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How to convert a sole proprietorship firm into an LLP?

Conversion of a sole proprietorship firm into a limited liability partnership (LLP) is a good option for anyone who wishes to expand his/her small and medium scale enterprise. As it has only one person, a sole proprietorship cannot be directly converted into a LLP. It can be either done by closing the proprietorship and registering an LLP or by including another person in the business and making him a partner and then converting it to an LLP.

Steps to incorporate an LLP

Application for DIN or DPIN: The Designated Partner Identification Number (DPIN), which the two proposed designated partners must apply for, requires the following: passport-sized photograph, a scanned copy of either the telephone bill, driver’s license or previous two months bank statement, soft copy of the PAN card and a completely filled form. If the partner is a non-resident Indian, then a copy of the passport will replace the PAN card. The passport copy and address proof should be notarised by the Indian embassy, a foreign public notary or company secretary in full-time employment.

Acquire/register DSC: With the DPIN, you can apply for the DSC for the two designated partners. The documents you need to submit for this are the same as those you need for DIN 1, along with the e-form.

LLP Incorporation: Form 1 is to be filled for name confirmation and Form 2 should be filled for incorporating an LLP after the name is confirmed.

File LLP Agreement: After the incorporation of the LLP, an initial LLP agreement is to be filed within 30 days of incorporation of LLP.

Benefits of converting Proprietorship into LLP

Automatic Transfer: All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the LLP.

No Stamp Duty: All movable and immovable properties of the firm automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.

No Capital Gains Tax: No capital gains tax shall be charged on transfer of property from the firm to the LLP.

Continuation of Brand Value: The goodwill of the firm and its brand value is kept intact and continues to enjoy the previous success story with legal recognition.

Carry Forward/Set Off: The accumulated loss and unabsorbed depreciation of firm is deemed to be loss/depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP.

 

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How to Apply for ISI Certification?

ISI stands for the Indian Standards Institute, a body set up when India gained Independence to create standards needed for orderly commercial growth and maintaining quality in industrial production. By the mid-80s, the country’s socio-economic climate had changed, triggering the need to set up a stronger body, the Bureau of Indian Standards (BIS), which then took over ISI. The Product Certification Scheme of BIS aims at providing third-party guarantee of quality, safety and reliability of products to the ultimate customer. The presence of the ISI certification mark, known as Standard Mark, on a product is an assurance of conformity to the specifications. The conformity is ensured by regular surveillance of the licensee’s performance by surprise inspections and testing of samples, drawn both from the market and factory.

Product Certification

BIS is authorised by a legislation of 1986 to offer product certification. This certification programme is basically voluntary. Any manufacturer who feels confident enough that his product has the ability to meet the BIS standard can apply for product certification in two ways:

a) Submitting an application at the nearest BIS office. A BIS officer will then evaluate at the factory level, the capability of the manufacturer to produce goods according to the standards laid down for the category. Samples are tested at the factory and outside. If the evaluation is satisfactory and the product passes the tests, a licence is granted and the manufacturer can use the coveted ISI mark.

b) The manufacturer provides test reports to BIS after it gets the product tested in the bureau’s labs and gets the necessary documents certified independently. BIS is supposed to check the veracity of the reports within a month and grant a licence for usage of the ISI mark.

Mandatory Certification

While product certification is otherwise voluntary, there is, however, a list of items which for reasons of public health, safety or mass nature of consumption are mandatorily certified by BIS. These include gas valves and cylinders and infant food. Manufacturers of such products can’t apply for ISI mark under the voluntary scheme.
 There are 16 broad categories, including textiles, packaged water, food, automobile components, plastic products and electronics, for which BIS has laid down standards. If anyone wants to add a new category to the current list, they can apply for it.

There are 19,000 standards formulated for products across the 16 categories. It covers so many areas with such meticulous detail that there actually shouldn’t be any substandard products. For example, there is a standard for windshield wipers of four-wheelers, for the quality of silver foil used in sweets, for precast concrete slabs used in pavements and even for hooks and fasteners. So, yes, there is a standard for almost every product, and new ones can be made for products not yet covered.

 

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What is an 80G Certificate for Tax Exemption?

Exemption under section 80G gives rebate to a donor on the amount he donates to an organisation that has an 80G certificate. When a public charitable organisation (such as an NGO) registers with the income tax department by getting 12A certificate, it gets an 80G certificate, subject to an inspection from the deparment.

Applying for 80G Certificate

To get the 80G certificate, the organisation has to fill Form 10G and attach its activity report for the past three years, or at least a year, with the audited report right from the date of establishment or of the past three years. You can download the form to get registered for 80G from the income tax department website.

The main role of 80G certification is to encourage the donors who donate funds to the nonprofit organisation. That is, the organisation holds the 80G certificate to provide tax exemption to the donors who donate their funds. In the 50% of the donated amount, the donor shall get 10% of maximum tax exemption according to his gross total income.

Click here to find out how to register a trust

Requirements for 80G certificate

1. If a nonprofit organisation is undertaking any business, it has to maintain a separate account and should not mix the donations they receive for social cause.
2. Other than the charitable cause, the organisation or its byelaw should not represent any other causes towards spending of such donation amounts or the assets and income.
3. The organisation shall not be able to apply for 80G if it supports religion-based, caste and creed-based activity.
4. The organisation should be registered under the Societies Registration Act, 1860, or registered under section 25 of the Companies Act, 1956.

