Anilesh Seth

Ideator, Co Founder & CEO, KROW

www.krow.in

Strategic Advisor to the Qatalys Group of Companies

Mentor at the KYRON incubator

Visiting Faculty at CMR IT Exec MBA program

Ex-CEO/MD: LGSI, Qatalys & Supervalu India

www.slideshare.net/anilesh

http://In.linkedin.com/in/anileshseth

anileshseth@hotmail.com

Session objectives

• To get a broad overview of the different forms of enterprise that can be set up in India – understand broadly the pros and cons of each and gain a brief appreciation of the procedure involved

• To be able to make an informed decision of the type of enterprise a start up should consider setting up – without getting mired in the legal details or the intricacies of each and every step of set up

• The scope of this session includes a simple introduction to non-profit organizations, without a treatise on either the procedure of setting up one or on the pros and cons vis-à-vis other forms of organization

Types of companies

Unlimited liability Limited liability Non profit

Proprietership

Partnership

Limited liability partnership

Private limited company

Public limited company

Trust

Society

Section 25 company

Proprietorship

A proprietorship firm is one in which an individual invests own or

borrowed capital, uses own skills in management and is solely

responsible for the results of operation*

PROs CONs Procedure

Simple and easy to start or exit No separate entity of the firm No registration with the Govt

Undivided profits Unlimited liability Proprietor needs a PAN card

Prompt decision making Limited availability of funds Bank account in the name of the

business

Secrets of trade Uncertain life of business Service tax, CST/VAT as applicable

*Tata McGraw Hill Education: Managerial economics

-Freelance business consultant

-Real estate agent

-Mom ‘n Pop grocery store

Partnership

A Partnership is a relationship between persons who have agreed to

share the profits of a business carried on by all or any of them acting

for all*

*Tata McGraw Hill Education: Managerial economics

-Law firms

-Service firms set up by two or more

PROs CONs Procedure

Easy formation Uncertain life of the firm Finalize a business name

Stronger credit position Unlimited liability Register a deed with the registrar of

companies

Shared risk Dissents and distrust Get a PAN no for the firm and open a

bank account

Shared wisdom and resources Insufficient funds/Ability to raise funds Service tax, CST/VAT as applicable

Limited liability partnership An LLP is a hybrid between a company and a partnership that provides

the benefits of limited liability and allows its members the flexibility of

organizing their internal structure as a partnership based on a mutually

arrived agreement

-KROW

-Accounting firms

PROs CONs Procedure

Easy formation Ability to raise funds through shares

is limited

Finalize a business name

Limited liability Requires DIN no

Requires annual returns but no

onerous compliance needs

Register a deed with the registrar of

companies

Easy to close down

Get a PAN no for the firm and open a

bank account

Service tax, CST/VAT as applicable

Private limited company This is a type of company that offers limited liability to its shareholders

but places restrictions on ownership

PROs CONs Procedure

Limited liability

More stringent regulations to be

followed such as Board meetings etc

Finalize a business name

Continuity of existence More steps in company formation –

need for Memorandum and Articles of

Association

Requires DIN no

Can raise more capital as max no of

shareholders is 50

Not easy to shut down Prepare M & Articles of association

Apply for incorporation

Service tax, CST/VAT as applicable

Public limited company This is a type of company that offers limited liability to its shareholders

but places restrictions on ownership

PROs CONs Procedure

Limited liability

Stringent regulations and greater

transparency

Similar to a private limited company –

but requires a certificate of

commencement of business

Can raise money from a wider set of

shareholders

Not easy to shut down

Requires a minimum of 7

shareholders and 3 directors

Can create a market for the shares by

getting them listed

Generally no restriction on share

transfers

Caselet

• Three young aspiring engineers decide to set up an apps company whilst still at college

• Their capital requirement is minimal since at this stage they all feel they need to do is to develop specific apps – something each one is good at. They don’t need to hire anyone for this stage

• They would however like to “sell” the downloadable apps to consumers in a pilot mode before deciding the next course of action

• They have thought of a name for their business – Zappapp – and have decided to pool in about Rs 1,50,000/= as start up capital for any miscellaneous expenses that may be required

• They plan to build a portal and to host it on the cloud

• They are not sure if they want to take up jobs after graduating or want to stay with their startup

• They do realize that for them to grow and scale they will need to infuse money in the future from investors. They don’t know how much and when

What form of enterprise would you advise them to set up?

Thank you!