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Business Formation
The concept of One Person Companies was introduced in India through the Companies Act, 2013 to support entrepreneurs who are capable of starting ventures on their own. It allows them to create a single person economic entity. Like a Company, an OPC is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.

Who is eligible?

As per the Companies (Incorporation) Rules, 2014, the following persons can be eligible to incorporate an OPC in India Only a natural person who is an Indian citizen and a resident of India
  1. Shall be eligible to incorporate a One Person Company;
  2. Shall be a nominee for the sole member of a One Person Company
Further, the rules have explained the term of a resident in India as follows: The term ?resident in India? means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one calendar year.

What are the benefits of choosing this entity type?
  1. It is a legal entity separate from its members
  2. Member liability is limited.
  3. Being a private company, an OPC encourages entrepreneurs to set up their own businesses without the help of a second member.
  4. The statutory requirement of appointment of Statutory Auditor and re-appointment of the auditor is not applicable.
  5. The provisions of Sections 98, 100 to 111 of the Act relating to the holding of general meetings shall not apply.
  6. Section 173 for holding and conducting a minimum number of 4 board meetings shall not apply.
Hey, are there any restrictions?
  1. The person who is already a member or nominee of 1 OPC, cannot incorporate more than 1 OPC or become a nominee in more than one such company.
  2. No minor shall become a member or nominee of the One Person Company or hold shares with beneficial interest.
  3. OPC cannot be incorporated or converted into a Company under Section 8 of the Act.
  4. OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any corporate body.
  5. No such company can convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital).
Alrighty, what are the minimum requirements to form one?
  • Minimum one Director
  • Minimum one Member
  • Minimum share capital shall be INR Rs. 1,00,000/-.
  • Application for allotment of Director Identification Number (DIN).
  • Digital Signature Certificate (DSC).
What is the Pre-Registration compliance?
  1. Director Identification Number:
This is a unique identification number issued by the Ministry of Corporate Affairs., for an existing Director or a person intending to become the Director of a Company. Documents required:
  1. Identity Proof: Copy of PAN Card for this is mandatory.
  2. Address Proof: Copy of Passport/Voter/Election ID/Driving License/Aadhar Card/Electricity/Telephone (Utilities) Bills. Address proof must be in the name of the applicant only and utility bill must not be older than 2 months from the date of filing of the e-form.
  3. Passport size Photo: 1 soft copy or photocopy of the applicant?s latest photo in JPEG format.
  4. Current Occupation
  5. Email Address of the Applicant
  6. Contact Number
  7. Educational Qualification
  8. Verification to be signed by the applicant. For this purpose, there is a DIR4 form.
  9. Digital Signature Certificate:
This is the digital equivalent (electronic format) of physical or paper certificates. Examples of physical or paper certificates are driver’s license, passport. A digital certificate can be presented electronically to prove your identity, to access information or services on the Internet or to sign certain documents digitally. Since the MCA accepts electronic submission of Forms on its website, the DSC is mandatory for all users. Documents required:
  1. Digital Signature Certificate application Form (duly signed by an applicant). An applicant is required to sign across the photo.
Download the DSC Application Form (Class II Individual Certificate).
  1. All other documents are same as required for the DIR-3 Application.
So, after Registration compliance? The following are the requirements to be followed mandatorily,
  1. To apply for ShLicenselicense, PAN TAN.
  2. To open Current Bank account.
  3. To pay subscription money with Current Bank account.
  4. To issue share certificate to subscriber by company.
What about the Annual Return Filing for OPC? Every company shall prepare an annual return in the prescribed form containing the particulars:
  1. Its registered office, principal business activities, particulars of its holding, subsidiary and associate companies.
  2. Its shares, debentures and other securities and holding patterns.
  3. Its indebtedness
  4. Its members and debenture-holders
  5. Its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year.
  6. Meetings of members or a class thereof, board and its various committees along with attendance details.
  7. Remuneration of directors and key managerial personnel.
  8. Penalty or punishment imposed on the company.
  9. Matters relating to certification of compliances.
  10. Details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration, and percentage of shareholding held by them; and
  11. Such other matters as may be prescribed,
The annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company.

