ECommerce Business is trend in India but entrepreneurs are confused about the business registration and other legal Compliance so MyOnlineCA team given a overview about the legal process and compliance.
Business Formation - its a very important part that every ecommerce must have to register with the government so they can protect their business and not faced any legal issues from their customers.
So Any ECommerce Entrepreneurs have many Options to register their business ;-
a) Proprietorship Registration- its a very Simple Process to doing any business in India. in a Proprietorship Firm Main Objective is Opening a Current Bank Account but banks need minimum 2 legal registration to open a current account in the name of business.
So these 2 legal registration are -
Costing Overview about the Proprietorship Registration -
if they go for the Proprietorship Registration then
VAT Registration with CA Certification costing nearby 7000 to 10000 Rupees or more.
Note : its depend on state wise, in Some States its need Security also like Fixed Deposit that is refundable.
if they have Shop then apply for Shop License that is depend on Area Wise so its costing nearby 2000 to 3000 Rupees.
Who's apply for the Proprietorship Registration in ECommerce Industry :-
if any alone Entrepreneurs Initial Purpose is selling products on marketplace like Flipkart/Snapdeal/Amazon then must go for Proprietorship because these marketplace need VAT Registration Certificate.
b) Partnership Registration :- its need minimum 2 Partners. its a best registration where you are working in MNC's and One Day your friends and you are thinking about trying the business and that is eCommerce then must choose Partnership Registration.
Costing Overview about the Partnership Registration :- Partnership Registration is cost nearby 5000 Rupees and getting the VAT Registration if required then its additional 5000 to 10000 Rupees.
c) Limited Liability Partnership(LLP) :- LLP minimum requirements is 2 Persons. its a new concept in India and its a best for any startup in India. Mostly ECommerce Startup choose LLP Mostly because they can enjoy all Major Company Features in the LLP at the Lowest Costing.
Costing Overview about LLP :- LLP Costing is nearby 8500 to 10000 Rupees.
After the Incorporation of LLP you have to apply for the VAT Registration when your turnover exceed 5 lac rupees.
Who's Choose Limited Liability Partnership :- Startup choose the LLP when they have partners and wanna enjoy the company features because if we compare LLP with the Proprietorship Firm and Partnership Firm then its also best. Reason is in the Proprietorship firm you need VAT Registration i.e costing around 7000 to 10000 and you have to filing also VAT Returns quarterly so its increase your running cost and in the Partnership Firm you have to spend on the Registration at least 5000 then for the VAT Registration when your turnover exceed 5 lac Rupees.
So LLP Ultimately is the best option because you have to just spend 9000 Rupees and get the Company Features and no need to Registration of VAT till the 5 lac.
d) Private Limited Company :- Private Limited Companies is choose by the Startups when they have investors and their initial plan is for the funding then Private Limited Company is the best option. in the Private Limited Company Some Unique Features that can not enjoy in some other business formation like ESOP means, you can not issue share to you employees for the motivation purpose.
e) One Person Company :- if you are single owner and wish that you wanna enjoy all company features and a legal status of the company then must go for the One Person Company.
Overall Suggestion for ECommerce Entrepreneurs :-
a) if you are single and your initial purpose is selling on marketplace then go for proprietorship.
b) if you are single and your initial purpose is selling through your brand name or through your website then go for LLP and make the partner your brother/sister/relatives/friends.
c) if you have partners and your initial purpose is selling through your website or through the Marketplace but the budget is lower for the formation and wanna enjoy the company features then go for the LLP.
d) if you have partners and want to raise the funds earlier and project is big then must go for the private limited company.
e) if you are alone owner and your wish is just create a company and doing the business as a single owner then go for one person company.
Conversation of Business Formation Later :-
a) Proprietorship Firm and Partnership Firm convert it into anytime as LLP/PVT Ltd/OPC.
b) LLP can not convert it into the Private Limited but here is alternative solutions, you can create another private limited company and takeover that company.
c) Private Limited Company/OPC can convert it into LLP.
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