• PROPRIETORSHIP
• PARTNERSHIP
• LLP(LIMITED LIABILITY PARTNERSHIP
• NPO(NON PROFIT ORGANISATION)

PROPRIETORSHIP FIRM

Sole proprietorship, as defined by the Govt. Of India, is a “one-man organisation where a single individual owns, manages and controls the business.”

One of the primary benefits is ease of formation, since a government registration is not required. There are no fees to be paid for starting a one-man business on your own, and there is no government regulatory paperwork and compliance to be fulfilled. There are no minimum capital investment requirements, and the proprietor has full control and ownership stake.

Starting a Sole Proprietorship Business in India

There are only two things you need to do for starting a sole proprietorship business in India.

• Choose a business name
• Select a location as the place of doing business.

Now you can legally start doing business.

Registration for Sole Proprietorship Business in India

You don’t need to register your sole proprietorship in India. But in order to receive payments in the name of the business, you need to open a current account in a bank. For this, you will need proof of existence of the firm, and the address proof. Documents needed include:

• Pan card and ID for address proof of proprietor
• Business address proof (eg: electricity bill in your name, or electricity bill + registered rental agreement, etc.)
• Two government registration documents confirming name and address of business (shop establishment license, MSME, GST, etc.)

PARTNERSHIP FIRM

A partnership is a very common form of business organisation. Especially in India, partnership firms are generally finding favour when the business is medium scale. So it is important that we learn about the Partnership deed and the registration of such deeds.

Partnership Deed

Now a partnership is when two persons form an association to carry out a business with the motive to earn profits. They share the profits from such a business. Such an association will be voluntarily entered into by the partners based on an agreement between them.

Such an agreement between partners can be written or can even be oral. However, it is strongly advised for legal and practical purposes that such an agreement or contract be in the written form. And this written agreement between partners to form a partnership firm is what we call a Partnership Deed.

Contents of Partnership Deed

This partnership deed will contain all the conditions and the legalities of the partnership deed. It will provide a guiding basis for all future activities. And in case of a dispute or legal proceedings, it can also be used as evidence. A general partnership deed will contain the following information,

• The agreed name of the Partnership Firm. Please note that such a name cannot have the words “company” or “private company” in it.
• The nature of the business will also be mentioned in the deed
• Date of commencement of such business
• The place of business, i.e addresses of main office or branch offices if any, where communication can be sent
• The duration of a partnership if it is a partnership for a specific purpose or time. If it is a partnership at will then no such duration will be mentioned
• Contribution to the capital of all the partners
• Profit sharing ratio. However, if no ratio is given it is assumed that the profit is shared by all the partners equally.
• Salary of all active partners
• Interest on contribution and the interest on drawings (must be according to the provisions of the Indian Partnership Act 1932)
• Terms and conditions of the retirement or expulsion of a partner, and the terms to continue the partnership after such an incident
• The day-to-day functioning of the firm and the distribution of the managerial duties among the partners
• Preparation of the firm’s accounts and the provisions for internal and statutory audit
• Procedure for voluntary or forced dissolution of the firm
• Guidelines for solving any disputes and arbitration process to be followed

Registration of Partnership

As per the Partnership Act 1932, it is not compulsory to register a partnership firm. The firm does not have a separate legal identity and registration will not alter this fact. However, registration is the definite proof of the existence of the firm and its legality

Non-registration of a firm has some real-life legal consequences for the partners and the firm itself. So it is always advisable to draw up a written partnership deed and register the firm with the Registrar of Firms. The consequences of not doing so are as follows,

• The firm cannot file legal proceedings against any third party for any situation. For example, if the client has not paid his dues to the firm, the firm cannot sue him if it is unregistered.
• An unregistered firm cannot fail a case against a partner for any reason (like mismanagement, theft etc)
• A partner of an unregistered firm cannot file a suit against one of the other partners either

Procedure of Registration

According to the India Partnership Act 1932, there is no time limit as such for the registration of a firm. The firm can be registered on the date when it is incorporated or any such date after so. The requisite fees and fines must be paid. The procedure for such a registration is as follows,

• Application to the Registrar of Firms in the prescribed form (Form A). Nowadays this facility is even available online. Such an application must contain certain basic details about the firm such as,
  
  • Name of the Partnership Firm
  • Name and address of all partners
  • Place of business (address of main and branch offices)
  • Duration of the partnership
  • Date of joining of partners
  • Date of commencement of business
• The duly signed copy of the Partnership Deed (which contains all the terms and conditions) must be filled with the registrar
• Deposit/pay the necessary fees and stamp duties
• Once the registrar approves the application, the firm will be entered into the records. And the registrar will also issue a certificate of incorporation.

