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Agreements, Co-Founder agreement

Importance of asking the right questions to the founding even before creating an entity will protect the organizational culture and safeguard relationships in the long run. Perhaps Co-founders’ agreements is the product of conversations that should take place among a company’s founders at the early stages of formation rather than later in the life of a company. The goal of these conversations is to have an open and honest discussion about the attitudes, fears, and aspirations of individuals involved with the startup. In this blog, we will look at the Top 28 Questions to ask your Co-founders before entering Co-founders Agreement. It is essential to have this conversation – Answering these hard questions now will help you and your co-founders avoid personal conflicts in the future.

 

Strategy

  1. What goals does each of us have for the start-up?
  2. What goals do we have for ourselves?
  3. What are our respective timelines for these goals?

 

Ownership Structure

  1. Who gets what percentage of the company?
  2. What will we each contribute to the company? (e.g., duties, job descriptions, hour commitments, roles, and responsibilities).
  3. How much capital are we each contributing and for what?
  4. Is the percentage of ownership shares subject to vesting based on continued participation in the business?

 

Management

  1. How are key decisions and day-to-day decisions of the business to be made? (e.g., by majority vote, unanimous vote, or certain decisions solely in the hands of the CEO?).
  2. What salaries (if any) are the founders entitled to? How can that be modified?
  3. What happens if one of us wants to leave?
  4. If one founder leaves, does the company or the other founder have the right to buy back that founder’s shares? At what price?
  5. What happens if one of us wants to sell the company, raise money, or kill the company?
  6. What happens if one of us becomes disabled or dies?
  7. What happens if it takes us longer than we expected to get our product up and running? Can we each launch other startups while working on this project
  8. Under what circumstances can a founder be removed as an employee of the business?
  9. What happens if one founder is not living up to expectations under the Founders’ Agreement? How would this situation be resolved?
  10. If it turns out the business is not taking off and we decide to end our venture, can one of us take the idea and try it again?
  11. If we need to raise start-up capital, where will it come from and how much of the company are we willing to give in exchange for that start-up capital?

 

Factors that may be considered in an unequal distribution of equity include:

  1. Who came up with the idea that is the key to the Business Concept;
  2. Who has the greatest stake in the IP in the Business Concept;
  3. Who developed the technology necessary to run the Business Concept;
  4. Who owns the patents on which the Business Concept or its products will be based;
  5. Whether any Founder brings existing copyrights or trademarks into the Company;
  6. Which Founders are providing the start-up capital for the Business Concept and in what percentage contribution;
  7. How much time has each Founder invested in the development of the Business Concept;
  8. Whether all Founders are full-time contributors to the development of the Business Concept;
  9. What was the opportunity cost for each Founder to help create the Business Concept? Those who sacrificed more lucrative, high-power positions at established businesses are often compensated more for their risk than those who were not actively employed when the venture began; and
  10. Who has the industry expertise necessary to get the Business Concept going?

 

It is always helpful to have clear clauses in the Co-founders’ agreement for resolving the conflict as that will avoid confusion and uncertainty and save time and money. The conversation that you have with your founding team will decide the meat of Co-founder’s Agreement – The Agreement lays out the rights, responsibilities, liabilities, and obligations of each founder.

 

Remember, 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! 🙂

 

2

Start up Lessons

Startup India stand up India is rightly called the bag of incentives because it not just makes the compliance part easy, but has compartments for a huge funding opportunity and continued support. We at Wazzeer have helped some of our clients to crack this opportunity for great good. So, in this blog, we will walk through the quick list of incentives that ventures starting up in 2018 can try their chances for. 

  1. Self –certify compliance with nine labor laws and environmental laws.
  2. Startup India hub – to enable nurturing and entrepreneurial thinking
  3. E-Portals and App – For interacting with Government and regulatory bodies, and collaborating with various other startups signed up in the platform
  4. Legal support at lower cost
  5. Patent registration and Tracking at faster rate
  6. Relaxation on Public procurement eligibility criteria for Startups
  7. Faster Exit for startups
  8. Financial support through Fund of Funds
  9. Credit Guarantee Funds for Startups
  10. Tax Exemption on capital gains
  11. Company income exempted from Income Tax for 3 years
  12. Tax exemption on investments above Fair Market Value
  13. Industry-Academia Partnership and incubation facilities

 

The procedure to register a venture under Startup India Initiative:

 

 

 

 

 

 





Wazzeer has developed a simple to use system to quickly check your eligibility for Startup India Initiative, we strongly believe entrepreneurs like you should give it a shot, let’s connect  🙂

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Direct Taxes, TAXATION

In this article, we shall look into the Top 14 Direct Tax scenarios that a typical a statup in its journey would be eventually encountering with. Let’s jump into the brief details on these – Direct Taxes in India that startups should know.


