Question 1

What entity should I choose — Pvt Ltd or LLP — and how does it affect funding and tax?

Accepted Answer

For venture-bound startups, a private limited company (Pvt Ltd) is almost always the right choice. It allows equity fundraising, ESOP pools, and is the structure most investors and accelerators accept. LLPs are more flexible and have lower compliance overhead, but cannot issue equity shares — making them unsuitable if you plan to raise institutional capital. The choice also has implications for income tax (LLPs are taxed as a firm; Pvt Ltd pays corporate tax and enjoys the 80-IAC tax holiday under Startup India if DPIIT-recognised). We walk through this with every founder before incorporation.

Question 2

When do I really need GST registration, and what happens if I ignore it?

Accepted Answer

GST registration is mandatory when your aggregate annual turnover exceeds ₹20 lakh (₹10 lakh for some states and special category states). You also need it regardless of turnover if you supply inter-state, if you are an e-commerce seller, or if you want to claim input tax credit. Ignoring it when you are liable means penalties under S.122 of the CGST Act (₹10,000 or the equivalent of tax evaded, whichever is higher), and risk of blocking input tax credits. Register early — it is a straightforward process.

Question 3

How do I implement ESOPs properly without overcomplicating things?

Accepted Answer

ESOPs for Indian private limited companies are governed by S.62(1)(b) of the Companies Act 2013 and the SEBI (SBEB) Regulations for listed companies. For unlisted private companies, you need a board-approved ESOP scheme, a vesting schedule, an exercise price, and a grant letter for each employee. Key decisions: pool size (typically 10–15% diluted from founders' shares), vesting cliff (usually 1 year), total vesting period (4 years is standard), and exercise price (can be at fair market value or a nominal amount). ESOP valuation for tax purposes is determined at exercise under S.17(2)(vi) of the Income Tax Act. We handle the scheme design, board resolutions, and documentation.

Question 4

What do investors expect to see in my books and compliance history before funding?

Accepted Answer

Investors — especially at Series A and beyond — will conduct financial due diligence. They typically want: (1) audited or CA-certified financials for 2–3 years, (2) GST and TDS returns filed on time with no gaps, (3) ROC filings current (annual returns, financials, DIN compliance), (4) a clean cap table in a shareholder register or cap table tool, (5) employment agreements, IP assignment, and founder vesting documentation. Starting from day one with clean books and timely filings means due diligence becomes a smooth process rather than a scramble.

Question 5

Can you support us through SME IPO or SME listing?

Accepted Answer

Yes. For founders considering an SME IPO on BSE SME or NSE Emerge, we provide advisory support on the financial restructuring, restated financials, DRHP financial sections, and ongoing compliance post-listing. Eligibility requires a net worth of at least ₹1 crore and post-issue paid-up capital not exceeding ₹25 crore. The process typically takes 9–18 months. We work alongside a SEBI-registered merchant banker (which is mandatory for SME IPOs) and support the CA-specific deliverables throughout.

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