And this is how the process of registration will be completed and the firm will attain legal recognition.

LLP FIRM

How to Incorporate a New Limited Liability Partnership A Limited Liability Partnership may be incorporated as per the procedure explained below:

User Registration

• Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services, i.e. www.llp.gov.in . This website may also be accessed through the website of the ministry www.mca.gov.in On the home page of the URL www.llp.gov.in click “Register” tab on top right hand corner of the page.
• Fill in the registration form. Fields marked * in the form are to be mandatorily filled. Select your user name and password.
• Upload digital signature certificate
• On successful registration, system will give a message that you have been registered successfully. Obtain Designated Partners Identification Number (DPIN).
• All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN) / Director Identification Number (DIN)”.
• DPIN/DIN may be applied from: http://www.mca.gov.in/MCA21/ Din.html . Digital Signature Certificate
• Partner/Designated partner of LLP/proposed LLP, whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorized certifying agency, details of which are available on the home page of the LLP portal under the tab “Certifying Authorities”. Reservation of name
• Log on to the LLP portal by clicking the “log in” tab on the top right corner of the homepage and enter your username and password. After login, click “E-Forms” link.
• Open Form-1 for reservation of name and fill in the details. Select name of the proposed LLP (upto 6 choices can be indicated).
• Any partner or designated partner in the proposed LLP may submit Form-1.
• Append digital signatures and submit the e-form • Pay the necessary fee by credit card (master/visa).
• Free name search facility (of existing companies / LLPs) is available on MCA portal (hyper link available on LLP portal).The system will provide the list of similar/closely resembling names of existing companies/LLPs based on the search criteria filled up.
• Details of minimum two designated partners of the proposed LLP, one of them must be a resident of India, is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners.
• Check status of your application by logging on the portal.
• For more details see Instruction Kit provided on the home page under “Users Guide” tab. Incorporation of LLP
• Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement”.
• Pay the prescribed registration fee as per the slab given in Annexure A of the LLP Rules, 2009, based on the total monetary value of contribution of partners in the proposed LLP.
• Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP.
• On submission of complete documents the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act will register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.
• You can check status of your application by logging on to the portal
• For more details see Instruction Kit provided on the home page under “Instruction Kit” tab. Filing of LLP agreement (Form-3) and Partners’ details (Form-4)
• Form 3 (Information with regard to LLP agreement and changes, if any made therein) and Form-4 (Notice of Appointment of Partner/ Designate Partner, his consent etc.) may be filed with the prescribed fee simultaneously at the time of filing Form-2 or within 30 days of the date of incorporation or within 30 days of such subsequent changes.

NON PROFIT ORGANISATION

The non-profit organizations in India can register either as:

• Trusts or
• Societies or
• Private Limited Company under section 8 of the Companies Act.

These organizations work for companies at large and undertake public welfare activities with a charitable purpose. Such purposes may include social contribution in the form of education, medical help or undertaking activities of public utility that promote public welfare.

Thus, the most preferred way to run an NGO or a non – profit organization is to form a Public Charitable Trust.

A Trust can be a private or public Trust depending upon the class of people that receive benefits. Furthermore, the main intent of running a Trust is to transfer the property to the beneficiary.

What is a Trust?

As per the Indian Trust Act 1882, a Trust is an arrangement where the owner (trustor) transfers the property to someone else (trustee) for the benefit of a third person (beneficiary).

Such a property is transferred by the trustor to the trustee along with a proclamation that the trustee should hold the property for the beneficiaries of the Trust.

