Is mking membrs by tking money & pying them 2 make mmbr ryt?
This query is : Open
22 October 2013
If a company wants to do business of taking money to make members and organizing quiz for the members and pay them for the correct answers.
Along with this, the company pays the members commission for further making members and continue the membership tree?
Is doing this business valid and if it is what should be the objects mentioned in the MOA?
Please reply.
Along with this, the company pays the members commission for further making members and continue the membership tree?
Is doing this business valid and if it is what should be the objects mentioned in the MOA?
Please reply.
22 October 2013
sushant..its practically a ponzi scheme. So be very careful when u advise clients with such schemes.
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22 October 2013
Sir, can it be called a ponzi scheme if we are not guaranteeing any return.
Its just like saying:
" You give me business, i will give you commission"
Please correct me sir, wherever I am wrong.
Its just like saying:
" You give me business, i will give you commission"
Please correct me sir, wherever I am wrong.
22 October 2013
But where is the business. What you are referring to is a typical case of ponzi schemes floating around in this country.
Lets say in the first round the company receive Rs 100 as membership Fees (no commission payable as the members are direct)
And you re-distribute Rs 50 as game prize.
Now is this Rs 100 your revenue (as you say its business? If yes, then should I charge service tax on it? when you distribute prize money, again tax - income tax, entertainment tax (if applicable). the remaining balance is chargeable to income tax.
With each additional cycle, you would end up accumulating cascading effect of commissions and taxation. And where is the business is still the question to be answered??? You are just revolving old money with new money!!!
Lets say in the first round the company receive Rs 100 as membership Fees (no commission payable as the members are direct)
And you re-distribute Rs 50 as game prize.
Now is this Rs 100 your revenue (as you say its business? If yes, then should I charge service tax on it? when you distribute prize money, again tax - income tax, entertainment tax (if applicable). the remaining balance is chargeable to income tax.
With each additional cycle, you would end up accumulating cascading effect of commissions and taxation. And where is the business is still the question to be answered??? You are just revolving old money with new money!!!
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23 October 2013
Sir,
if the co. pays service tax on Rs.100 recived initially from one member and income tax on Rs. 30(after deducting Rs. 50 as prize money and Rs. 20 as commission for making new members) and also pays income tax and s. tax on full rs. 100 received from the new member also,
then is it still a ponzi scheme?
if the co. pays service tax on Rs.100 recived initially from one member and income tax on Rs. 30(after deducting Rs. 50 as prize money and Rs. 20 as commission for making new members) and also pays income tax and s. tax on full rs. 100 received from the new member also,
then is it still a ponzi scheme?
23 October 2013
Dear Sushant’
Kindly Confirm
What is the Main Business of such company.
Kindly Confirm
What is the Main Business of such company.
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23 October 2013
Sir
the main business is making money by organizing quizzes only. The entire amount received will be shown in profit and loss a/c. The expenses will be that of commission and prize money distribution.
the main business is making money by organizing quizzes only. The entire amount received will be shown in profit and loss a/c. The expenses will be that of commission and prize money distribution.
23 October 2013
As per my views company can do business and make monies.
23 October 2013
Thank You sir.
One more help sir,
what should be the legal language of the objects to be mentioned in Main object in MOA?
One more help sir,
what should be the legal language of the objects to be mentioned in Main object in MOA?
23 October 2013
Dear Sushant,
I am not saying you cannot do this business. You can comply to all the tax regulations etc.
All I am saying that, on the basis of the structure you have detailed in your earlier messages, the scheme has all the making of ponzi schemes.
The structure of paying commissions on the basis of membership tree leads to cascading effect. Given that there is no pool of money to pay for these commissions other than the money received from new members, sooner or later, you get embroiled into a payment crisis.
Its like a bank taking deposits and instead of investing that deposit into a interest earning asset, you just keep use it to pay interest on the earlier deposits.
Google any of the scams (including the recent one - Sharda scam Kolkotta), you will find the same modus operandi. Its all well as long as you keep getting new deposits/members. Even a month delay in getting new members, the whole structure falls like a 9 pins.
I am not saying you cannot do this business. You can comply to all the tax regulations etc.
All I am saying that, on the basis of the structure you have detailed in your earlier messages, the scheme has all the making of ponzi schemes.
The structure of paying commissions on the basis of membership tree leads to cascading effect. Given that there is no pool of money to pay for these commissions other than the money received from new members, sooner or later, you get embroiled into a payment crisis.
Its like a bank taking deposits and instead of investing that deposit into a interest earning asset, you just keep use it to pay interest on the earlier deposits.
Google any of the scams (including the recent one - Sharda scam Kolkotta), you will find the same modus operandi. Its all well as long as you keep getting new deposits/members. Even a month delay in getting new members, the whole structure falls like a 9 pins.
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23 October 2013
Thank you Kaushik Sir,
I would keep that into mind.
I would keep that into mind.
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