Choosing the right Form of Business

Choosing the right business entity allows an entrepreneur to reduce liability exposure, minimize taxes, and ensure that the business can be financed and run efficiently. It also provides business owners with a mechanism for ensuring that the business operations will continue, rather than being automatically terminated, upon the death of an owner. Formalizing the business also clarifies the ownership of all participants in the venture.

When choosing a business entity, you should consider:

(1) the degree to which your personal assets are at risk from liabilities arising from your business;

(2) how to best pursue tax advantages and avoid multiple layers of taxation;

(3) the ability to attract potential investors;

(4) the ability to offer ownership interests to key employees; and

(5) the costs of operating and maintaining the business entity.

Comparative Study:

Features	Sole Proprietorship	Partnership	Limited Liability Partnership	Private Limited Company
Starting up	No registration required	Registration is optional	Mandatory registration	Mandatory Registration
Business Name	No approval required. Should not infringe trademark or copyright	No approval required. Should not infringe trademark or copyright	Approval required prior to incorporation	Approval required prior to incorporation
Legal Status	Not a legal entity	Not a separate legal entity	Separate legal entity	Separate legal entity
Foreign Nationals	Not allowed	Not allowed	Allowed. Min 1 resident Designated partner needed	Allowed
Persons	Min: 1, Max: 1	Min: 2, Max: 20	Min: 2, Max: No Limit	Min: 2, Max: 50
Repatriation	Not allowed	Not allowed	Not allowed	Allowed
Charter Document	None	Partnership Deed	LLP Agreement	Memorandum of Association (MoA) and Articles of Association (AoA)
Business Licenses	Applicable as per business requirements	Applicable as per business requirements	Applicable as per business requirements	Applicable as per business requirements
Validity	Till death of Owner	Dissolved on death of a partner. Can be dissolved at the will of all partners or even one partner can give notice for dissolving.	Perpetual succession	Perpetual succession
Registering Authority	None	Registrar of Firms	Registrar of Limited Liability Partnerships, MCA	Registrar of Companies, MCA
Governing Act	None	The Indian Partnership Act, 1932	The LLP Act, 2008	The Companies Act, 2013
Compliance Requirements	Low	Low	Moderate	High
Income Tax Rates	Individual rates	30%	30%	25-30%
Profit Sharing	Taxable	Exempt from tax	Exempt from tax	Taxable
Liability	Unlimited. Personal property is also covered	Unlimited. Personal property is also covered	Limited upto contribution in LLP (except in case of Fraud)	Limited upto extent of shares hold (except in case of Fraud)
Capacity to Sue	Individual level	As a Firm (in case of registered firms). Individually/ Collectively (in case of not registered firms)	As a Firm	As a Company
Market Reputation	Low	Low	Moderate	High
Winding up/ Dissolution	Easy	Easy	Prescribed process to be followed	Prescribed process to be followed

Preetham Shetty and Co. offers a Cost effective & Easy Business Registration Services packages for its Clients with in Bengaluru. For more info contact info@preethamandco.com

Provisions relating to Invoices under GST

The government is set to roll out GST or Goods and Services Tax from July 1. Amid concerns regarding new paperwork once GST kicks in, the Central Board of Excise and Customs has come out with a few clarifications on facts highlighting GST provisions relating to invoice for trade. In its bid to allay concerns of traders on invoice generation post-GST, the CBEC, under the Department of Revenue, said: “There are some apprehensions in the trade circles that GST invoices have to be issued as per prescribed format and that issuing invoice is going to be burdensome process. This is not correct. Some important facts about GST provisions relating to invoice are highlighted for information of all stakeholders.” Touted as the biggest reform since Independence, the incoming indirect tax regime is aimed at creation of a common market, preventing ‘tax-on-tax’ and making goods and services cheaper.

The Central Board of Excise and Customs gave a list of facts on invoicing relating to GST:

All GST taxpayers are free to design their own invoice format.

GST Law only required that certain fields must mandatorily be in the invoice.