1. Corporate income tax – Indian company, A resident company is taxed on its global income.

  • Tax at the rate of 30 percent is levied on income earned during a tax year.
  • A Surcharge and Education Cess is also levied. Alternatively, a company is required to pay MAT at 18.5 percent on the adjusted book profits in the case that the book profits are less than the taxable income of the Company.
  • A Surcharge and Education Cess is also levied DDT at 16.995 percent (including a surcharge of 10 percent and education cess) is liable to be paid on the dividend, declared, distributed or paid by a domestic company.
  • Dividend income received by an Indian company from foreign companies would be taxed at 15 percent (plus applicable Surcharge and Education Cess as given above) provided it holds at least 26 percent in the nominal value of equity share capital of the foreign company.
  • 66 percent (inclusive of applicable surcharge and education cess) shall be levied on the specified distributed income of unlisted domestic companies that buy back shares from its shareholders.

 

 

2.  Tonnage Tax Scheme for Indian shipping companies:

Tax is levied on the national income of the Indian shipping company arising from the operation of ships at normal corporate tax rates. The national income is determined in a prescribed manner on the basis of the tonnage of the ship. Shipping companies can opt for the scheme or taxation under normal provisions. Once the scheme has been opted for, it would apply for a mandatory period of ten years and other tax provisions would not apply.

 

 

3.  Securities Transaction Tax:

STT is levied on the value of taxable securities transactions at specified rates. The taxable securities transactions are:

  • Purchase/sale of equity shares in a company or a derivative or a unit of an equity-oriented fund entered into in a recognized stock exchange; and
  • Sale of a unit of an equity-oriented fund to the mutual fund.

 

 

4.  Commodity Transaction Tax:

CTT is levied on the sale of a commodity derivative (other than agricultural commodities) entered in a recognized association from a date to be notified.

 

5.  Wealth Tax:

Wealth tax is levied on specified assets at one percent on the value of the net assets as held by a taxpayer (net of debts incurred in respect of such assets) in excess of the basic exemption of $ 55,147.

 

6. Head Office Expenditure and Taxes:

Foreign companies operating in India through a branch are allowed to deduct executive and general administrative expenditure incurred by the head office outside India. However, such expenditure is restricted to the lower of:

  • Five percent of adjusted total income (as defined); or
  • Expenditure attributable to the Indian business. In cases where the adjusted total income for a year is a loss, the expenditure is restricted to 5 percent of the average adjusted total income (as defined).


7.  Taxation on the transfer of shares of a closely held company without or for inadequate consideration:

 

With effect from 1 June 2010, the transfer of shares of a closely held company without or for inadequate consideration to a firm or to a closely held company is taxable in the hands of the recipient of shares. The taxable income for the recipient will be the fair market value of the shares if the transfer is without consideration. If the transfer is for inadequate consideration then the taxable income will be the difference between the fair market value and consideration that exceeds the threshold of $ 919. The computation of the fair market value of the shares has been prescribed.

 

8. Share premium in excess of the fair market value deemed as income:

 

With effect from 1 April 2012, where a closely held company receives from any person, being a resident, any consideration for issue of shares that exceeds the face value of shares, the aggregate consideration received for such shares as exceeds the fair market value of shares is taxable in the hands of the recipient. However, this does not apply in a case where the consideration for issue of shares is received by (a) a VCU from a venture capital company or a venture capital fund; or (b) a company from a class or classes of persons as may be notified.

 

9. Withholding of taxes:

 

Generally, incomes payable to residents or non-residents are liable to withholding tax by the payer. However, in most cases, individuals are not obliged to withhold tax on payments made by them.

 

10. Carry forward of losses and unabsorbed depreciation :

 

Subject to the fulfillment of prescribed conditions Business loss (including that of speculation business), unabsorbed depreciation, and capital loss (long-term as well as short-term) can be carried forward and set off as per the prescribed provisions of the law. Business losses can currently be carried forward for a period of eight years whereas unabsorbed depreciation can be carried forward infinitely.

 

11.  Corporate Re-organisations:

 

 Corporate reorganizations, such as mergers, demergers, and slump sales, are either tax neutral or taxed at concessional rates subject to the fulfillment of the prescribed conditions.

