An Entrepreneur in Mumbai

I want to start selling, should I register and charge VAT (Value Added Tax)?

2011-03-08T13:15:00.000+05:30

Recently, a reader who is about to start an online business asked me this question... At that moment I didn't know the answer, so today that I visited my Chartered Accountant decided to clarify this (also because I'm thinking of a new venture on these lines).

A company is only required to register for VAT if its turnover for sales of goods is above Rs. 5 lakhs (Rs. 500,000). Thus, while your turnover is below that, you need not register for it, nor charge your customers for this.

Certainly, you can register for it even before if you want to. It will cost about 20 to 30,000 Rupees, and eventually you will recover this money from the government at the end of the Financial Year as a settlement when you file your income returns.

If you are starting your business, my advice is that you wait and only when you see things are moving on well and you are getting close to Rs. 5 lakhs turnover, then approach your C.A. for VAT registration. Surely your clients will appreciate it.

Note that Sales tax and VAT are one and the same thing.

But VAT is separate from Service tax. Even if your company's turnover for services is above 10 lakhs and you are registered for Service tax, this is completely independent and does not affect VAT.

According to my CA they will unite these two in the future into one (called Goods and Sales Tax, GST), with benefits for tax deductions... But this may not happen until 2012 or 2013.

When is Service Tax applicable for a Private Limited company ?

2011-03-04T17:28:00.000+05:30

The very basic information: if your turnover is less than 10 lakh Rupees (Rs. 10,00,000) you do not need to charge Service Tax to your clients, thus you don't even need to have a number for it, i.e. you don't need to register yourself for this purpose.

But I was gladly surprised to discover some time ago that even if your total turnover is great than 10 lakhs you may still not need to charge Service Tax! And it all depends on what services you are providing.

There are certain services that according to the fiscal law they are not liable to Service Tax, thus if you are providing those services, you (and your clients) need not worry about this hassle.

Even better, it could be that your company is providing more than one service, some of them taxable and others not. As long as those that are not taxable do not exceed 10 lakhs, you need not charge Service Tax.

It's important that you confirm with your Chartered Accountant that you need not register for Service Tax, and in turn, he will have to do some thorough research about this issue. Also, remember that rules change every year and something that was not taxable last year, may become taxable the next one so be careful and keep an eye on this.

Just in case you are into this business... IT services do have Service Tax. But Translations and Interpretations don't! At least for this year...

Speech by Indian Ambassador at Business Meeting in Asuncion

2010-07-20T14:44:00.003+05:30

This is an interesting speech by the Indian ambassador in Paraguay:

"...The economy of India in the last few years is growing at a rate of 8% or 9%. In spite of the global crisis, in 2009 the economy of India grew at a 6%. This year is going to grow 8%.

This is not going to be a miracle of 1 or 2 years. The economy of India is going to sustain this growth in the decades to come...."

Speech of the Indian Ambassador to Paraguay, Argentina and Uruguay at a Business Meeting in Asunción, Paraguay.

Translation and subtitles by Encyclomedia http://www.ecam.co.in

Social Sense and Inspiration

2010-05-17T16:44:00.006+05:30

Following one's inspiration and likings is a very important part of being an entrepreneur. Without it, would be quite difficult to enjoy our work and we would not be able to continue in this task which is not easy and requires a lot of perseverance.

Dr. Carlos Llano's life, who expired a few days ago, is quite inspiring and exemplary. From being bed ridden for one year as a tuberculosis patient, to becoming a doctor in Philosophy, then getting to be a manager of a very successful company... following his likings (Philosophy), his skills and what he had learned in his business life, got to found one of the best Business Schools in Mexico.

Encyclomedia's team translated this video-biography and added the subtitles in English.

Don't miss out his message for business-men: "Social Sense".

Encourage entrepreneurs... an ad from Hindustan Times

2010-04-24T09:44:00.002+05:30

On Sunday morning while cycling from Goregaon to Santacruz (where I live), I saw this billboard of Hindustan Times. At that moment I didn't stop to take a picture because was in a rush. But today I saw it again at a bus stop and finally did it.

