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What are the procedures involved for incorporation of Start-up
21-Jul-2023 (In Startup Law)
Dear Team, I am starting a new business which will be run by my wife which will involve Various kind of classes /training : 1. Personality Development 2. Foreign Language 3. Preparation for GEE, TOFEL , IELTS ext. 4.Coaching classes 5. Student Library etc. These classes will be run at centres across Lucknow and may be down the line to other centres. Also, we would be selling it's franchisee to others schools and parents as well. Would need clarification on following: 1. Shall I start with a Properietorship concern or Pvt Ltd. Company concern ? And reasoning for it. 2. What if initially we start with a Properietorship and after few months or years convert it to Pvt LTD? 3. Also, since i am a salaried class person and this business will be run by my wife in her name only. Can I transfer my funds to her individual account and then she can use it for her business. Also In this case , am I liable to pay additional tax as I will no where be associated with her business ? Please advise
Pursuant to your query I would suggest a private limited formation for your business. For your information, sole proprietorship formation is more suitable for small businesses which shall not be suitable as per your future plans of expanding and franchising. Certain benefits that you get in private limited formation: company becomes a separate legal entity, ease of getting funding (if required in future to expand) from angel investors etc., introduction of new directors as and when required etc.
As per your second query I would like to inform that section 56 of the Income tax Act, provides that money received by an individual from any person without consideration, the aggregate value of which exceeds INR 50,000, is taxable under the head “income from other sources”. An exemption, however, is available if the money is received from a relative which includes among others, the spouse of an individual. Therefore, you will only have to pay the income tax on your salary and neither you nor your wife thereafter shall be accountable to pay any additional tax on such transferred fund.
Should you have any further question please contact me as I specialize in incorporation of start up businesses.
As per your second query I would like to inform that section 56 of the Income tax Act, provides that money received by an individual from any person without consideration, the aggregate value of which exceeds INR 50,000, is taxable under the head “income from other sources”. An exemption, however, is available if the money is received from a relative which includes among others, the spouse of an individual. Therefore, you will only have to pay the income tax on your salary and neither you nor your wife thereafter shall be accountable to pay any additional tax on such transferred fund.
Should you have any further question please contact me as I specialize in incorporation of start up businesses.
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Adv. Prerna Oberoi
Noida | 25+ Answers
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