 

12.  Limited Liability Partnerships:

 

The LLP Act was introduced in 2008 in India. LLPs are subject to AMT at the rate of 18.5 percent of the adjusted total income in the case where the income tax payable is less than 18.5 percent of the adjusted total income. The provisions dealing with DDT do not apply to an LLP. The conversion of a private company or unlisted public company into an LLP is exempt from tax subject to prescribed conditions.

 

13.  Foreign Institutional Investors:



 To promote the development of Indian capital markets, Business investing in listed Indian shares and units are subject to tax as per the beneficial regime. A Surcharge and Education Cess will also be levied. The rate of tax on other short-term capital gains is 30 percent plus surcharge (if applicable) and education cess.

 

14.  Domestic Transfer Pricing:

 

 The transfer pricing regulations also apply to certain domestic transactions defined as SDT covering the following:

  • Payments (i.e. only expenditure) to specific parties;
  • Transactions between tax holiday eligible units and other business of the same taxpayer;
  • Computation of ordinary profits of a tax holiday unit of the taxpayer where there are transactions with entities with close connection;




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! 🙂



Reference: https://mea.gov.in/images/pdf/22899_India_in_Business.pdf

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Business Formation

Taxis in India have always been popular but recently, with the increasing use of technology and companies releasing their app-based models, a new market altogether has emerged. Under this app base model, the companies have now started using the internet and satellite facilities to make the provision of taxis more convenient and user-friendly. Not only is it personally beneficial for all the users as it saves time and money for parking the vehicles, relives them of the responsibility to constantly care for it but is also very beneficial for the environment and reduces traffic when a shared model is used. In this blog, we will be looking into the Legal regulations to Start Bike Taxi Business in India.



The growing global market of bike taxis:

Even so, escaping the enormous amount of traffic is not always possible especially during the peak hours of the day. Well, in such a scenario, smaller cars always help but a two-wheeler simplifies the problem to a much greater extent. It allows one to pass through narrow spaces between the vehicles stuck in traffic jams, is much easier to cater to in terms of care and parking spaces in public places and relatively cheaper. Keeping in view all of the above, various companies and start-ups such as Uber, Rapido, Ola, HeyBob etc. have ventured out into this market and this move has also been well appreciated by the consumers. According to a recent report by World Moto Inc., which is a company engaged in the business of making motorcycle taxi meters estimated the bike market of the world to be worth approximately $500 billion.



Start-up’s market summary:

There are a couple of start-ups that are experimenting with this market and trying to compete with the big players such as Ola and Uber. For example, in Gurgaon, we have M-taxi, Bikxie, and Baxi fully functional with 25, 22 and 200 bikes respectively during the year 2016. With these many bikes, they had until that date catered to about a total of 200-250, 7500, and 2000 plus per day rides respectively.  N.O.W., another start-up has entered the Noida market with about 10 bikes and Hey Bob was running about 40 bikes in Bangalore at one point. While there are a couple of States that have eased their regulations for bike sharing and commercial use of bikes, the lack of them in most States has made it extremely difficult for them to function.



The Indian Legal Scenario:



The law on the subject:

In India, the basic law that regulates the transport means is Motor Vehicles Act, 1988. The Act provides for laws governing all aspects that relate to motor vehicles such as its applicability in case of personal vehicles, vehicles being used for commercial use, licenses and permits that need to be obtained, liability in cases of accidents, insurance claims etc. and also provides for setting up of the Motor Accidents Claims Tribunal for adjudication of claims under the Act.

Any vehicle, therefore, running for any commercial purpose such as a taxi or as for deliveries will be first required to obtain clearances from the Transport Offices of the States that they want to run in.



The regional regulation of bike taxis:

The regulatory aspects of this class of taxis have not been very clear in India. While there is gross uncertainty in the rules of the Regional Transport Office (“RTO”) of most of the states, some have attempted to clarify their stand on the issue. Goa was the first state in the country to allow commercial use of bikes. Haryana became the second state to relax their rules in this respect.


The situation is not so favorable to these start-ups in all states. A press statement in the form of clarification disallowing these services was specifically issued by the RTO in Maharashtra stating that these services are not allowed to be provided by the Motor Vehicles Act as applicable to Maharashtra. Time and again, registration of bikes as commercial vehicles has also been refused on account of the lack of a proper framework for the functioning of these cabs in India.