I think it is a wonderful ad with a great logic. If we really want to solve the jobs issue in Mumbai it has to be done by creating more employment, and the best way to do that is by encouraging entrepreneurs to work harder and better. Helping them so that their work is more efficient in creating new businesses and companies that will generate more jobs.

This will also help more people to take the leap to be entrepreneurs themselves.

Frequent exercise... an essential for entrepreneurs!

2010-04-24T09:38:00.001+05:30

In my previous post I wrote about the great importance that rest and exercise have in the life of an entrepreneur.

This itself is a great motivation factor to really try doing it frequently, but many at time is not enough forthose of us have many things to do and get the frequent temptation to exhange the time of exercise for more work.

A very useful incentive is to have a team with whom we practise sports.

Recently, I joined a group of enthusiasts at cyclists.in. It has proved to be a very successful aid. Although the rides I go for with them are at 5.30 in the morning, I do manage not miss them at least twice a week.

At times it is difficul and feel more like staying in bed or switching on the computer to advance some work... But knowing that there is a group of people that count on you coming, surely helps to take that step.

Besides, there are other added advantages with respect to business in doing sports, especially by joining a team... Among others, a lot of networking! But I may give more examples about that in a future post.

What about you? What is your sport? Have you joined any team? Have you searched for it? Google it if you haven't!

Exercise and rest

2010-04-02T16:19:00.005+05:30

Not very long ago, while waiting at the bank, I went through a "test for entrepreneurs" in a magazine that was lying there. One of the questions and it's "best" answer gladly struck me.

The question was about daily exercise and rest. And the best answer was supposed to be that you do daily exercise, at least for a few minutes a day.

I was gladly surprised and it was a wonderful reminder of what I have heard many times before. So as to work harder and more efficiently, we need to rest, mainly our mind, by doing some exercise. Since I love sports (mostly doing them rather than watching them), it was an advise that I did not wait much before I made sure I was following it!

Of course, we need to strike a balance between spending enough time at work and not over-doing our exercise, but since generally the tendency is towards getting stuck at doing more and more work, it is a very good struggle to fight to get time to exercise.

This is a very difficult point at times for Entrepreneurs, as our timings mainly depend on ourselves and there is nothing much like "leave the office at 6". However, at the same time, we have the advantage that nobody will scold us because of having arrived a few minutes late for work because we were at the gym... of course, this won't happen very often because we are really eager to go and our work as well!

The Entrepreneurship Process. Block #3

2010-03-26T17:28:00.002+05:30

What a hectic month with a lot of translations work! Really good fun!

But finally I get some time to post the third block of this series of videos which I had posted earlier. As I wrote then:

A few weeks ago I posted the first block of this intervie w with Mrs. Silvia de Torres Carbonel, the Director of the Entrepreneurship Centre at I.A.E. the leading business school in Argentina. ... As you will see, it is in Spanish, but I write my points again in English.

The Business Plan

It doesn't assure success, but prevents failure.
Helps to organize the entrepreneur's thinking
It must be active, permanently growing
It is modified frequently upon reality
It is a promise of the future
Helps to structure the business
Helps to understand the business
Objectives:

Understand your own business
Being able to communicate it to others
Motivate others to join it

Now going from one weakness to another one... Investments, how to get them, where from?
Over here they speak about the topic somehow locally to Argentina, but something more globally applicable, the Entrepreneur has two options:

Loans --- means payment of interests
Capital. Could be his own, or from somebody else, which means giving shares.

Regarding the investors, what are they especially looking for?

They look at the team setting up rather than the idea itself.
That they may be projects have a certain degree of innovation (not necessarily a new product)
That they may be able to grow within the internal market and also capable to expand globally.

What is your advise to for entrepreneurs?

Never stop dreaming, this is the primary motor of entrepreneurship in life.
That they execute, keep clear the importance of execution and implementation.
That they never stop forming themselves; everyday it is more needed to acquire formation so as to be able to develop enterprises.
That they realize the responsibility that they have because the involve a lot of people, their society: the entrepreneurs today are the leaders of tomorrow and they must be ethical and socially responsible.

