Cost of Closing a Pvt Ltd company vs LLP,  ?

Want to Close down a new Company or LLP ? What are the Advantages and Disadvantages ?

Query in your mind ? What to do ?

So, You have thought of a Closing down a non working company due to any reason ? .OK

Advantage and Disadvantage

What  are the Advantages… ?

Closing of liabilities….hmmm…. anything else ?

What are the Disadvantages ? Did you think about it ? 

You must read this before you go ahead

First, Closing down the company ?

What if, the business idea does not work ?

or, What if you and your new friend / Partner cannot work together due to any reason ?

or, What will happen if you are in LOSSES ?  and there is no Hope of revival in near future ?

Answer to the first set of three questions is …

the Company can be given birth in a week / month… but takes many months/even a year to close down.

Source : https://www.compliancecalendar.in/close-llp

This site says.. every year Tens of Thousands of Companies and LLP are made but … this site and we ourselves know that average 70% don’t start business or don’t continue beyond the first 2 years …. So you are not alone…. 

and

source 2 : https://www.professionalutilities.com/private-limited-company-closure.php

Second, Big Risk of being DisQualified and removed from your own Main company ?

What if, the “non working”  Company / LLP is not able to file its Annual return ? due to any reason ?

Effect : You will stand Disqualified from all your other companies also .. including your running “existing businesses”.

Want evidence ? see this …

Source : https://cleartax.in/s/director-disqualification-removal-disqualification

• Where he/she is the director of a company that has either –
• a. Failed to file the annual returns for 3 years running
• b. Failed to pay interest on/repay the deposits for over a year
• c. Failed to pay any dividend that was declared for over a year
• d. Failed to redeem debentures or pay interest on debentures for over a year

In short, if your this new Company does not file its return due to mis-up between the partners… you become disqualified to remain director of your main business also.

Can you afford this Risk ?

What is the Probability.. that new business will not work ? ….

you might say it will work 100%… but market past shows that only 30% work and 70% do not work. So, better get somebody else in the family to become the Director till the company becomes of a significance and can be seen as a working company.

Can the procedure to close the LLP or Company be done with single party signatures ?

Of Course not. Both Parties , or say 100% of the Partners  , Directors, and shareholders must sign  the MOU for “closure”.

So, you are in a problem. Yes.

Sad part is that if both parties are not on talking terms,… and other party has nothing to lose…

Reasons ? maybe he has got a job somewhere, or he has left India for job outside India…. or ….. he does not want to pay for the LLP / Company closing expenses……he just wants to tease you …. 

in this case, you are saddled for life.

Daily rate penalty starts in all laws : GST, TDS, ROC, and Income Tax.

Better Solution : Sell the company to somebody else..

Get whatever you can… in case there are any assets.

if assets are NIL, or it is a zero asset company, then, Sell at NAV .

it could be Even at Rs 0.00 …

At least be free of the closure costs, ROC closure costs are significant… GST closure costs are also significant, Income tax closure efforts and costs are also significant

Contact us page click here

www.mlgassociates.org and www.mlgassociates.in

Proprietorship vs Partnership vs Pvt Ltd vs LLP, what to do. ? Advatanges vs Disadvantages, what to make for a Startup / New Venture ? Hope this comparison was well taken in positive light.

Last few days left.. Be Alert … Some ideas and Tips in MSME 43B(h) -Income Tax

Alert dated 20th April-2024 at — 4 pm

1. Hope you have paid  all MSME vendors bills of 29-2-2024, by 15th April 2024…..

2. Hope your MSME vendors Bills upto 15th March 2024 are also paid between 20th and 30th April 2024.. 

3. Hope your planning includes MSME vendors Bills upto 31st March 2024 are also paid between  30th April and 10th May 2024. (Just to be safe)…

4. See this yourself.

5. Also remember to clear all the MSME dues…
6. Short cut :Vigilance point
7. 5th March by 5th April ( start the process by 30th day.. so that you are safe bye 45th day )
   10th March by 10 April
   15th March by 15th April
   20th Mar. by 20th April
   25th Mar by 25th April
   31st March… by 30th April( I have kept a Buffer )
8. 
9. If you are an MSME … you might have been benefited from this in the March payment wave
10. So, similarly, the WAVE continues

11. Nobody can save your company from accidental tax later .. 

12. This is a benefit Govt is giving to MSME’s and if you are a MSME take this benefit from your customers….
13. Almost 4 Crores MSME are already registered and are claiming this benefit… are you taking this Benefit ???
14. Have you made your Financial Budget to pay all eligible MSME vendor’s : Arrange Funds as soon as possible. Keep Buffer for new creditors, new invoices of this period.
15. 