Similarly, in Bangalore also the RTO deemed this practice to be illegal as the Motor Vehicles Act, 1988 does not provide for a separate class of two-wheeler vehicles for the purpose of registration and without a proper Registration Certificate, no vehicle is allowed to run at all, whether privately or commercially. In fact, in a statement by Mr. H.G. Kumar, the Additional Transport Commissioner and Secretary of State Transport Authority, Bangalore expressly remarked that “Companies like Uber are not authorized to carry passengers on private bikes. Uber and Ola are the major culprits and nobody should operate without a proper license.” Additionally, he also stated that these companies in order to run their bikes have gotten their vehicles registered as private vehicles and therefore, are in violation of the law. Further, since they also do not carry proper registration certificates that justify their activities as a commercial taxi vehicle, no claims in relation to insurance shall be entertained in case of any accidents. Interestingly, a couple of days later, the Bangalore authorities once again changed their stand on the issue and indicated the department’s willingness to entertain such registrations as the time and the consumer demands it, which definitely is a welcome step.




Legal considerations before starting a bike-taxi business in India:

Following are some factors that must be kept in mind while starting a bike-taxi business in India from the legal point of view:


  • Does your State allow it? – The first and the foremost consideration is definitely to check with the RTO department of your State and ascertain whether it is legal to run such a business in your State.
  • Compliance with business regulations: if you are running the business as a sole proprietor, or in a partnership, registration is not mandatory. However, if you wish to start your venture as a public, private or a one-person company, or a limited liability partnership, registration is mandatory with the concerned authorities under the relevant laws.
  • Compliance with the motor vehicle laws: The Motor Vehicle Act, 1988 provides that the State Government shall constitute an authority that shall carry out all the functions given under the Act. The entity entering such a business will not only have to comply with the provisions of the Act by obtaining the necessary permissions and licenses but also have to consider the relevant state rules and regulations.
  • Compliance with information technology laws: If you are planning to launch a website or an android or apple mobile-based application, you’ll have to also consider the implications and applicability of the Information Technology Act, 2000 and all the rules made thereunder.
  • Other ancillary laws: You will have to take into consideration other laws that may be applicable keeping in mind the scale of your operations, kind of operations etc., environmental laws, labor and industrial laws, direct and indirect tax laws also.



Conclusively, as soon as the grey area in terms of legal regulators is clearer, no doubt the market for this will see a huge raise in no time.


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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Business Formation, Private Limited Company

Out of 4 startups born every day in India, 75% register their startup. This blog is intended to remind the importance of incorporating the startup. Yes, they say, on incorporation, a company acquires legal entity shape, but it’s not just that. In this blog, we will look into the Top 7 reasons to incorporate the startup as Private Limited Company.  As entrepreneurs, it is wise to utilize the right information at our disposal reason being most of the time we are on our own.

 

  1. Corporate Personality: The Company is a distinct legal or juristic person independent of its members (directors). From the date of incorporation mentioned in the certificate of incorporation, subscribers to the memorandum and all other persons will be capable of exercising all the functions of an incorporated company under the Act and having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name.
  2. Limited Liability: In the event of the company being wound-up, no member is bound to contribute anything more than the nominal value of the shares held by him which remains unpaid.
  3. Perpetual Succession: Irrespective any change in the board members, the company will be the same entity with the same privileges and immunities, estate and possessions. The death or insolvency of individual members does not affect the corporate entity, its existence or continuity. The company will continue to exist indefinitely till it is wound-up.
  4. Transferable Shares: Shares or other interest of any member of a company can be movable property, transferable in the manner provided by the articles of the company. This encourages investment of funds in the shares, so that the members may encash them at any time. Thus, it provides liquidity to the investors as shares could be sold on the open market and on the stock exchange. It also provides stability to the company.
  5. Separate Property: The property of the company is not the property of the shareholders, it is the property of the company. The company is the real person in which all the property is vested, and by which it is controlled, managed and disposed of. In the eyes of law, even a member holding majority of shares or a managing director of a company is held liable for criminal misappropriation of the funds or property of the company, if he unauthorized takes it away and uses it for his personal purposes.
  6. Capacity to Sue: A company can sue in its name and be sued by others. Neither the members of the board nor the team is liable for anything wrong.
  7. Flexibility and Autonomy: The Company has an autonomy and independence to form its own policies and implement them through Memorandum and Articles of Association.


