper is required. The names of all partners and their details should be there in the deed. The object clause is required in partnership deed. The manner of sharing the profits , salary of partners and capital contribution is also covered in partnership deeds.

b). How to tax income of a partnership firm?

There is a separate tax rate to tax the income of a partnership. Their tax incidence is highest in comparison to all other forms of business. They don’t get any minimum exemption like the individual and huf.

4. LLP

a). How to set up an LLP?

An LLP can be set up fairly easily. All that’s required is a minimum of 2 or more assigned partners, their respective documents, including PAN & address proof, such as Aadhar, Driving license, etc. Furthermore, a photo of each participant & credentials pertaining to the property where the business will be based or conducted. These could be a rent agreement, tax receipt/ownership deed or latest utility bill. The same also applies in the case of partnerships with foreign nationals (using their documents from abroad).

b). How to tax income of an LLP?

This is simple & tax is levied at a flat rate of 30% on all income under Rs. 1 Cr, beyond which an additional 10% surcharge is applied over the total amount. Method of payment include downloading & filling a physical challan document (ITNS 280), subsequently making the payment at a designated bank branch. Alternatively, one can pay online via the e-pay portal.

5. OPC

a). How to set up an OPC?

A One Person Company (OPC) can be established with just 1 director & member (totalling a minimum of 2 people overall). This is as per Section 2(62) of the Company’s Act 2013. Firstly, one needs to apply for a Digital Signature Certificate (DSC) of the intended director. This requires an Aadhar & PAN card (both for ID, address proof & tax purposes), photo, email address & phone number.

Upon receiving the DSC, one needs to apply for the Director Identification Number (DIN) for the proposed Director using the SPICe form. This should be accompanied by the name and the address proof of the director. For existing companies, form DIR-3 is required. Since January 2018, the applicant doesn’t need to file this separately. The DIN can now be applied within the SPICe form for up to three directors.

Now the name of the company needs submitting & approval. This needs to be in the form of “ABC (OPC) Private Limited”. There are 2 avenues in applying for this: either using form SPICe 32 or the RUN web service by MCA (by submitting 1 name & the justification of this). Since 23/3/2018 though, the Ministry of Finance has permitted 2 proposed names & 1 resubmission (RSUB), whilst reserving unique names for unique names (RUN service) for companies.

Upon approval by the MCA, one can progress further. 

The following documents need preparing to be submitted to the ROC (Registrar of Companies):

  • The Memorandum of Association (MoA) which are the objects to be followed by the Company or state the business purpose for which the company will be incorporated
  • The Articles of the Association (AoA) which stipulates the operating company by-laws
  • As there’s only 1 Director and a member, a representative nominee needs to be appointed. In the event that they become incapacitated or dies & is unable to perform their duties, the nominee will act on the director’s behalf. Consent will be acquired in Form INC – 3, along with their PAN & Aadhar Card

Proof of the proposed company’s registered office, plus ownership and a NOC from the owner is also required. Furthermore, affidavit & consent from the proposed director on form INC -9 & DIR–2, respectively. Finally, a declaration by the professional which certifies that all regulations are fulfilled.

No coming onto the filing of forms with the MCA. All documents will be attached to the SPICe form series along with the DSC of the director & member. These will then be uploaded to their site for approval. Upon uploading, forms 49A & B will be generated for the PAN & TAN of the company. These need to be sent to the MCA as well.

Lastly, upon verification, the ROC will issue a certificate of incorporation, ready for initiating business operations.

b). How to tax income of an OPC?

This is simple: it’s merely applied at a flat rate of 30%.

6. Private company

a). How to set up a private company?

Upon finalising & deciding a name for the company:

#1: Apply for DSC (Digital Signature Certificate)

#2: Apply for the DIN (Director Identification Number)

#3: Check for the proposed name availability & secure it

#4: File the EMoa and EAOA to register the private limited company name

#5: Apply for both the PAN and TAN of the company

#6: Certificate of incorporation will be issued by RoC, along with PAN & TAN

#7: Open a current bank account using the company name

b). How to tax income of a private company?