Entrepreneurship incubators

2010-02-09T16:53:00.001+05:30

During my College days here in Mumbai (just a few years ago) I was glad to see in the last year that something started moving in an Entrepreneurship cell. It was perhaps not very much: I remember going with it to visit an Entrepreneur in Mahim and perhaps a few other things were organised. But it was the beginning of something which I hope would expand greatly.

And now I am happier to see that it has grown quite a bit. In fact, this week they have had a wonderful event which I hope has a lot of success. Unfortunately, I got tied up with work and won't be able to attend any of the sessions (as I had said I would), but I am sure they will be very well conducted and a wonderful help for the to-be Entrepreneurs coming out of Engineering Colleges. This of course, was part of the E-Week celebrations that have been going on across the country.

At CRCE (my College) they had the following events:

9th Feb: Seminar on how to make a business plan.
10th Feb: The College Chef Competion
11th Feb: Business Quiz Competition

Also, today I read another interesting piece of news, the Science and Technology Minister Prithviraj Chavan said yesterday that "Every university have to have a incubator,", referring to the business incubators that the Government is going to start supporting across the country, aiming at increasing the number of entrepreneurs.

He said:
"There are over 5,000 incubators in the world. Of them, nearly 1,400 are in North America. Over 1,000 are there in China. Their number is only 40 in India,"

Source: Press Trust of India

The Entrepreneurship Process. Block #2

2010-02-03T10:43:00.003+05:30

Almost two weeks ago I posted the first block of this intervie w with Mrs. Silvia de Torres Carbonel, the Director of the Entrepreneurship Centre at I.A.E. the leading business school in Argentina. Here I post the second block out of three, along with a few points I have extracted from it. As you will see, it is in Spanish, but I write my points again in English.

This part of the interview somehow begins focusing (the third block will be mainly on that) on the Business Plan. What do you think about it? Do you agree that it is something important? Certainly, at times, is not something easy to do, right?

At times many entrepreneurs are thought of leaving aside their social responsibility and focus only on the profits they get for themselves.
It is through their work along with others' work, the product, the service and the economic results (for themselves included) that they are serving society.
They develop through their work.
The responsibility of the entrepreneur in society is to be a good business man, giving work, giving improvement to society.

The most common error of the entrepreneur is in the execution. There are many good ideas, but that is not enough, they must be executed: execution, execution, execution.

Latin America is fertile soil for entrepreneurs.

In developing countries entrepreneurs arise mainly by need (not having other options) rather than by opportunities (as it happens in developed countries).
Governments should focus on helping the entrepreneurship process which is not the same as supporting SMEs. Entrepreneurship process is the frequent creation of new businesses.

About the Business Plan:

This is the weak point for many entrepreneurs.
It is important as a tool, as a map... it is a key tool.
It helps to think well about the enterprise to be started.
It helps giving dimensions to the opportunity.
It helps to imagine the model and inputs so as to capture the opportunity.
It helps to understand the market and the competitors.
Most importantly: it helps to understand what are the required resources so as to reach the objective.

Finally, they give a few testimonies from various young entrepreneurs about what is required to be an entrepreneur:

"Push, perseverance, passion... and never give up"

"The skill to generate and keep relationships with the business and entrepreneurship community"

"Bring down to earth ideas and risk what is needed for what is wanted"

"Courage and humility"

What do you think, do you have those skills?

If you notice anything wrong in my summary, either in the translation into English or because I got the point wrong, do let me know it!

India, Mexico to discuss feasibility to free trade pact

2010-01-28T16:58:00.003+05:30

The Economic Times published on Tuesday 26th of January 2010, in its printed edition a very short article which is quite interesting for people like me that are in the business between India and Mexico:

India and Mexico would discuss the feasibility for a free trade agreement in May to boost two-way trade, a senior Mexican official said on Monday. A high-level joint group on economic and financial matters would have its second meeting in May to discuss the FTA among other matters, the Mexican ambassador to India, Jaime Naulart, said here. "It is at a very nascent stage and we are looking at the feasibility of such an agreement," he said during an interactive session with members of the Indian Chamber of Commerce. Addressing the members of the chamber, Naulart said Mexico saw the FTA as one of the tools to solve the country's economic problems.