As an end note, a quick comparison between available entities that a for-profit organization can choose to incorporate

Top 7 reasons to incorporate the startup as Private Limited Company

 

Relevant Blogs for your further reading:

 

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Partnership Firm

Indian Partnership Act, 1932 clearly states that there must be an agreement between the partners of a partnership firm by a contract, and the partnership agreement must comply with essentials of a valid contract, and the partners must be competent to contract and the object of partnership should not be forbidden. We at Wazzeer have received an ample number of questions on Counsel Application, where partners have shared some really critical issues faced by partners in their respective partnership firms, well I am going to add a snapshot of those conversations to the end of this blog. Coming to the essence of this blog, arm to help you Check if your Partnership Deed is Valid.


Partnership Deed may be oral but to avoid future disputes it is always advisable to have it in writing. Note, before the partnership is actually started Partnership Deed should be in place. Thus, the written document is a wise choice.


First and Foremost, the Partnership Deed must be properly drafted and stamped according to the provisions of the Indian Stamp Act. Each partner should be given a copy of the deed and if the firm is to be registered, a copy of the deed should be filed with the Registrar of Firms.


Entrepreneurs, in general, have little to no expertise to validate a contract (only document that would actually safeguard the dream venture and yourself). So, We at Wazzeer are providing you simple and easy tricks, just like correcting a 6th class going student test papers, you will now be able to validate the Partnership Agreement.


A typical partnership deed contains the following covenants, check if these are in place and order:


  1. The firm name and business to be carried on under that name.
  2. Names and addresses of partners.
  3. Nature and scope of business and address(s) of business place(s).
  4. Commencement and duration of the partnership.
  5. The capital and the contribution made by each partner.
  6. Provision for further capital and loans by partners to the firm.
  7. Partner’s drawings.
  8. Interest on capital, loans, drawings and current account.
  9. Salaries, commission, and remuneration to partners,
  10. Profit (or loss) sharing ratio of partners.
  11. The keeping of proper books of accounts, inspection, and audit, Bank Accounts, and their operation.
  12. The accounting period and the date on which that accounts are to be prepared.
  13. Rights, powers, and duties of the partners.
  14. Whether and in what circumstances, notice of retirement or dissolution can be given by a partner.
  15. Provision that death or retirement of a partner will not bring about dissolution of partnership,
  16. Valuation of goodwill on retirement, death, dissolution etc.
  17. The method of valuation of assets (and liabilities) on retirement or death of any partner.
  18. Provision for the expulsion of a partner.
  19. Provision regarding the allocation of business activities to be performed by individual partners
  20. The arbitration clause for the settlement of disputes. The terms contained in the partnership deed may be varied with the consent of all the parties, and such consent may be express or implied by a course of dealing. [Section 11(1)]



Actual queries regarding Partnership firm, Partnership Deed, and disputes between partners:

How to Check if your Partnership Deed is Valid?

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Post Incorporation

Guess what is the next set of action items in the Checklist for a new Startup planning to be a fully compliant? The answer is – Legal, Accounting, and Compliance work that a startup has to carry within 6 months of its inception. In this article, we are going to be helping you, entrepreneurs, to plan accordingly to win the battle of becoming a successfully compliant startup. This blog precisely will act as a checklist for a new venture planning to be a fully compliant one.

 

LEGAL WORK

  1. Obtain director identification number (DIN) online from the Ministry of Corporate Affairs portal (National). It will take 1 day and cost of INR 100.
  2. Obtain digital signature certificate online from a private agency authorized by the Ministry of Corporate Affairs (National). It will take 3 days and the cost of INR 1,500.
  3. Reserve the company name online with the Registrar of Companies (ROC) (National). It will take 2 days and INR 500 as cost.
  4. Stamp the company documents at the State Treasury (State) or authorized bank (Private). it will take 1 day and INR 1,300 (INR 200 for MOA + INR 1,000 for AOA for every INR 500,000 of share capital or part thereof + INR 100 for stamp paper for declaration Form 1)
  5. Get the Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate Affairs (National). It will take 5 days and INR 14,133.
  6. Make a seal (Private. It will take 1 day and the cost of INR 350 (cost depends on the number of seals required and the time period for delivery).
  7. Obtain a Permanent Account Number (PAN) from an authorized franchise or agent appointed by the National Securities Depository Ltd. (NSDL) or the Unit Trust of India (UTI) Investors Services Ltd., as outsourced by the Income Tax Department (National). It will take 7 days and the cost of INR 67 (INR 60 application fee + 12.36% service tax + INR 5 for an application form, if not downloaded).
  8. Obtain a Tax Account Number (TAN) for income taxes deducted at source from the Assessing Office in the Mumbai Income Tax Department. It will take 7 days and the cost of INR 57 (INR 50 application fee + 12.36% service tax).
  9. Register with the Office of Inspector, Shops, and Establishment Act (State/Municipal). It will take 2 days and the cost of INR 6,500 (INR 2000 + 3 times registration fee for trade refuse charges).
  10. Register for Value-Added Tax (VAT) at the Commercial Tax Office (State). It may take 12 days and the cost of around INR 5,100 (registration fee INR 5000 + stamp duty INR 100).
  11. Register for Profession Tax at the Profession Tax Office (State). The time period is 2 days and No cost.
  12. Register with Employees’ Provident Fund Organization (National). The time period is 12 days and No cost.
  13. Register for medical insurance at the regional office of the Employees’ State Insurance Corporation (National)

