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Monday, May 21, 2018
You are here : FAQs


  • Business Set Up
  • What are the various types of business organizations that can formed in India?

    A. For Indian Owners

    • a. One Person Company
    • b. Private Company
    • c. Public Company
    • d. Proprietorship
    • e. Partnership
    • f. Limited Liability Partnership

    B. For Foreign Owner

    • a. Company
    • b. Branch Office
  • Whether approval of Government of India is required before making Foreign Investment in India?

    A foreign national can incorporate a company in India and subscribe the equity shares of that company but under the foreign Investment Policy of India, such investments are categorized under two routes:

      a. Automatic Route
      b. Approval Route
      a. Automatic Route

      Under the Automatic Route, the Government of India has prescribed the limit of foreign investment in various sectors and if you are incorporating a company to operate in that sector and within the limits of foreign investment allowed in that sector, you can establish your company in India. In case their investment falls under the automatic route, a company can be incorporated without any permission

      b. Approval Route

      If you do not fall under the above route or you are making investment in sector more that limit of foreign investment available in that sector, than you will be required to take the permission of Foreign Investment Promotion Board for incorporating a company in India. In case their investment falls under approval route, they have to take the permission of relevant regulatory authority before incorporating a company.

  • Cases for mandatory conversion of an OPC into Private Limited/Public Limited ?

    In case the paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover exceeds during the relevant period exceeds two crore rupees, then the OPC has to mandatory convert into private or public company.

  • Documents for obtaining din no of a foreign national?

    Details of a valid passport should be filled in form DIR-3 and a certified copy of same should be attached with DIN application. All supporting documents including photograph should be certified by the Indian Embassy or a notary in the home country of the applicant or by the Managing Director / CEO / Company Secretary of the company registered in India, in which applicant is a director. If a foreign director has a valid multiple-entry Indian visa or Person of Indian Origin card or Overseas Citizen of India card, then the attestation could also be done by Public Notary / Gazetted Officer in India or practicing CA / CS / CWA.

  • How to Start Section 8 company/Non Profit Company?

    The Procedure to register Section-8 company is same as a Private Company and a additional license from Central Government is required. To register a section 8 company, applicant is required to file Form INC-1 for name availability. Once the name is approved/made available, there is a further requirement of obtaining a license for a Section 8 Company, for which Form RD-1 is to be filed in order to obtain a license for such company. After obtaining license number, applicant can proceed further to incorporate a company by filing e forms INC-7, INC-22 and DIR-12 or e-forms INC-7 and DIR-12 as the case may be.

  • What is the expected time which is required to establish a business in India?

    Generally the time required to establish your business depends upon the form of organization and nature of business. Keeping in view, Company form of business, it would take around 14-20 days to establish business excluding the time taken for preparing and signing the documents.

  • I am startup which form of business organization will be suitable for us?

    As startup, since your business is at its initial stage of birth and therefore the form of business should be easy to run and manage and which is also attractive in from the point of investors for providing necessary funds. Keeping in view the same, Limited Liability Partnership is highly recommendable.

  • What are the various types of companies in India?

    There are basically two types of Companies in India, which are outlined below-

    • a. Public Limited Company
    • b. Private Limited Company
  • What is the minimum number of members required to form a Public Company and Private Company?

    There should be at least seven persons (natural or artificial) to incorporate a Public Company and two members in case of Private Company.

  • Whether a foreign national can be appointed as director of an Indian Company?

    Yes, a foreign national can be appointed as a director of an Indian Company incorporated, there are no restrictions as to his appointment.

  • Are shares of Private company easily transferrable?

    Yes, shares of Private Company are easily transferable among members of the company but for transferring the shares to non member, the share should be first offered to an existing member and if he refuses to purchase the same, the shares can be transferred to non-members.

  • How can we place any restrictions as to the working of Private Company?

    A Private Company functions in a closely held manner and therefore restriction as to its working can be placed upon it but to make these restrictions effective and binding on the company it should be placed in the Articles of Association of the Company.

