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  • Writer's pictureAparna Gayatri Devagiri Sriram

Episode 10: Options and legalities to consider while setting up your Organisation

Welcome to another episode of Her Business is Our Business where we Gayathri and Aparna look at Women Entrepreneurship beyond funding – sharing expertise, experiences and tools to grow your business.

In this episode, I, Gayatri speak to Rani NR, a practising Chartered Accountant based out of Bangalore. We discuss all the important points to consider and focus on while planning a business or setting up your organisation.

Starting from the various entity format options available, criteria to choose the right entity format, compliance, rule and mandates under each entity to how to maintain books of accounts and the contents of a partnership deed, this episode covers everything you need to know.

If you are looking to start a business, listen on!

Key points of discussion:

  • The various forms of business entity available:

1) Proprietorship concern

  • Stated by just one person

  • No one will share responsibilities

  • No restriction on the name

  • Not mandatory to have a trademarked name

  • PAN number of the person is the pan number of the company

2) Partnership firm

  • Can be started by two people of more (2-20)

  • Shared responsibility

  • Shared profits and losses

  • Requires a PAN number

  • Requires a registered name

3) Limited liability partnership

  • All conditions and statutory compliances are similar to the partnership concern

  • Registered under the Ministry of corporate affairs

  • Liabilities are limited to what is committed in the partnership agreement

  • A person who claims the liability cannot go beyond the commitment of the capital as per the agreement. This is the biggest advantage of this format.

4) Private Limited Company

  • Shared capital

  • Compliances, rules and regulations are more while compared to the LLP format

  • Will not be allowed to borrow capital from others outside the company

  • High Compliance cost

  • Choose Partnership or Proprietorship while experimenting

  • LLP is a good option for a business where you are required to maintain a very formal relationship with both the partners and customers

  • If you have an existing successful concept and require external funding such as investors or Foreign investments, opt for Private limited entity format.

  • Many Government schemes are available such as Start-Up India and DIIP that entrepreneurs of today can explore

  • A partnership deed should contain a few mandatory clauses such as:

  • Start date of the business

  • The objectives

  • Name of the firm

  • Name of the partners

  • Profit & Loss share percentage

  • Maintenance of the books of accounts

  • Authorized signatory

Clauses good to have in the deed:

  • Roles played by each partner in the business

  • Arbitration clause

  • Remuneration clause

*The points mentioned in this episode are thinking points only. We urge you to contact a professional for advice.

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