 

 

COMPLIANCE WORK

  • Bookkeeping services.
  • Tax return filing (GST,TDS)
  • Quarterly advance tax
  • Payroll services( up to 15 employees)
  • Company returns and ROC compliances
  • Maintenance of statutory records
  • One year free access to ClearTax GST Biz Software (for invoicing).

 


ACCOUNTING WORK

  1. Open a Bank Account – Having a separate bank account keeps records distinct and will make life easier come tax time.
  1. Track Your Expenses – It’s a crucial step that allows you to monitor the growth of your business, build financial statements, etc.
  1. Develop a Bookkeeping System – Bookkeeping is the day-to-day process of recording transactions, categorizing them, and reconciling bank statements.
  1. Set up a Payroll System – Maybe you’ll hire a part-time employee to help you out, or a freelancer to design your logo.  For employees, you’ll need to decide on a payroll schedule and ensure that you’re withholding the correct taxes; there are lots of services that can help with this. 
  1. Investigate Import Tax – When importing products, you’ll likely be subject to taxes and duties. These are fees that your country imposes on incoming goods. Take the time to learn about importing goods.

 

  1. Determine How You’ll Get Paid – When sales start rolling in, you’ll need a way to accept the payments. 
  1. Establish Sales Tax Procedures – The world of eCommerce has shaken up sales tax regulations and they are admittedly a bit confusing due to location issues. 
  1. Determine Your Tax Obligations – If you’re self-employed (sole proprietorship, LLC, partnership), you’ll claim business income on your personal tax return. Corporations, on the other hand, are separate tax entities and are taxed independently from owners. 
  1. Calculate Gross Margin – You need to know the costs incurred to produce your product. 
  1. Constantly Re-evaluate Your Methods – As you keep growing, it’s good to continually reassess the amount of time you’re spending on your books, and how much that time is costing your business. 

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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Funding Compliance

Below are 5 ways to raise funds for a startup to raise funds for your startup without equity or Share options:

 

1)    Bootstrapping your startup business:

 

Self-funding, also known as bootstrapping, is an effective way of startup financing, especially when you are just starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. You can invest from your own savings or can get your family and friends to contribute. This will be easy to raise due to fewer formalities/compliances, plus fewer costs of raising. In most situations, family and friends are flexible with the interest rate.

 

Self-funding or bootstrapping should be considered as a first funding option because of its advantages. When you have your own money, you are tied to the business. On a later stage, investors consider this as a good point. But this is suitable only if the initial requirement is small. Some businesses need money right from the day-1 and for such businesses, bootstrapping may not be a good option.

 

Bootstrapping is also about stretching resources – both financial and otherwise – as far as they can. Check out these 30 tips to save money and improve your business cash flow.

 

 

2)    Crowdfunding :

 

Crowdfunding is one of the newer ways of funding a startup that has been gaining a lot of popularity lately. It’s like taking a loan, pre-order, contribution or investments from more than one person at the same time.

 

This is how crowdfunding works – An entrepreneur will put up a detailed description of his business on a crowdfunding platform. He will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc. and then consumers can read about the business and give money if they like the idea. Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they really believe in.

 

Why should you consider Crowdfunding as a funding option for your business?

The best thing about crowdfunding is that it can also generate interest and hence helps in marketing the product alongside financing. It is also a boon if you do not sue if there will be any demand for the product you are working on. This process can cut out professional investors and brokers by putting funding in the hands of common people. It also might attract venture-capital investment down the line if a company has a particularly successful campaign. Also keep in mind that crowdfunding is a competitive place to earn funding, so unless your business is absolutely rock solid and can gain the attention of the average consumers through just a description and some images online, you may not find crowdfunding to work for you in the end. Some of the popular crowdfunding sites in India are Indiegogo, Wishberry, Ketto, Fundlined, and Catapooolt. In the US, Kickstarter, RocketHub, Dreamfunded, Onevest, and GoFundMe are popular crowdfunding platforms.