Should you be generating Financial Statements for Annual Returns Filing of an OPC?

Financial statements of a one-person company need to be filed with the Registrar, after they are duly adopted by the member, within 180 days of closure of financial year along with all necessary documents.
  • The financial statement, signed by one director, for submission to the auditor for his report thereon.
  • The report of the Board of Directors to be attached to the financial statement.
  • Board of Directors Report of OPC means a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
  • Filed with ROC within 180 days from the closure of the financial year.
  • Financial statement, may not include the cash flow statement.
Startup entails complex procedures and many bureaucratic hurdles, entrepreneurs are better off using professional services. Hiring a virtual lawyer and virtual accountant can save time and help ensure that the process goes smoothly.

For any Legal and Accounting support, Happy to help you, let us talk at Wazzeer.

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GST, TAXATION
With GST replacing most of the indirect tax especially VAT and Service Tax, it becomes necessary for existing suppliers (registered at respective tax authority) to migrate to GST at earliest. GST Registration is necessary to claim Input tax credit or to collect the tax from customers

LIABILITY TO GET REGISTERED UNDER GST

Any supplier having an aggregate turnover of Rs. 20 Lakhs or more needs to be registered at State from where it makes a taxable supply of Goods and Services. This limit is Rs.10 Lakhs if the business is carried out in the North Eastern States including Sikkim.

MIGRATION TO GST

Section 166 of Model GST law provides for Migration of existing taxpayers. Here existing taxpayer means assesses registered under any acts as specified, i.e.
  • Central Excise
  • Service Tax
  • State Sales Tax/VAT
  • Entry Tax
  • Luxury Tax and
  • Entertainment Tax (except levied by the local bodies).
Existing Taxpayers are legally required to register themselves at GST Platform.

PROCEDURE

The whole procedure of Migration can be divided into two parts:
  1. Issuance of Provisional ID &Password – In order to get your GST Number, you need to get a provisional Id and password. The government has digitized the whole procedure. For your provisional ID, you need to log in to the website of Automation of Central Excise and Service Tax using existing aces user id.
The ID is issued only to those persons who have PAN associated with their registration. Only one provisional ID is issued in case state and PAN associated with the business is same. Every person registered under Central Excise/ Service Tax is provided with GST Identification Number. This is a Provisional Registration.
  1. GST Registration: GST REG20 is required to be filled after receiving the provisional ID. A unique username and password are to be created using above provisional id and password at GST Registration Portal (www.gst.gov.in).
After username is created you need to upload supporting documents. After providing requisite details, and uploading necessary documents, it is required to be verified by the Authorized Signatory required to do so as per nature of the business. Once above steps are completed, Application Reference Number (ARN) is issued to the taxpayer in 15 minutes. Once an assessed has ARN he migrates to GST with A provisional Certificate issued to him in GST REG- 21. The Provisional Registration converts into GST registration if he is required to be registered under GST Act otherwise GST REG 24 is issued.