This is levied at a rate of 25% plus surcharge of 7% if the total income exceeds Rs. 1 Cr but less than 10 Cr. Above 10Cr, the surcharge increases to 12%. The overall rate increases to 30% if the annual turnover exceeds 250 Cr.

7. Public company

a). How to set up a public company?

The requirements for registration of Public Limited Companies (PLC) are similar to those of establishing an OPC, with a few differences – yet it remains simple. There are a multitude of rules and regulations set under the Companies Act, 2013 for this. Aspects to consider during this process include:

  • A minimum of 7 shareholders & 3 directors are needed to form a PLC
  • A share capital of at least Rs. 5 lakhs is required
  • A Digital Signature Certificate (DSC) of one of the directors is needed for submission
  • Self-attested copies of identity and address proof
  • The intended directors of the company will need a DIN
  • An application is warranted for selecting the company name

The main object clause of the company must be mentioned, stating what a company will do after its incorporation. The application needs to be submitted to the ROC along with the required documents like MOA, AOA, filled forms DIR – 12, INC – 7 & 22. These need to be accompanied by the applicable registration fees. Upon obtaining an approval from the ROC, the company can apply for the ‘certificate of business commencement.’

Documents required for incorporating a PLC:

  • Proof of identity & address plus PAN number of all the shareholders and directors
  • Utility Bill of the proposed registered company office location
  • NOC from the landlord/leaseholder where the company office intends to be situated
  • DIN & DSC of all the directors
  • Memorandum & Articles of Association (MOA) & (AOA)

b). How to tax income of a public company?

This is levied at a rate of 30% plus surcharge of 5% if the total income exceeds Rs. 1 Cr. Additionally, 3% Education cess & Secondary and Higher Education cess on the total of the income tax & surcharge.

8. Listed company

a). How to get a company listed?

Firstly, the issuer should be a company incorporated under the Companies Act 1956 / 2013 in India. Secondly, the post issue paid up capital of the company (face value) shouldn’t exceed Rs. 25 crore. A track record of at least three years of either:

i. the applicant seeking listing; or

ii. the promoters (holding a minimum of 3 years of relevant experience & holding at least 20% share of post issue equity capital share, collectively or individually) or a promoting company, established in or outside India or

iii.Proprietor/Partnership firm which subsequently converted into a company (however not in established as such for three years), then approaches the exchange for listing

The company/entity should have an operating profit (earnings excluding interest, depreciation and tax) from operations for a minimum of any 2 out of 3 financial years preceding the application and its net worth should be in the positive balance.

It’s also imperative that the applicant company has not been referred to a former board for Industrial and Financial Reconstruction (BIFR). Furthermore, no action should have been taken under the Insolvency and Bankruptcy Code against the issuer and promoting companies.

Lastly, the company shouldn’t have received any winding up petition admitted by a NCLT or court. No material regulatory/disciplinary action by a stock exchange or regulatory body should be recorded in the previous three years against the applicant company.

b). How to tax income of a listed company?

This is also referred to as corporation tax. It is set at 25% for annual turnovers of less than (& including Rs. 250 Cr) & 30% above this. A 5% surcharge is levied on any amount exceeding 1 Cr, irrespective of the total amount.

About Author

CA Shaifaly Girdharwal

CA Shaifaly Girdharwal is a qualified chartered accountant practicing in GST. She is the co-founder of www.consultease.com and a famous YouTuber with more than 2,40,000 subscribers for her channel dedicated to the GST videos. She is also a trainer and author. She is a trainer at https://www.consultease.com/courses/.