 

3. Govt Programs That Offer Startup Capital:

 

The Government of India has launched 10,000 Crore Startup Fund in Union budget 2014-15 to improve startup ecosystem in India. In order to boost innovative product companies, Government has launched ‘Bank Of Ideas and Innovations’ program.

 

Government-backed ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)‘ starts with an initial corpus of Rs. 20,000 crore to extend benefits to around 10 lakhs SMEs. You are supposed to submit your business plan and once approved, the loan gets sanctioned. You get a MUDRA Card, which is like a credit card, which you can use to purchase raw materials, other expenses etc. Shishu, Kishor, and Tarun are three categories of loans available under the promising scheme. Learn more about MUDRA.

 

Also, different states have come up different programs like Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, etc to encourage small businesses.

SIDBI – Small Industries Development Bank Of India also offer business loans to MSME sector. In the US, there is a small business lending fund and a dedicated portal for Government grants available for local businesses. If you comply with the eligibility criteria, Government grants as a funding option could be one of the best. You just need to make yourself aware of the various Government initiatives.



Remember, 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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IP, Trademark

Speaking of wild thoughts, imagine if Apple had trademarked its logo just under one class, say Class 9 – It Covers all types of Mobile Applications (APPS) and Downloadable Software (anyone having a Mobile Application has to get a Trademark Registered in this Class for its protection).

Sanjay a busy entrepreneur decides to start his own electronics manufacturing company (Home based automation and application development). Sanjay wanted to have a brand name that can be trademarked and can be easily remembered by the target audience.  Out of blue, Sanjay got an idea to use Apple as its brand name.

Sanjay hired a lawyer to look up if he could get his company named as Apple Technologies Private Limited; his lawyer did the due Trademark research and figured out a way that can be done.  Here are the suggestions made by the lawyer:

Trademark can be applied under two criteria: Primary Trademark Classes and Secondary Trademark Classes (the explanation would be more elaborate while Applying for the Trademark, below Descriptions are for your Reference and understanding only)


Primary Trademark Classes –

Class 35 – E-commerce Platform, Business Operations, Consulting, Promotions and Advertising Services(this covers your Amazon or Uber type integrated portal).

 

Secondary Trademark Classes – 

 

  • Class 37 – Cleaning, Washing, Repairing Services related to Household Work, Construction Work etc, (it majorly covers the domestic Help provided in Household Work, in other words, it covers major work that would be done by a Domestic Helper i.e. a SMART CHOTU while a person would be booking them on your platform)

 

  • Class 42 – Covers Designing of Website and Mobile Applications; Maintenance of Mobile Application and Websites. (this is done when you have an IT team to do changes and maintenance of the Website and Application)

 

Ironically, Sanjay would have got the Trademark approved very easily unless Apple files an opposition. Yes, the Trademark Act has all those provisions, which is why Multi Class Trademark Registration is suggested.

 

Multi-Class Trademark Registration simply means:

An application for registration of a single trademark can be made in respect of goods and/or services in one class. If in case you choose multi-class registration, then you are required to apply for registration those many times. Example: In case you choose to trademark under class 1 and class 35, then you need to apply for trademark registration twice, one class at a time. The applicant should specify the goods and/or services in relation to which the application is made. A specification that claims registration for all goods, products or services etc. in a particular class would be regarded as wide.

 

The take away:

Entrepreneurs little do they know about the fancy Laws and regulations, but as a business owner being aware and taking the right decision for the company is always in your hand. It is advisable to have a Trademark registered in all your relevant Trademark Classes for Complete Protection of your Brand. Majorly because of the fact that if someone else tries to Copy, Infringe or Misuse the same name and Trademarks it in your Relevant Class, then you would lose all the rights over your BRAND in that specific Work domain.

 

Once Again, reminding you of the benefits Trademark Registration:

  • Exclusive Right on Your Brand Name & Logo.
  • You Become the True Owner of Your Brand Name & Logo.
  • It Protects your Brand Name & Logo from being Copied by someone else.
  • You get the Power to Sue anyone trying to Infringe your Brand Name or Logo.
  • If someone else Trademark’s your Brand before you then you would lose all the Rights over your Brand and will be stuck in years of Litigation.


