What sharing should i keep in my start up for safeguarding tax issues

716 votes

You should better give them an option of sweat equity shares rather than offering them direct shareholders right as per the MOA and AOA which would be there with your company.
This way they will be the owners of shares and will be responsible to pay taxes accordingly but will also be responsible to work more efficiently on their project as if they fails to perform then they won't be getting the fruits of their shares as their shares are 'sweat equity shares'.

Advocate Pulkit Prakash LawRato

603 votes

There has to be an MOA and aoa which is Memorandum of association and article if association to fulfill the gaos that might be a little difficult ti handle when the business starts ti progress. These two if drafted well must be your biggest strength.

Advocate Palav Agarwal LawRato

829 votes

I believe what you are trying to say is that in case you issue shares of your company to the select faculty (sweat shares??) would there be any tax implication for the company. Prima facie, I dont think there would be any such issue for you. The shares taken by the faculty would be an asset in their hands and any gains made from such shares would devolve to them and they will have to fend or deal with tax implication at their end. All share holders are equal partners to the profits and liabilities of the company limited to the extent of their shareholding. So in case of any loss, the existing shareholders will have to bear it (o the extent of their shareholding). Make sure that you draw up the scheme for such equity to be issued to the faculty to ensure that in case one of them leaves the company, you can buy back the shares and not part with the ownership of the company. However, you may think of other ways to ensure participation of faculty in lieu of paying salaries up front . If you need further help, you can always reach out here.

Advocate Joydeep Nath LawRato

928 votes

You will have to fevise it clearly because each person will be taxed as per the income derived from the business to their share as provided in the arrangement. The query must be clear and you must provide specific details so as to help us to understand and then answer carefully to avoid any confusion.

Advocate Tahir Ashraf Siddiqui LawRato