Documents Required for Migration:
  • Proof of Constitution of Business depending upon nature of the business.
  • Passport Photos and Details of Promoter/ Partner/ Director/ Karta
  • Proof of Appointment of Authorized Signatory and Photo
  • Address Proof of Principal Place of business and additional places if any
  • Details of Bank Accounts with statements or at least first page of statement
  • Details of Goods and Services Supplied
 All documents must not be more than 1mb and in Pdf format. Pictures shall be in JPEG with a max size of 100 KB. We will be glad to help you with the GST migration, let’s connect.
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Uncategorized
Every business entity needs to be given some name and the functioning of the business is carried out in that name only. In the case of a company which enjoys the status of the separate legal entity, selecting a proper name is a must. Name approval from the Registrar of Companies is pre-requisite condition before incorporation of the company. Procedure for Name approval Application to concerned Registrar of Companies to ascertain the availability of name in eForm-INC1 need to be made. Maximum 6 suitable names can be submitted in order of preference and name must indicate main objects of the company. The Name itself:
  • The proposed names must not be similar or resemble the name of any other already registered company, or
  • Proposed name should not violate the provisions of emblems and names (Prevention of Improper Use Act, 1950), or
  • Proposed name(s) should not constitute an offense under any law.
  • Last word ?Limited? need to be used in the case of a public limited Company, or ?Private Limited? in the case of a private limited Company and ?LLP? needs to be used for ?Limited liability Partnerships?
Along with government fee and complete form, the digital signature of the applicant proposing the company needs to be attached. For filling this form Digital Signature of one of the Promoters is mandatory. The details need to be provided in eForm INC1 are:-
  • Authorized capital for the proposed company
  • Main objectives of the proposed company
  • State (location) of the proposed company
  • Personal details of all Promoter?s
  • Copy of trademark application/certificate (if applicable)
  • In case, there is a logo associated with trademark then image of logo
  • Balance sheet (if applicable) and Income tax returns for last 2 years
If the name is approved by Registrar of Companies, letter of acceptance is issued for the proposed name. If proposed name(s) are not available, fresh names can be applied through the same application. ?I will be glad to help you in this, let’s connect.
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Uncategorized
In Limited Liability Partnership or LLP under LLP Act 2008, where all or some of the partners have limited liability as per the shares and offers them protection from misdeeds, negligence, and incompetence of other partners. However, the liability of partners is unlimited in case of fraud committed by LLP. The LLP Agreement regulates the conduct of business. Section 56 of LLP Act 2008 provides that private companies can convert into LLP. Thus Companies are converting themselves into LLP?s because of:
  1. Tax benefits: by converting into LLP, the company saves Dividend Distribution Tax, Minimum Alternative Tax, and Income Tax because interest and remuneration is paid to partners as salary that is payable to directors.
Earlier there was no capital gains tax when existing entity converted into LLP but after the amendment of 2016, a company having assets in excess of Rs 5 crore in any of three preceding years has to pay capital gains tax.
  1. Less Statutory Compliances: compared to statutory compliances of a private limited company as per Companies Act 2013 an LLP gets relief in the form of
    • No requirement to maintain statutory record registers.
    • No requirement to pass resolutions for addition or deletion of Directors, increasing capital.
    • No such requirement to hold a Compulsory annual meeting.
    • No conditions or cap for loans except what is stated in LLP Agreement.
    • Compulsory Audit only if Turnover is above 40 lakhs.
One of the areas where the company had an upper hand over the LLP was that the LLP was not an eligible entity for claiming tax incentives (100% deduction for 3 years) offered to start-ups as provided by the draft Finance Bill, 2016. However, the Finance Act, 2016 has eliminated this disparity by extending this benefit to LLPs. Thus, where start-ups do not intend to raise funds from the public, LLP seems a good start for the initial setup. Conditions for conversion of Private Companies into Limited Liability Partnership: A company is converted into LLP by complying with the provision of Schedule 3 of LLP Act 2008 and can do so only if (a) There is no security interest in its assets subsisting or in force at the time of application; and (b) The partners of the limited liability partnership to which it converts comprise all the shareholders of the company and no one else. The procedure of conversion:
  • In order to get converted into LLP, every designated partner must possess Director Identification Number. A meeting of Board of Directors must pass a resolution for conversion of Company into LLP as well as to authorize a director to apply for the name of LLP. A copy of this resolution is to be attached with e-form LLP-1 with Registrar of Companies (ROC).
  • Once registrar issues name approval Certificate, Incorporation Documents as the address of registered office of LLP, notice of consent of Designated Partners, Details of LLP(s) or companies in which designated partner is a director are filed using E-form 2 with ROC.
  • E- Form 18 is filed with ROC for application of Conversion along with certain attachments as a statement of shareholders, assets and liabilities of the company, NOC from IT authorities and list of all secured creditor along with their consent.
  • Registrar of LLP issues a Certificate of Registration as per the provisions of this act and may refuse if not satisfied with the particulars or other information.
  • After all above formalities are complied with and approved by Ministry, LLP Agreement is to be submitted within 30 days of incorporation using E- form 3
  • Once Registration Certificate is issued, information of conversion is to be intimated to concerned Registrar of Companies with which it was registered under the provisions of Companies Act 2013 within 15 days of such conversion using E-form 14.
Should You Really Go for Conversion? In case you are a small entrepreneur and want your business to be internally driven, LLP is the best option to run your business. But the company surely provides much better opportunities for large business as evolved laws are there for bringing capital and diluting or liquidating stakes.