  • What is LLP?

    A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one partner is not responsible or liable for another partner’s misconduct or negligence, this is an important difference from that of a unlimited partnership. In an LLP, all partners have a form of limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a corporation.

  • What are the benefits and drawbacks of LLP?

      Benefits of LLP

    • 1.  Renowned and accepted form of business worldwide in comparison to Company.  Low cost of Formation 
    • 2. Easy to establish
    • 3. Easy to manage & run
    • 4.  No requirement of any minimum capital contribution
    • 5.  No restrictions as to maximum number of partners
    • 6.  LLP & its partners are distinct from each other
    • 7.  Partners are not liable for Act of partners
    • 8.  Less Compliance level
    • 9.  No exposure to personal assets of the partners except in case of fraud
    • 10. Less requirement as to maintenance of statutory records
    • 11. Less Government Intervention
    • 12.  Easy to dissolve or wind-up
    • 13. No requirement as to Minimum Alternate Tax
    • 15.  Audit requirement only in case of contributions exceeding Rs. 25 lakh or turnover exceeding Rs.40 lakh

      Drawbacks of LLP

    • 1. Any act of the partner without the other partner, may bind the LLP
    • 2. Under some cases, liability may extend to personal assets of partners
    • 3. Cannot raise money from Public
  • What are the restrictions in respect of maximum and minimum numbers of partners in a LLP?

    A minimum of two partners will be required for formation of an LLP. There is no limit on the maximum number of partners.

  • Whether a body corporate may be a partner of an LLP?


  • What are the qualifications for becoming a partner in llp?
      Any individual or body corporate may be a partner in a LLP. However an individual shall not be capable of becoming a partner of a LLP, if

    • a. has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force
    • b. is an undischarged insolvent
    • c. he has applied to be adjudicated as an insolvent and his application is pending
  • Is partner ceased from his liability on cessation of his being partner of LLP?
      The cessation of a partner from the limited liability partnership does not by itself discharge the partner from any obligation to the limited liability partnership or to the other partners or to any other person which he incurred while being a partner. The person/former partner may still continue to be a partner in the eyes of other persons unless :-

    • (a) the person has notice that the former partner has ceased to be a partner of the limited liability partnership or
    • (b) notice that the former partner has ceased to be a partner of the limited liability partnership has been delivered to the Registrar
  • What is the liability of a Partner upon reduction of minimum number of members in an LLP?

    The Act provides for the minimum of two partners to carry on LLP. If at any time the number of partners of a limited liability partnership is reduced below two and the limited liability partnership carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.

  • Whether other business entities like firm or company would be able to convert themselves into LLP?

    Yes. The LLP Act 2008 contains enabling provisions pursuant to which a firm (set up under Indian Partnership Act, 1932) and private company or unlisted public company (incorporated under Companies Act) would be able to convert themselves into LLPs. Provisions of section 55 to 57 and Schedule II to Schedule IV to the Act provide procedure in this regard.

  • Whether LLP would be able to convert itself into company under the Companies Act, 1956?

    NO, This would not be allowed under LLP Act.

  • Whether it is necessary for all partners/members to become partner of LLP post conversion?

    At the time of conversion, all the partners/members shall become the partner of the LLP and thereafter new partners can be admitted and old can cease as per the LLP Agreement. 

  • What do you mean by Contribution?

    Contribution as per the lexicon interpretation means? Part or Share?. In reference to LLP, contribution can be termed as, What a partner is contributing towards the Limited Liability Partnership for running of his business.

    Contribution  in case of LLP is alike Share Capital in case of Company.

  • What can be form of contribution?

    A contribution of a partner may consist of tangible, movable or immovable or intangible property or other benefit to the limited liability partnership, including money, promissory notes, other agreements to contribute cash or property, and contracts for services performed or to be performed.

  • Whether contribution can be increased?

    Yes, the Contribution  of LLP would be provided under the LLP Agreement and the same can be increased by way of amendment in the LLP Agreement.