The income tax department has the power to approve or reject such approval upon disqualification of the nonprofit organisation or dissatisfaction found by the department towards the nonprofit organisation activities.

 

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How to register a religious charitable trust?

A public charitable or religious institution can be formed either as a trust or as a society or as a company registered under section 25 of the Companies Act, 1956. It generally takes the form of a trust when it is formed primarily by one or more persons. To form a society, at least seven persons are required. Institutions engaged in the promotion of art, culture and commerce are often registered as non-profit companies.

Registration of Charitable Trust

Registration of a religious charitable trust is created with a document called the trust deed. The trust is created by the founder (author or settler) with the trustees. The trust deed consists of the objects of the trust, operation of the trust, trustee information and trustee powers, rights, duties and liabilities. After the creation of the trust deed, the trust will have to be registered with the registrar or sub-registrar’s office according to the laws relevant to your state. After the registration of the trust, you shall get the copy of the registration from the registrar and you will have to apply for a permanent account number (PAN) card. Subsequently, the trust will have to apply for proper income tax registration. After getting the income tax certificate for the trust (12A), you can also apply for tax exemption certificates (80G) from the income tax department. This can only be done after a year of operation. A trust must be registered with either movable or immovable properties.

Application for 80G Certificate

To get the 80G certificate, the organisation has to fill Form 10G and attach its activity report for the past three years, or at least a year, with the audited report right from the date of establishment or of the past three years. You can download the form to get registered for 80G from the income tax department website.

Besides individuals, a body of individuals or an artificial person such as an association of persons, an institution, a limited company, a Hindu undivided family through its karta, can also form a trust.

 

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How to close down your society

A housing society can be defined as a group of house owners residing in the same building, apartments or the premises who form a society as per the laws and regulations to ensure smooth functioning of utilities and other facilities that are provided to them.

Special Resolution

A co-operative society may, by special resolution, authorise its own dissolution. A notice of the general body meeting called for the purpose shall also be sent by registered post with an invitation to attend to the registrar, to creditors, if any, to any co-operative society to which the co-operative society is affiliated, and to any co-operative society with which a partnership contract has been entered into.

Presentation to General Body

The invitees only have the right to make a presentation to the general body, if they wish to do so, on the issue of the proposed dissolution. Within fifteen days of the authorisation for the dissolution, the co-operative society shall send to the registrar a copy by registered post of the authorisation to dissolve the co-operative society.

After Authorisation

After receiving the authorisation, if the registrar is satisfied that the co-operative society has no assets or liabilities, he will dissolve the co-operative society, delete its name from the register of co-operative societies and issue a certificate of dissolution of such co-operative society. If the registrar is not satisfied, he will, within thirty days of the date of receipt of such a resolution, send the notice of the special resolution to be published (at the expense of the society) in the official gazette and in a newspaper in Hindi and English.

Certificate of Dissolution

In the case of dissolution, the Registrar may require, till the certificate of dissolution is issued by him, from the liquidator appointed by the co-operative society or from any other person who is required to furnish information, a periodical return showing the progress of dissolution; the distribution of any undistributed surplus or reserve; and any other relevant information.

Also see Procedure for Forming a Housing Society

 

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General Power of Attorney in Delhi

A power of attorney (PoA) is a written authorization under which one person (the principal) appoints another person to act as an agent (also known as the attorney-in-fact ) on his or her behalf, thus conferring authority on the agent to perform certain acts or functions on behalf of the principal.

General PoA

A general PoA gives broad powers to a person or organisation to act in your behalf. These powers include handling financial and business transactions, buying life insurance, settling claims, operating business interests, making gifts, and employing professional help. A general PoA (as opposed to special PoA) is an effective tool if you will be out of the country and need someone to handle certain matters, or when you are physically or mentally incapable of managing your affairs. A general PoA is often included in an estate plan to make sure someone can handle financial matters.

It is important for an agent to keep accurate records of all transactions done on your behalf and to provide you with periodic updates to keep you informed. If you are unable to review updates yourself, direct your agent to give an account to a third party. As for legal liability, an agent is held responsible only for intentional misconduct, not for unknowingly doing something wrong. This protection is included in PoA documents to encourage people to accept agent responsibilities. Agents are not customarily compensated; most do it for free. Should you, a friend, or relative suspect wrongdoing on the part of your agent, report the suspected abuse to the police and consult a lawyer.

Procedure for Getting a General PoA

1. A PoA can be drafted by any lawyer in a very short time. It need not be done on stamp paper, but must be made in the presence of two witnesses and a notary public. When authenticated by a notary public, it has the same effect as registration.

2. Registration at the sub-registrar’s office is not done, and is usually only in case of sale of property, for which a special power of attorney is required.

3. In case of registration, a PoA is chargeable under Section 48 of Schedule 1 of the Indian Stamp Act, 1899. A stamp duty has to be paid compulsorily by the principal or donor in the jurisdictional registrar’s office. In case of a general PoA, stamp duty is be Rs. 100.

Cost of a PoA

A Power of Attorney can cost as little as Rs. 500, depending on the lawyer you appoint, though some lawyers can charge well over Rs. 3000 for one.

 

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