16. Sent letters to all creditors ? Kept evidence ? Two rounds of emails is a must evidence.

17. Do you have letters or MOU with each MSME vendor, … with overriding clause for 45 days, irrespective of the PO’s and Invoices. ( get the format in the Google drive link below )
18. Reduce your advance tax ? Pay MSME in Advance. …. yes possible ( most likely.) But conditions apply. Risk involved. But likely due to a past Supreme Court Judgement
19. Section 43B(h)  

20. Sales Idea.. if you have power to do more sales, and have sufficient funds : Deregister in MSMED Act…. give affidavit to your Potential Customers… “Get More Sales” and “Get more Margin”

    

21. Non Registered MSME Vendors ….? The Udhyam Adhar is compulsory. No need to see the Balance Sheet, or take a CA Certificate. Not relevant and not required.

22. Past or Future ? Future bills only ( old bills prior to 1-4-2023 are not in problem in this section.. they are problem in section 41 .. with bigger consequences …… Since they are like … why unpaid… why are you not paying… are they not a liability at all ?????

    

23. Three year MSME category Rule notification dt 18-10-2022.. Change of category upwards… you can take the benefit of previous classification for three long years. Yes you can. ( see notification in the Google drive link below )

1. Cheque Hand over   ( Cheque in Transit ?)……….? This idea can work only if you have 100% clear balance in your bank account… Else… It will not be acceptable. 

2. Money is coming automatically to most MSME’s .. every day… Congratulations, if you are the beneficiary too.

3. Hope the PSU’s also start paying in the same way. The PSU chief will be shocked with huge tax if he does not organise the payments to all the MSME vendors in time… this will create a new culture.

Ideas, Tips, things to take care of… MSME act related 43B(h) income tax topic . Good ideas you can work around with and make more money.

Google Drive link for the Powerpoint presentation , Copies of Letters, Emails, MOU.. as discussed in the Session by Mr Sangeet Kr Gupta. in the last Zoom seminar

MOU copy inside

43B(h) benefit ? 43B(h) action ? 43B(h) what to do ? 43B(h) safety ? 43B(h) annexure ? 43B(h) when to follow ? 43B(h)penalty? 43B(h)areyousafe?

How to do this in Finsys ? Very simple… Just ask the accounts to take out the Vendor Outstanding report.. in Future date… say 1st May 2024… and see what will come as overdue on that date… all those invoices are fit to start processing.. so that you are safe.. by 1st May and so on….

Team at your service.. Contact us page

Ideas MOU format letter format … uploaded on the google drive link above

Tax Residency Certificate or TRC is a important document in International Taxation

Many times when an Indian Business makes payments to Non Residents, the Rate of TDS are different if they produce TRC.

So, What is this TRC ?

Q– How long is a Tax Residency Certificate valid for?

The validity period of a TRC varies depending on the country issuing it and the specific terms of the certificate. Some TRCs are valid for one year, while others may have longer validity periods.

Q– Can a Tax Residency Certificate be renewed?

Yes, in most cases, TRCs can be renewed by submitting updated documentation and meeting the renewal requirements set by the tax authorities.

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Q– Can I use a Tax Residency Certificate in all countries?

TRCs are specific to the country that issues them and are generally used to claim tax treaty benefits between that country and other countries with which it has a tax treaty.

What is the validity of the TRC certificate in India?

 

In India, TRC certificates are valid till the end of the financial year from its date of issue.

source :

https://cleartax.in/s/tax-residency-certificate#

Is TRC mandatory for claiming DTAA benefit ?

As per Section 90(4), taxpayers must furnish their tax residency certificates along with the relevant information in Form 10F in order to claim DTAA benefits.

See first source : https://arlettipartners.com/tax-residency-certificate-italy/ … its extract as under

Question : How long does the tax residence certificate last?

The tax residence certificate can be obtained upon request and usually relates only to the relevant tax year shown on the certificate itself.

and also, ……When the tax residence certificate must be presented to a foreign authority, it may be needed to legalize it for use in that country. …….. this is similar to the electronic self declaration, Form 10F in India

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Is TRC Compulsory ?

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As per FAQ and Tutorials on Income Tax Department, Govt of India, site : https://incometaxindia.gov.in/Tutorials/64.Double-Taxation-Relief.pdf  See Question number 4

 

Q4. A non-resident, to whom a DTAA applies, shall be entitled to claim any relief under such DTAA only if he obtains a ____?______ of his being a resident of any foreign country from the government of such country.

(a) Tax Residency Certificate (TRC)

(b) Taxpayer Identification Number (TIN)

(c) Both (a) and (b)

(d) None of the above

Correct answer: (a)

Explanation : A non-resident, to whom a DTAA applies, shall be entitled to claim any relief under such DTAA only if he obtains a Tax Residency Certificate (TRC) of his being a resident of any foreign country from the government of such country. Further, he shall be required to furnish some additional information in Form No. 10F electronically.