  • Whether contribution can be removed in LLP?

    Yes, the Contribution of LLP would be provided under the LLP Agreement and the same can be increased by way of amendment in the LLP Agreement.

  • What is a section 8 company?

    Companies which are formed for the following purpose are known as Section 8 Companies or Association not for Profit:

    • 1.  For the purposes of promoting commerce, art, science, religion, charity to any other useful object
    • 2. With intention to apply its profits or other income for promoting its objects, and 
    • 3. Which prohibits payment of any dividend to its members, Section 8 Company is a voluntary association of person formed for promotional activities. Besides establishing a Trust and Society, the other alternative to establish a Non Profit organization is Section 8 Company 
  • For what purpose Section 8 Company can be formed?

    Section 8 Companies are basically formed for promoting commerce, art, science, religion, charity to any other useful object.

  • What are the benefits and drawbacks of Section 8 company?

      Benefits of Section 8 Company:

    • 1.Foreign Funds: Section 25 Companies are recognized under Foreign Contribution Regulation Act for receiving foreign contribution and funds for carrying on charitable and religious activities 
    • 2. Liability: A Company exists as a separate legal entity from your personal life. Both company and person who own it are separate entities and both functions separately 
    • 3. Perpetual Succession: An incorporated company has perpetual succession. Notwithstanding any changes in the members of the Company, the Company will be a same entity with the same privileges, immunities, estates and possessions
    • 4.  Easy Transferable Ownership: The shares and other interest of any member in the Company shall be a movable property and can be transferable in the manner provided by the Articles, which is otherwise not easily possible in other business forms
    • 5. Separate Property: A Company as legal entity is capable of owning its funds and other properties. The Company is the real person in which all the property is vested and by which it is controlled, managed and disposed off
    • 6. Taxation: Another main benefit to incorporating is the taxation of a Company. Companies are often taxed at a lower rate and are provided with better taxable benefits as compared to other forms of business organization
    • 7. Raising Money: A Company can sell shares of the Company to the public or can accept deposits from public and can therefore raise money easier than other business structure types
    • 8. Recognized Under Tax Laws: Section 8 Companies are recognized under Income Tax Laws for exemption from payment of tax on income generated from rendering services for charitable and religious purposes
    • 9. Capacity to sue: As a juristic legal person, a Company can sue in its name and be sued by others. The managing director and other directors are not liable to be sued for dues against the Company
    • 10. Better Governed: Companies are governed by Companies Act, 1956 and have to follow various regulatory procedures during the course of its governance, moreover they have to comply with stringent disclosure norms which let to better governed organizations and creation of value for owners
    • Drawbacks of Section 25 Company:

    • 1. Costly to Form and Run: In comparison to other business forms, it is costly to incorporate and run a Company. Lot of compliances is required to be carried every year and therefore the cost of running is also high in comparison to other forms.
    • 2. Regulated form of Business: Company is highly regulated form of business , as lot of compliances like maintenance of various registers , holding of meetings are required to done each year and for undertaking various activities or decision.
    • 3. Audit and Financial Disclosure: It is necessary for all the companies to get its accounts audited annually and to prepare its balance sheet and profit and loss account in accordance with the prescribed guidelines.
    • 4. Lack of Control: In case of companies, the ownership and management is divorced, in order words, it is not necessary the people owning the company are also managing it. 
    • 5. Long Closing Proceedings: It is generally not easy to close the company as compared to other forms of business, the procedure to close is long and involves compliance of various formalities.
  • How to register Section 8 company?

    To register a section 8 company, applicant is required to file Form INC-1 for name availability. Once the name is approved/made available, there is a further requirement of obtaining a license for a Section 8 Company, for which Form RD-1 is to be filed in order to obtain a license for such company. After obtaining license number, applicant can proceed further to incorporate a company by filing e forms INC-7, INC-22 and DIR-12 or e-forms INC-7 and DIR-12 as the case may be.

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