Thus, Trusts can be classified into two categories:

Public Trust

It is a trust whose beneficiaries include the public at large. Further, a Public Trust can be further subdivided into Public Charitable Trust and Public Religious Trust.

Private Trust

A private Trust is the one whose beneficiaries include families or individuals. Further, a Private Trust can be subdivided into:

• Private Trusts whose beneficiaries and their requisite shares both can be determined
• The Private Trusts whose both or either the beneficiaries and their requisite shares cannot be determined

12A and 80G Certificates

A Trust or an NGO can acquire 12A certificate from the Income Tax Department. Thus, a Trust acquiring such a certificate is exempted to pay income tax for the entire lifetime on its surplus income.

Also, an NGO must obtain 80G certificate. This certificate allows donors, that is persons or organizations making donations to an 80G certified NGO, to avail deduction. Thus, such a deduction is given to the donors under section 80G of the Income Tax Act.

Legislation Pertaining to Trust

A Trust is governed by Indian Trusts Act, 1882 across India. However, each state can formulate its own Trusts Act to govern such non – profit organizations in its own state.

Further, a Trust can receive funds and projects much like a Society. However, its quite challenging to get funds or projects immediately after a Trust gets registered.

Therefore, to obtain funds or acquire projects, a Trust needs to meet certain eligibility criteria. Such criteria may include relevant experience, performance of a Trust, its age and such other parameters.

Furthermore, a Public Charitable Trust has to be registered with the office of the charity commissioner who has jurisdiction over the Trust. Hence, following is the procedure for its registration.

Registration Process for Public Charitable Trust

Choose an Appropriate Name for the Trust

This is the first step in registering the Trust. Additionally, the name so suggested should not come under the restricted list of names as per the provisions of the Emblems and Names Act, 1950.

Decide the Settlers or Authors and Trustees of the Trust

There is no defined provision with regards to the number of settlers/authors. However, in most of the cases there is typically one author.

Further, there is no limit on the maximum number of trustees. But a minimum of two trustees are necessary to form a Trust. Also, the author generally cannot be the trustee. And he needs to be a resident of India.

Formulate Memorandum of Association (MOA) and Trust Deed of your Trust

A Trust Deed is legal evidence of your Trust’s existence and it contains the rules and regulations of your Trust. This document also contains the bylaws regarding the changes, removal or addition of the Trustees.

Memorandum Of Association (MOA)on the other hand represents the charter of the Trust. It defines the relationship of the Trustor with the Trustees and specifies the objectives for which such a Trust is formed. Such a document should contain the names, addresses and occupations of all the members along with their signatures.

Documents Required to be Submitted at the Time of Registration

• Trust Deed
• Self attested copy of the proof of identity of the settler (Aadhaar card, passport, voter ID, driving license or any such photo ID)
• Self attested copy of the proof of identity of each trustee (Aadhaar card, passport, voter ID, driving license or any such photo ID)
• PAN card
• Proof of the registered office address of the Trust (electricity/water bill or registration certificate)
• Non Objection letter signed by the landowner

Prepare Trust Deed on a Stamp Paper

As a Trust, you need to prepare the Trust Deed on stamp paper. The value of this stamp paper is of a certain percentage of the total value of the Trust’s property. Further, this percentage varies from state to state.

In addition to this, you need to pay a fee of Rs. 1100. Out of this amount Rs. 100 is the registration fee and Rs. 1000 are the charges of keeping a copy of the Trust Deed with a sub – registrar.

Once you submit the papers, you can collect a certified copy of the Trust Deed within one week’s time from the registrar’s office.

• Submit the Trust Deed with The Registrar

After receiving a certified copy of the Trust Deed, submit the same along with properly attested photocopies with the local registrar.

Further, the settler must put his signatures on every page of the photocopy of the Trust Deed. Also, it is mandatory for the settlers as well as two other witnesses to be physically present along with their identity proof (original as well as self attested photocopy) at the time of registration. However, physical presence of Trustees is debatable.

Obtain the Registration Certificate

After submitting the Trust Deed with the registrar, the registrar retains the photocopy and returns the original registered copy of the Trust Deed.

Then, after completing all the formalities registration certificate is issued within a minimum of seven working days.