The above is the Official Explanation to this Question by the Government

This proves beyond doubt that the valid TRC is compulsory

10F is apart from and additional to the TRC

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Other related Points

The Tax Residency Certificate (TRC) is a critical document for Non-Resident Indians (NRIs) as well as Other Non Residents, aiming to handle their tax duties efficiently. Understanding its ins and outs and how to obtain it is crucial for NRIs navigating the complex world of international taxation. In this article, we’ll delve into the intricacies of TRC, its significance for NRIs, and the steps to obtain it.

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Purpose of Tax Residency Certificate

The primary aim of a Tax Residency Certificate is to prevent double taxation for individuals living in one country but earning income in another. It serves as proof of tax residency status and allows NRIs to claim tax benefits under Double Taxation Avoidance Agreements (DTAA) between countries.

Eligibility Criteria for NRIs

To qualify for a TRC, individuals must meet the criteria of being Non-Resident Indians (NRIs). An NRI is someone who is an Indian citizen or of Indian origin residing outside India for employment, business, or other purposes, or staying abroad with uncertain duration of stay.

Application Process for TRC

The application process involves submitting specific documents and forms to designated authorities. These documents typically include proof of identity, address, and tax payments. NRIs can apply for a TRC at designated offices or through online portals, depending on country regulations.

Timeline for TRC Issuance

The duration to obtain a Tax Residency Certificate varies based on the country and the efficiency of issuing authorities. Factors like application volume and documentation completeness can affect processing time. NRIs should consider enough time for the application process when planning their tax affairs.

Importance of TRC for Non Residents

TRC is crucial for Non Residents as it validates their residency status in a particular country. It allows them to take advantage of tax benefits, prevent double taxation, and ensure compliance with tax regulations in their country of residence and in India.

Many times when an Indian Business makes payments to Non Residents. The Rate of TDS are different if they produce TRC. What is this ?

in the service of the MSME’s In India. Contact us page click here

Want to be systematic ? Want to reduce Wastages ? Want to prevent Leakages ?

Want to do Preventive Action plan

How to Account for Petty Expenses in the Company Pantry Washroom Repairs

[Academic discussion only]

These are the Steps recommended for

Method 1 : / Part 1 : Very small purchases, with following trigger points

Category 1

No minimum stock required,

infact no stock to be kept. either fully consumed, or purchased only exact qty, or left over is disposed off, like paint for your office /factory . The balance wet paint is discarded . Stock kept might be nil usually.

No Rate history required

No accountability required

Example

1. Staff car accidental repair.. spare parts
2. Office washroom taps repairs ( plumber )
3. Garden maintenance
4. Carpenter repair
5. Building repair – civil – Bricks, stone dust etc
6. Building whitewash. / paint
7. Office snacks, samosa, sweets, perishable ( Note Kitchen and pantry items = regular is excluded,.. it should be controlled if desired )

Ideal solution is

If expense is made before the rate is finalised

And po is only a formality

Then the solution is

Get proper invoice, if available ,if possible

Pass the accounts voucher in books via a special route. “ 5A”

Do TDS, as per rules =OK

Take ITC of GST as per rules, if available. = OK

No PR required = ok

No PR Approval required = ok

No PO required = ok

No PO Approval required = ok

No Gate Entry

No MRR required = Ok

No QC required= OK

Put all the items , even if 100 items in that invoice.. into single HS code,

Since not material for the company as a whole

TDS will be automatic, in Finsys based on the TDS section/Rate to the vendor master

Category 2 items

Here the trigger points are

Stock required = yes

Rate history required = yes

Consumption Accountability required

But they are not the production items

Example

1. All production C class items
2. All electrical repair
3. All machine repair
4. If material + can be standardised
   1. Tube light
   2. LED lights
   3. Machine oils
   4. QC lab items
   5. Kitchen regular items

5. Full year long term contract, organised super market. Dept store… with proper PO, proper credit terms, free office delivery, weekly or monthly schedule
6. So benefit
   1. Proper Po, Proper all things like a normal raw material
   2. Proper po vs actual MRR
   3. Price control
   4. Consumption control

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Materiality for bill :

1. 1. Above Rs 5000, bill is highly recommended
   2. 1000 to 5000 ok
   3. Below 1000 = you decide, ideally required, but can allow in case it is practically not possible. Even a paper slip can be approved by the sanctioning authority if situation so demands example autorickshaw charge of Rs 200, or Metro coupon of Rs 24, or a Water bottle of Rs 20, or a Tea of Rs 10

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So, this was the academic discussion and suggested SOP’s for a Small / Medium Pvt Ltd company, especially in the home grown MSME sector.