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Uncategorized
You would agree with me that most startups are under the categories of Micro Enterprise that is having an investment of less than Rs 25 lakhs. Considering the total share of MSME?s being 37% of the GDP, one cannot ignore the importance of this sector. Thus Government of India wants to ensure that MSME?s gets maximum benefits of the current fiscal and trade policies. However, to avail the benefit of any such existing policies, it is required that your Enterprise must be registered one. ? Prior to October 2016, to get yourself registered as MSME?s you need to carry out a lot of paperwork and fill Employment Memorandum I and II. However, Kamath Committee on Financial Structure of MSME sector recommended a single window clearance system. Hence, Policy of Udyog Aadhar came into force. What is Udyog Aadhar? Udyog Aadhar is a facility by which your company gets a 12 digit unique ID and becomes a legal entity. Any micro, small or medium enterprise to start out any business needs to get itself registered under Udyog Aadhar. Process of getting your own Udyog Aadhar Id
  1. To do registration, owner of the enterprise needs to fill a single form online or offline available at the site of ministry. This form is free of cost.
  2. The document required for the registration are Personal?Aadhar number,?Industry name, Address, bank account details, PAN number in case of Cooperatives, private or public limited and LLP and details of major activity carried out by the enterprise.
Why get your Udyog Aadhar? The government of India announces various incentives time to time to promote MSME?s through MSMED Act 2006. Once registered you get:  
  • Easy sanction of Bank loans at lower rates of interest
  • Credit Guarantee scheme
  • Excise exemption
  • Exemption under direct tax laws
  • Interest on Delayed Payments Act which is thrice of the rate stipulated by RBI for the time being
  • Other Subsidies from State Governments as extended credit facilities, Industrial extension support and services, Assistance in marketing( both within the country and outside) Assistance for construction of industries in underdeveloped areas, Technical consultancy, assistance in capital, and so on, for enhancement of technology in MSME?s
  Apart from it Government in a phase wise manner enhances the list of reserved products to be brought from MSME?s only. Moreover, as per Trademark Rules 2017, special provision has been carved out for micro and small industries. As per schedule A of the rules, the fees for filing a trademark application for MSME?s is only 50% as compared to another form of business. Understanding the nature of Your Enterprise Since for the time being, Udyog AAdhar is available to MSME?s only, it is important to understand What an MSME is. MSME standing for MICRO, SMALL and MEDIUM enterprise are divided on the basis of Investment which is different for manufacturing or service sector
Manufacturing Sector
????Enterprises?Investment in plant & machinery
????Micro Enterprises?Does not exceed 25 lakh rupees
????Small Enterprises?More than 25 lakh rupees but does not exceed five crore rupees
????Medium Enterprises?More than five crore rupees but does not exceed ten? crore rupees
Service Sector
????Enterprises?Investment in equipment
????Micro Enterprises?Does not exceed 10 lakh rupees:
????Small Enterprises?More than 10 lakh rupees but does not exceed two crore rupees
????Medium Enterprises?More than 2 crore rupees but does not exceed five crore rupees
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Uncategorized
The Government on March 6, 2017 notified a new set of trademark rules which have replaced the old rules constituted way back in the year 2002. The main idea behind the change is to help expedite the approval process and increase filings, both of which have shown positive trends over the past few months. While the examination time for an application has been brought down from 13 months to just 1 month in January 2017, official figures suggest that filings have jumped 35 per cent in 2015-16 against the previous year. Here are a few important things you should know that have changed in the new rules:
  1. Ease of doing business: One of the most important things is that the total number of forms that an applicant had to fill out has been reduced from a monumental 74 to a quite reasonable 8.
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  1. Slashing of cost: The new rules have hiked fee for Trademark application to Rs. 9,000 but application fee for individuals, start-ups and small enterprises has been kept to Rs. 4,500 only (Government fee)
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  1. Clarity in the approval process: To make a business doing easier, the method to determinate well-known trademarks has been clarified for the very first time. Provisions relating to the expedited processing of an application for registration of trademark have been extended up to the registration stage. Until now, they were only till the examination stage.
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  1. Quick disposal: Concept of video conferencing has been introduced in the new rule and the number of adjournments in opposition proceedings has been limited to two by each party, these measures are surely going to help in disposal of cases on time.
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Sole proprietorship?is the easiest form of business which some small businesses and startups choose to start with. By doing any one of the registrations that is Service tax registration/VAT or Small Scale Industry registration sole proprietorship is good to kick off. This has some drawbacks like unlimited liability of the proprietor, yet businesses take this as another part of the risk in their entrepreneurship journey.   As a business, it becomes difficult to manage and control all the business activities individually and sole proprietor chooses to convert it into another form of business structure. This blog is dedicated our beloved fans that have been requesting us to shoot a blog on this topic.  
  1. Partnership firm:?Sole proprietorship business can be converted into partnership. The Indian Partnership Act 1932, governs partnerships and it is optional whether to register or not with the registrar of Companies. The Registered firm enjoys additional benefits like protects its partners’ rights. With 2 partners, you should be good to register.
  Documents Required:
  • Duly filled Specimen of Affidavit
  • Certified copy of the Partnership deed
  • Proof of ownership of the place of business or the rental/lease agreement
  • Based on the Partnership deed, to open current bank account PAN card can be obtained based on Partnership deed.
 