How to Start Photography Business in India

This article will be discussing the procedure required for starting the photography business in India

The photography business is gaining popularity among the people in India as the market is sitting among the digital community and in digital space, you know the important aspects to show your product is a photos videos so the increase for the photographers for videographers have increased significantly in the recent years

If you are passionate in the photography e is the perfect business you can have right now

Photography business

Here is how you can start , register and manage your photography business

Decide what type of photography you will do

The first thing you need to do is to decide the what type of photography you will do the photography can be different types like for a real estate developer it can be the photography of real estate products portfolio you can also carry on a photography for royal wedding can carry on photography business for a Photoshop and I will different websites as well

You can also do the photography for products that are sold on eCommerce platforms, photography can be done for nature for tourism and many other things it is very important to focus on what you are choosing initially and you can explain your project portfolio further.

Making a business plan

the next thing you have to do is to make a proper business plan for your photography Business business plan you need to take consideration of all the aspects that are required at movement and also how the future implications in a technological changes could be taken care of

In business plan you need to consider all the aspects that you business has to follow like a how you will market your business what marketing strategies you will follow for promoting your business online you can take care of Instagram and other social media marketing platforms for initially promoting your business and once you make the sales you can go with a period as well you need to decide the geographic for your business where you can operate and you should target the perfect audience on that.

Now you have to decide the pricing plan for your portfolio they take how much you will charge for doing things you love for per day basis for project basis of things will work for you.

Start your own website

Now just buy a domain name from domain service provider and create a simple wordpress website with full portfolio photos that you already shooted this will help you to gain access to prospective clients and create your brand identity

Create a website you need to have your own business logo, you can tell help of the online logo maker like canva.com and other alternatives.

Register your business

Now what you have to do is to register your photography business legally in India registration of photography business is same as doing any other business and does not require many formalities you can start with sole proprietorship business if you are a single individual, you can also start a one-person company

Photography business is of more than two or more individuals then you can go with a partnership or private limited company registration

If you are going to pitch the corporate clients it is advisable to go with a private limited company registration as it provides more credibility among your prospective clients.

Documents Required for photography business registration in India

  • PAN Card
  • Aadhar Card
  • Bank Statement with current address
  • Mobile No
  • Email id
  • Electricity Bill of office address
  • Rent Agreement, if rented
  • NOC from Owner

please note that your home address can also be your business address so you can start your business from your home address also

Getting the first client for your photography business

First client for your photography business only say for every business is the most important aspect because ultimately the clients are only people who provides sales to your business so start promoting your fishes online among the large part of your audience you can take help of digital marketing by doing the Facebook ads or Instagram ads, for doing all your digital marketing activities you can hire the digital marketing people available on Profit sharing basis as well this will help you to to get good amount of clients with less risk

Regularly you will be getting a good portfolio and you will start getting automatically will help you to generate regular flow of Business and you can now hire another people for your business with you and scale as much as you can.

Issuing of first sales invoice

Now once the client is finalized you can offer him to issue the sales invoice and get the payment, it is advisable to get the sales invoice formatted rightly has per the Indian laws, you can take help of the invoicing software available online and make a profile of your business and issue the first sales invoice

Filing of company returns

If you register your business online as a private limited company then you need to file regular compliance returns for your company as per Indian companies act, filing of returns are mandatory and non filing can lead to you very high amount of penalties so you need to regularly get in touch with your legal advisor who handles your business filings.

Please be noted that even if your sales and purchases are NIL, you are required to file your business returns in mandatory.

Filing of GST returns

You are registered under the GST then you are required to file the GST returns regularly, non-filing of GST returns attracts penalties and you can consult with your legal advisor for your business.

How to take the help of the Fast legal team for carrying on your legal filings and business registration formalities.

Filing of income tax returns

Every business needs to file their own income tax return beside company and GST returns and under income tax you have to pay the taxes on the profit earned on your business

Is always advisable to take help of a chartered accountants or other tax practitioner for filing of your income tax returns online.

Fastlegal provides income tax return filing services for your business you can take help of fastlegal team members