E-Commerce Compliance in India: GST, TDS & TCS
Fast-growing businesses that will require funding from venture capitalists (VCs) need to register as private limited companies. This is because only private limited companies can make them shareholders and offer them a board of directors. LLPs would require investors to be partners, and OPCs cannot accommodate additional shareholders.
In exchange for the convenience of easily accommodating funding, the private limited company set-up needs to meet the Ministry of Corporate Affairs (MCA). These range from a statutory audit, annual filings with the Registrar of Companies (RoC), annual submission of IT returns, as well as quarterly board meetings, the filing of minutes of these meetings, and much else. Suppose your business isn’t geared to meet these requirements. In that case, you may want to wait a while before you jump into registering a private limited company.
The private limited company is assumed to have many tax advantages, but this is not the case. There are some industry-specific advantages, but taxes are to be paid at a flat rate of 30% on profits, and the dividend distribution tax (DDT) applies, If you’re looking for the structure with the lowest tax burden, the LLP does offer some better benefits.
A private limited company cost around Rs. 8000 to start at the very least, excluding professional fees. However, this will be higher in some states; in Kerala, Punjab and Madhya Pradesh, the fees are much higher. It would help if you also had some paid-up capital, which can be as little as Rs. 5000 to begin with. The annual compliance costs are around Rs. 13,000.
If you’re running a business that’s unlikely to require equity funding, you may want to register an LLP as it combines several benefits of the private limited company and general partnership. Like a private limited company, it has limited liability and has a simpler structure, like a general partnership.
The MCA has made some concessions to the LLP. For example, an audit needs to be performed only if your turnover is greater than Rs. 40 lakh or paid-up capital is more than Rs. 25 lakhs. Furthermore, whereas all structural changes need to be communicated to the RoC in the case of private limited companies, the requirement is minimal for LLPs.
If your business is earning over Rs. 1 crore in profits, the LLP offers tax benefits. The tax surcharge applies to companies with profits over Rs. 1 crore doesn’t apply to LLPs, nor does Dividend Distribution Tax. Loans to partners are also not taxable as income.
There is no limit to the number of partners in an LLP. So, if you’re building a large advertising agency, for example, you needn’t worry about any cap on the number of partners.
Much cheaper than starting a private limited company, with government fees of Rs. 5000, no paid-up capital and low compliance costs.
A significant improvement over the sole proprietorship firm, given that your liability is limited, the OPC is meant for solo entrepreneurs. However, note that if it has over Rs. 2 crore revenues, and paid-up capital of over Rs. 50 lakhs, it needs to be converted into a private limited company.
While there are no board meetings, you have to conduct a statutory audit, submit annual and IT returns, and comply with the various requirements of the MCA.
The OPC, like the private limited company, has some industry-specific advantages. But taxes are to be paid at a flat rate of 30% on profits, and the DDT applies, If you’re looking for a structure with the lowest tax burden, the LLP does offer some better benefits.
Nearly the same as a private limited company, with government fees of a little less than Rs. 7,000. However, this will change for different states; in Kerala, Punjab and Madhya Pradesh, the fees are much higher.
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