1.    The time period prescribed for issuing invoice is different for goods & services – for goods, it is any time before its delivery and for services, it is within 30 days from the date of supply of services.

2.    Small taxpayers, like small retailers, doing a large number of small transactions for up to a value of Rs. 200 per transaction to unregistered customers need not issue invoice for every such truncation. They can issue one consolidated invoice at the end of each day for all transactions done during the day. However, they should issue the invoice where the customer so demands

3.    In normal circumstances, one copy of invoice is required to be carried by the transporter. However, GSTN (Goods and Services Tax Network) provides a facility to obtain an invoice reference number and if a taxpayer has generated this number, his goods need not be accompanied by paper invoice during transportation. This mechanism helps to address frequently reported problems like paper invoices getting misplaced, mutilated, torn or lost in course of transportation of goods.

4.    In order to keep compliance burden low for small taxpayers, GST law provides that taxpayers with annual turnover of up to Rs. 1.5 crore need to mention the HSN (Harmonized System of Nomenclature) Code of the goods in the invoices.

5.    Keeping in view the large number of transactions in the banking, insurance and passenger transport sector, taxpayers need not mention the address of the customer and the serial number in their invoices.

6.    Where the goods are transported for delivery but quantity to be supplied is not known at the time of removal, the good may be removed on delivery challan and invoice may be issued after delivery.

7.    Where the goods are transported for delivery but quantity to be supplied is not known at the time of removal, the good may be removed on delivery challan and invoice may be issued after delivery.

8.    No need to issue separate Bill of supply if VAT invoice is issued for non-taxable supplies.

No need to issue separate Bill of supply if VAT invoice is issued for non-taxable supplies.

Types of GST Returns

Sequence of Events:

You file GSTR-1 for sales made (due date-10 of the next month).

Your buyer views the sales made by you in GSTR-2A.

Your buyer approves the sales filed by you and files GSTR-2.

If the buyer modifies the sales marked by you, you can see it in GSTR-1A & approve/disapprove.

When buyer and seller approve, GSTR-3 is generated with payment of taxes. (due date-20th)

For further enquires on GST, please contact us at: info@preethamandco.com

Goods and Services Taxpayer Identification Number (GSTN)

All the business entities registering under GST will be provided a unique identification number known as GSTIN or GST Identification Number. Currently any dealer registered under state VAT law has a unique TIN number assigned to him by state tax authorities. Similarly, service tax registration number is assigned to a service provider by Central Board of Excise and Customs (CBEC). Under GST regime, all these parties will come under one single authority and the different identification numbers will be replaced by a single type of registration number for everyone (GSTIN).
To get your GSTIN Click Here

TDS on Rent Payment exceeding 50000 per month

The Central Board of Direct Taxes (CBDT) has notified the amended rules in connection with the new provision mandating payment of TDS on rent above Rs.50,000/- per month. Finance Act, 2017 inserted a new provision, Section 194IB in the Income Tax Act as per which, Individuals and HUFs paying rent of Rs 50,000 or more per month must deduct 5% tax at source. The provision is applicable w.e.f 01.06.2017. As per the new provision, TDS is deductible at the rate of 5% of the rent paid or payable. If the person receiving rent doesn’t furnish his PAN then TDS is deductible at the rate of 20% subject to maximum limit of amount of rent payable for the month of March or last month of tenancy as the case may be. In connection with the above provision, the Board has now, amended the income Tax Rules. Form Nos. 16C and 26QC also has been released in this regard.

No requirement of TAN Number

Individual/HUF (other than those who need to get a tax audit done) need not get a TAN number to deduct TDS. TAN number is basically the Tax deduction and collection account number that is mandatory if one has to deduct TDS under the income tax act. This requirement has been relaxed.

TDS to be deducted once in a Financial Year

To further simplify the process of TDS, it can be deducted only once in the financial year. TDS can either be deducted at the time of credit of the rent to the account of the payee (landlord) for the last month of the financial year OR the last month of the tenancy if the property is vacated during the year OR at the time of payment whichever is earlier.