CA formalities

Finally, we took some time out and spoke with the CA again for the company registration.

• If we hire an employee we need to pay profession tax.

• If the total outgo for a subcontractor exceeds 50k in a FY , we need to apply for a TAN number and deduct TDS at source before making the payments

• There are three forms in which we can pay for subcontracted work, as a subcontractor fee, professional fee and as a salary. In professional fee the limit for TDS is 20k

• If domestic TO is more than 9 lacs we need to register for Service tax registration. If we are planning to sell a product we need to register for VAT registration. 

• Even if we plan to hire a single employee, we need to apply for a shop and establishment license. We need to maintain about 20 different forms of registers like attendance register, salary register, woman employee register etc.

• If we receive foreign currency payments we need to have an IE( Import export ) number. The fees for the same is 4k.

• The most important, the partnership deed is merely to satisfy the legal obligations, the partners need to have a sufficiently good understanding as to how they are going to run the business. 

• The partnership deed needs to executed on a 1000 rupee stamp paper.

It is a retrograde step to be starting with partnership, when one of the objectives is to create employee wealth. Of the many concepts I have rejected, one also is the grand objective of the existence of a company, i.e. to create shareholder wealth. Wealth usually is unequally distributed with zero correlation to a person's utility and intellect, but those wield power with whom it rests. Juxtapose these people with those individuals who actually give their precious years to the expansion of a company. It is with these employees that wealth needs to be distributed more evenly, hence the utility of ESOPs. 

No other Indian has made more crorepatis in India than Narayan Murthy with his ESOPs schemes in '96-'99 period. But the internet bubble took away this tool of employee retention from Infy. 

Google also right now is struggling with the problem, Infy faced during the bubble, when Google's share price has crashed and employees hold on to ESOPs at a price which is higher than the current market price. It has tried to do good this loss by buying these ESOPs from employees and giving them fresh ESOPs, or some such form of jugglery. 

The reason to start with partnership is all monetary. No cash to spend about 20k for a pvt limited, when one can issue share certificates and have an ESOPs scheme. 

The plan is to run this as a partnership for this financial year and if revenues justify our existence, then dissolve this and have a pvt ltd from the next financial year. 

Hopes. High hopes.