Frequently asked questions.

Here’s what you need to know-answers to most of the Frequently Asked Questions from Entrepreneurs, Professionals or others looking about LLP.

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General Questions

This segment consists of every basic detail one should know while incorporating a Limited Liability Partnership (LLP) firm.

Start up is any new business that applies an innovative solution. The solution can be either technological or a unique business model. According to Investopedia, Startup is "a company that is in the initial stage of business".

A company to be recognised as a startup, the following points must be considered:

  • Start up to be recognised as one must be registered,
  • Five years must not have elapsed from the Date of Incorporation or Registration,
  • Annual Turnover in the preceding Financial Year must not exceed ₹25 crores,
  • It must work towards innovation, development, or commercialisation of new products, processes or services driven by Intellectual Property or Technology,
  • It must not be formed by splitting up or reconstruction of business already in existence.

Before commencing the operations, it is important for you to register your startup as a legitimate business. Depending on the business you are setting up, you are required to fulfil the registration procedure like obtaining a certificate of incorporation or partnership registration, etc. Moreover, starting a business is knowing your responsibilities as an employer which is ensuring compliance with all the requisite labour regulations.

 

Startups after being registered with the Ministry of Labour and Employment are allowed to self-certify their compliance with various labour laws and exempted from inspection under the same. For the second and third year of your startup, you can file a self-certified return to continue to be exempted from the above mentioned laws under this initiative. Self-certification does not mean that you can evade from following the labour laws.

 

To protect your innovative idea that forms the basis of your startup, it must be registered under the Intellectual Property Rules laid down by the Government. The ideas are legally referred as your Intellectual Property.

The registration varies depending on the legal structure and the type of business entity.

It totally depends upon the nature of the business undertaking, nature of goods and services being sold and owners incorporating the business.

STARTUP INDIA:

To meet your objective, it is necessary to know the advantages and disadvantages. Here are some pros and cons of an LLP.

The Government of India launched a scheme called 'Startup India' for the promotion of innovation and a robust startup ecosystem in the country. The scheme allows you to claim many benefits like tax exemptions that will boost your business in the initial stages.

The following are the conditions to register under the 'Startup India' Scheme:

It is either incorporated as a Private Limited Company, registered as a partnership firm or a limited liability partnership in India.

It's incorporation or registration was less than 10 years ago.

Its turnover for any of the financial years since incorporation or registration has not exceeded 100 Crores.

It is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

Entities that were formed by splitting up or reconstruction of a business that was already in existence do not count as a startup.

 

Entities that were formed by splitting up or reconstruction of a business that was already in existence do not count as a startup.

 

When your business is registered under 'Startup India', you can sign a self declaration form and be exempted from inspection under the following laws:

The Industrial Disputed Act, 1947

The Contract Labour (Regulation and Abolition) Act, 1970

The Employees' Provident Fund and Miscellaneous Provisions Act, 1952

The Employees' State insurance Act, 1948

The Industrial Employment (Standing Order) Act, 1946

The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act , 1979

The Payment of Gratuity Act, 1972

The Trade Union Act, 1926

Building and Other Constructions Workers' (Regulation of Employment and Conditions of Service) Act, 1996

 

COMPLIANCE:

A business cannot be commenced by mere investment alone. This segment deals with the requirements to form an LLP.

The business must comply with the laws established by the Government in order to function smoothly. Startups require a compliance mechanism to deal with the ever rising need of legal compliance.

 

The business must comply with the laws established by the Government in order to function smoothly. Startups require a compliance mechanism to deal with the ever rising need of legal compliance.

 

Environmental laws deal with compliances under the National Green Tribunal Act of 2010 which incorporates all other environmental laws under its umbrella. Increasing environmental awareness has made laws related to the environment more rigid and non-compliances lead to penalty.

The Companies Act of 2013 regulates appointment of directors, the manner in which Annual General Meeting and Board Meeting is to be conducted, appointment of auditors, other basic requirements like Permanent Account Number (PAN) and Temporary Account Number (TAN), Bank account, etc after incorporation. Penalty also will be imposed for non-compliance.

The Income Tax Act of 1961 specifies time limit for filing Income Tax Return and in case of any discrepancy for an appeal to the higher authorities.

 

Startups having less than ₹40 Lakhs per annum turnover are exempted from being considered for Goods and Service Tax Registration. The purpose of the exemption is that the small businesses can develop without being made liable to GST in the initial days of growth as it is difficult to keep check on compliances with its profit making goals.

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