Setting up Bitcoin Related Business in
India
It must be noted that in order to carry out any business in India, a foreign person has to either operate through a branch, or through a subsidiary in India. An Indian person may choose to operate either individually (as a sole proprietor), through a firm (such as a partnership) or a body corporate (such as a company or a limited liability partnership). There are other mechanisms for operating a business as well, but the above mentioned are the most common.
Broadly speaking, in order to commence business in India, various structures/ entities (incorporated and unincorporated) may be adopted. A brief overview of the different entities is provided below.
Incorporated entities in India are governed by the provisions of the Companies Act, 2013 and the rules thereunder (“Act”). As per the Act, two kinds of entities may be established: (i) private limited company; and (ii) public limited company. Some of the key characteristics of a private limited company are as follows: (i) minimum paid-up capital of INR 100,000; (ii) number of shareholders must be a minimum of 2 and maximum of 200; (iii) transferability of shares is restricted; (iv) invitation to the public to subscribe to the securities of the private company is prohibited.
A few distinguishing characteristics of a public limited company are as follows: (i) minimum paid-up capital of INR 500,000; (ii) number of shareholders must be a minimum of 7, with no maximum prescribed; (iii) shares of a public company are freely transferable; (iv) public company may invite the public to subscribe to its securities.
The incorporation process of a private company is faster when compared with that of a public company. Further, private companies provide more flexibility than public companies in conducting operations, including the management of the company and the payment of managerial remuneration. However, since public companies provide for better exit options and allow for inviting the public to subscribe to its securities, public companies may be preferred over private companies depending on the nature of business involved.
Other than when persons operate individually or without association, unincorporated entities in India are primarily of two types: (i) limited liability partnership; and (ii) partnership. A limited liability partnership (“LLP”) is a form of business entity which permits individual partners to be shielded from the liabilities created by other partners’ business decisions or misconduct. In India, LLPs are governed by the Limited Liability Partnership Act, 2008. LLP is a body corporate and exists as a legal person separate from its partners. A partnership, on the other hand, is a relationship created between persons who have agreed to share the profits of a business carried on by all of them, or any of them acting for all of them. A partnership is not a legal entity independent of its partners.
The partners own the business assets together and are personally liable for business debts and taxes. In the absence of a partnership agreement, each partner has an equal right to participate in the management and control of the business and the profits / losses are shared equally amongst the partners. Any partner can bind the firm and the firm is liable for all the liabilities incurred by any partner on behalf of the firm. Various legal, commercial and tax considerations have to be taken into account before zeroing down on the nature of entity to be established.
It must be noted that in order to carry out any business in India, a foreign person has to either operate through a branch, or through a subsidiary in India. An Indian person may choose to operate either individually (as a sole proprietor), through a firm (such as a partnership) or a body corporate (such as a company or a limited liability partnership). There are other mechanisms for operating a business as well, but the above mentioned are the most common.
Broadly speaking, in order to commence business in India, various structures/ entities (incorporated and unincorporated) may be adopted. A brief overview of the different entities is provided below.
Incorporated entities in India are governed by the provisions of the Companies Act, 2013 and the rules thereunder (“Act”). As per the Act, two kinds of entities may be established: (i) private limited company; and (ii) public limited company. Some of the key characteristics of a private limited company are as follows: (i) minimum paid-up capital of INR 100,000; (ii) number of shareholders must be a minimum of 2 and maximum of 200; (iii) transferability of shares is restricted; (iv) invitation to the public to subscribe to the securities of the private company is prohibited.
A few distinguishing characteristics of a public limited company are as follows: (i) minimum paid-up capital of INR 500,000; (ii) number of shareholders must be a minimum of 7, with no maximum prescribed; (iii) shares of a public company are freely transferable; (iv) public company may invite the public to subscribe to its securities.
The incorporation process of a private company is faster when compared with that of a public company. Further, private companies provide more flexibility than public companies in conducting operations, including the management of the company and the payment of managerial remuneration. However, since public companies provide for better exit options and allow for inviting the public to subscribe to its securities, public companies may be preferred over private companies depending on the nature of business involved.
Other than when persons operate individually or without association, unincorporated entities in India are primarily of two types: (i) limited liability partnership; and (ii) partnership. A limited liability partnership (“LLP”) is a form of business entity which permits individual partners to be shielded from the liabilities created by other partners’ business decisions or misconduct. In India, LLPs are governed by the Limited Liability Partnership Act, 2008. LLP is a body corporate and exists as a legal person separate from its partners. A partnership, on the other hand, is a relationship created between persons who have agreed to share the profits of a business carried on by all of them, or any of them acting for all of them. A partnership is not a legal entity independent of its partners.
The partners own the business assets together and are personally liable for business debts and taxes. In the absence of a partnership agreement, each partner has an equal right to participate in the management and control of the business and the profits / losses are shared equally amongst the partners. Any partner can bind the firm and the firm is liable for all the liabilities incurred by any partner on behalf of the firm. Various legal, commercial and tax considerations have to be taken into account before zeroing down on the nature of entity to be established.
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