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Legal entity formation

Others 244 views 1 replies

Sandeep Goel

Partner

55 Points Posted on 12 December 2019

We are planning to get into a manufacturing and/or trading business activity for which identied a land costing 1.5 cr. Further, the building/shed, machinery and working capital will be approx 2.5 cr. Out of this total investment of 4 cr, own funds are 2.5 cr and rest will be loan. We are 2 partners and not sure if we should for a Partnership firm, LLP or Private Limited Company to start with our venture. Also, the own funds investment will come in various names such as mother, father, wife, brother and brother's wife.

Please suggest the right entity formation to go with considering our situation being a startup. We will be going slow in terms of investment as it will take time to understand the market intelligence and also being raw hands.

Replies (1)

sanjith kotni

Articled assistant

663 Points Posted on 13 December 2019

If you are an eligible start up as defined in sec 80IAC then form as LLP/ Pvt company as you can get income based deductions and 100 % profits are Exempted.

otherwise form as LLP in which you can benefits of lower compliance as companies act provisions are not applicable and get the benefits a company enjoyes and in income tax also you can claim various benefits like deductions for salary to partners and interest on capital.

If you are expecting turnover of below 2 crores then form a firm as you can get presumptive tax benefitts and no need to pay income tax on your total income and also no need to maintain accounts .