  1. One person Company:?The sole proprietor can convert his business to One Person Company as there is no need to induct any partner to incorporate One Person Company, it also empowers one person to manage and control all his business and on the other hand gives qualities of a company, like a separate legal entity. The individual will enjoy benefits like access to credits, bank loans, limited liability, legal protection for business, access to the market. One person company enjoys additional benefit like exemption from holding the annual general meeting, the annual return can be signed by director also and limited liability protection to directors and shareholder.
  Documents Required:
  • Digital Signature Certificate [DSC] for the proposed Director
  • Director Identification Number [DIN] for the proposed director.
  • Written consent of nominee which need to be filed with the Registrar of Companies (RoC) during Incorporation.
  • Memorandum of Association and Articles of Association [MOA & AOA]
  • After incorporation of one person company, all assets, liabilities, and goodwill of the Sole proprietorship can be transferred through a transfer agreement to One Person Company.
 
  1. LLP: The sole proprietor can also choose to convert his business into Limited liability partnership. LLP has many features like private limited company. Further, LLP enjoys tax benefits and less annual compliance. This all the assets, liabilities, goodwill and losses will be transferred as it is to limited liability partnership.
? Documents Required:
  • PAN Card of proposed partners
  • Digital Signature of Partners
  • Designated Partner Identification Number(DPIN)
  • Address proof of partners
  • LLP Partnership deed
 