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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Secretarial Compliance, Share Certificate, Transfer of Shares

Shares, like any other property, is an investment in a business which can be sold out, when something like that happens the process is called transfer of shares. Shares held by an investor are presumed to be capable of transfer unless the company has restricted the right to transfer them by a provision in its articles, or the shareholder has entered into a contract, such as a shareholders’ agreement, not to transfer the shares. This article is structured to help shareholders understand the methodology of Transfer of shares – What, Why, and How may it be done.

Statutory provisions:

  1. Section 56 of Companies Act, 2013
  2. Rule 11 of Companies (Share Capital & Debentures) Rules 2014
  3. Provisions are given in model articles of association given in Table ‘F’ of Schedule-I



Procedure for Transfer of Share in a Private Company:

 

Generally, articles contain the detailed provisions as regards to the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—

 

  1. Transferor should give a notice in writing for his intention to transfer his share to the company.

 

  1. The company, in turn, should notify to other members as regards the availability of shares and the price at which such share would be available to them.

 

  1. Such price is generally determined by the directors or the auditors of the company.

 

  1. The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.

 

  1. If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.

 

  1. Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.

 

  1. The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before the signing of the transfer deed.

 

  1. The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name, and address.

 

  1. Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.

 

  1. After receipt of share transfer deed, the board shall consider the same. If the documentation for transfer of share is in order, the board shall register the transfer by passing a resolution.

 

 

Procedure for Transfer of Share in a Public Company:

 

Section 58(2) provides that the shares or debentures and any interest therein of a public company shall be freely transferable. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—

 

  1. Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.

 

  1. The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before the signing of the transfer deed.

 

  1. The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name, and address.

 

  1. Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.

 

  1. After receipt of share transfer deed, the board shall consider the same. If the documentation for transfer of share is in order, the board shall register the transfer by passing a resolution.

 

 Main Provisions related to Transfer of Share:

 

  1. Instrument for Transfer of Share is compulsory: Section 56 provides that a company shall not register a transfer of shares of, the company, unless a proper transfer deed in Form SH.4 as given in Rule 11 of Companies (Share Capital & Debentures) Rules 2014 duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company, along with the certificate relating to the shares, or if no such certificate is in existence, along with the letter of allotment of the shares.

 

  1. Time Period for deposit of Instrument for Transfer: An instrument of transfer of shares i.e. Form SH.4 with the date of its execution specified thereon shall be delivered to the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.

 

  1. Value of share transfer stamps to be affixed on the transfer deed: Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.

 

  1. Time limit for issue of certificate on transfer (Section-56(4)): Every company, unless prohibited by any provision of law or of any order of any Court, Tribunal or other authority, shall, within One month deliver, the certificates of all shares transferred after the application for the registration of the transfer of any such shares, debentures or debenture stock received.

 

  1. Private company shall restrict right to transfer its shares: Entire shareholding of a private company may be owned by a family or other private group. Section 2(58)(i) of the Companies Act, 2013 provides that the Articles of a private company shall restrict the right to transfer the company’s shares.

 

  1. Restriction on transfer in Private Company not applicable in certain cases: Restriction upon transfer of shares is in private company are not applicable in the following cases:

 

(i) on the right of a member to transfer his/her shares cannot be applicable in a case where the shares are to be transferred to his/her representative(s).

 

(ii) in the event of the death of a shareholder, legal representatives may require the registration of share in the names of heirs, on whom the shares have been devolved.

 

Note: Restriction should not be in the form of prohibition and Restriction can only be by the Articles of Association.

 

  1. Time Limit for Refusal of registration of Transfer: Provisions related to Refusal of registration and appeal against refusal is given in Section 58 of the Companies Act, 2013. Power of refusal to register transfer of shares is to be exercised by the company within thirty (30) days from the date on which the instrument of transfer or the intimation of transfer, as the case may be is delivered to the company.

 

  1. Time Limit for appeal against refusal to register Transfer by Private Company: As per section 58(3), a transferee of shares may appeal to the Tribunal against the refusal within a period of thirty (30) days from the date of receipt of the notice from the Company or in case no notice has been sent by the company, within a period of sixty (60) days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.

 

  1. Time Limit for appeal against refusal to register Transfer by Public Company: As per section 58(4), a transferee of shares may, within a period of sixty (60) days of such refusal or where no intimation has been received from the company, within ninety (90) days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal.

 

  1. The penalty for Non-compliance: Where any default is made in complying with the provisions related to transfer of shares, the company shall be punishable by a fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 5,00,000/- and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs. 10,000/- but which may extend to Rs. 1,00,000/-.

 


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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