  1. Private limited Company: More like Pvt Ltd company is acquiring the Sole proprietorship firm. Sole proprietorship can be acquired by the private limited company by simply signing an agreement between the sole proprietor and the private limited company (after its incorporation) mentioning that all assets, goodwill, liabilities are transferred to the private limited company.
  Documents Required:
  • DSC of Directors
  • Pan Card and address proof of Directors
  • Director Identification Number of Directors
  • Memorandum of Association (MOA) and Article of Association (AOA)
     
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Food license is mandatory to carry any business activity which deals with production, manufacture, ?processing, distribution, selling, import, export, stock of any food article or beverage and it includes Dairy Business, Meat processing, Hotels. Benefits of FSSAI license FSSAI license certifies that food is tested and the hygiene, sanitary and safety requirements as set by government of India have been followed by the business entity. Punishment for carrying on business without FSSAI license The Food Safety and Standards Act, 2006 strictly prohibits any person or food business operator to engage into manufacturing, selling, distribution or imports of any food product without FSSAI license, punishment with imprisonment for 6 months and also with a fine upto Rs. 5,00,000. Who does not require FSSAI? Any small food business operator who manufactures or sells any food item himself or a petty retailer, hawker, itinerant vendor or temporary stall holder or distributes foods including in any religious or social gathering except a caterer are exempted from FSSAI license, but it is mandatory for them to register with Food Authority. Annual turnover of these Food Business Operator is less than Rs. 12 lakhs. Once these Petty food business operator register with Food Authority, Certificate of Registration and a photo identity card. Categories of FSSAI license: ?2 types, Central and State, depending upon the turnover /output or storage capacity of Food business operator. ? ? ? 1. State Fsssai license is mandatory for food Business operator(FBO) if:
  • Its Annual turnover of FBO is above 12 lakhs, or
  • It is 3 star hotels and above, or
  • If Transporter having 100 vehicles or turn over up to 30 crore
  1. ?Central FSSAI license is mandatory for food Business operator (FBO) if:
  • Its annual turnover is above Rs. 20 crores, or
  • Its business operations in more than one state, or
  • Any FBO is engaged in import or export of food products, or
  • It is Five star Hotels and above
Note: Eligibility for state and Central FSSAI license varies from business to business. Documents Required for FSSAI State and Central License:
  1. Blueprint or layout plan of the processing unit
  2. List of Directors or partners with full address and contact details
  3. Photo ID and address proof issued by Government authority of Proprietor or Partner or Director(s)
  4. Name and List of Equipments and Machinery along with their number, installed capacity
  5. List of food category desired to be manufactured. (In case of manufacturers).
  6. Authority letter with name and address of responsible person nominated by the manufacturer along with alternative responsible person indicating the powers vested with them viz assisting the officers in inspections, a collection of samples, packing & dispatch. (Mandatory for manufacturing and processors).
  7. Analysis report (Chemical & Bacteriological) of water to be used as an ingredient in food from a recognized or public health laboratory to confirm the portability (mandatory only for manufacturing and processing units only).
  8. A Copy of sale deed or Rent agreement orElectricity bill
  9. A copy of Partnership Deed or Affidavit or AOA & MOA towards the constitution of the firm.
  10. A copy of certificate obtained under Co-Op Act ? 1861/Multi State Co-Op Act ? 2002 for Co-Operatives. (if applicable).
  11. Food Safety Management System plan or certificate (if any).
  12. Source of raw material for meat and meat processing plants. (if applicable).
  13. Pesticide residues report of water (for packaged drinking water business),
  14. NOCs from Municipality or local body. (optional)
  15. Supporting document proof for turnover
  16. Import Export ?Code document issued by DGFT(dealing with import and export of food products)
  Start-up process entails complex procedures and many bureaucratic hurdles, entrepreneurs are better off using professional services. Hiring a virtual lawyer and virtual accountant can save time and help ensure that the process goes smoothly. For any Legal and Accounting support, Happy to help you,?let us?talk
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