This Free Trade Agreement would be a wonderful opportunity that we must take advantage of when it comes. I hope the information will be easily available soon!

Business Opportunities: Translations from India

2010-01-28T16:42:00.003+05:30

It seems that we are in the right track of business!

Yesterday I was forwarded this other article by another friend also telling me of business opportunities... this time he did it because he knows very well I am into the business of Spanish translations. In fact, his institute has been one of my clients when we did some simultaneous translation for a congress they organized last September.

The core of the article published by Indian Express is in this paragraph:

Though the translation industry in the country is still in its infancy compared to the $15-billion world market, it has high growth prospects in India with a potential to generate about 500,000 jobs in the country. And Pune is at the forefront of this segment.

It is clear that many companies from abroad are coming to setup themselves in India, and many at times, they need translations for their processes, marketing, sales, etc.

It seems that a lot of work will continue to pour down on us! Anybody wants to join the trend?

Business opportunities: Publishing

2010-01-28T16:35:00.002+05:30

This morning I received an e-mail from a friend with the text and the link to an interesting article. Let's try to take advantage of this kind of business opportunities.

It is an article with quite a few statistical data, but the first paragraph summarizes it quite well:

India remains the destination of choice for content, design, media distribution and other outsourced publishing work. Sixty-six per cent of respondents in a recent publishing survey said they would prefer to outsource publishing and pre-press work to India over competitors like the US, UK, China, Australia and the Phillippines.

The full article was published by Business Standard.

The solution: create 15 to 20 million employments

2010-01-28T16:24:00.004+05:30

Last night in the 9 o'clock show of NDTV they showed a partial summary of the panel discussion at the London School of Economics in which the book 'Not By Reason Alone' by JD (U) Member of Parliament, N K Singh, was being launched. Mukesh Ambani was there and said quite a few interesting things with respect to the migrant politcs. You can read the full text here, but I would like to point out a couple of things in this post.

Even though I am not really an admirer of Mr. Ambani, I actually loved the challenge that he has put forward for all business men and entrepreneurs. If we could reach that challenge, we would actually be getting closer to the solution of many social problems, not just in India, but the world over:

The challenge before us really is how do we create employment opportunities, how do we create earning opportunities? And I really think there is only one way we can measure our progress, and that is are we creating 15-20 million new employment and earning opportunities.

And I also liked how he put the so called overpopulation problem (which I believe is a myth) actually as an opportunity:

We are a young country, and over the next 15 years we are going to have over 12-15 million new people entering the workforce. That is our opportunity, but that is also our challenge.

I hope we can be part of this challenge!

JumboKing... an encouraging story

2010-01-22T16:38:00.003+05:30

I must say that I have enjoyed several times the vada pav's from Jumbo King and I really like them because they are filling, quick and mostly higienic...

The story of the entrepreneur who started it is quite encouraging...

What started as a couple's entrepreneurship initiative in 2001 is now a full blown retail chain with some very respectable leadership; Dheeraj Gupta; the man with a vision.....the promoter of JumboKing.

Masterstroke; give people what they want said all the marketers.

Almost 50 stores now and everyone' s asking; will people outside of Mumbai eat a vada pav? Questions are not new for this man who at every stage has been asked about the viability of his plans.......starting from will an only vada pav chain be successful?
Source: http://www.indiaprwire.com/pressrelease/restaurants/2010012241876.htm

Who wouldn't like to have a success like that?

Acting big

2010-01-22T15:08:00.002+05:30

This afternoon after lunch I was going through some old notes which I took while reading "The World is Flat" by Tom Friedman (an exceptional book, by the way).

I have posted them in another blog which I had not updated for long until today (read it here)

At that time, as you can see by the bold letters, I was very much into outsourcing, so I was struck by the 6th and 7th points... in fact, I think I made use of that for an article I wrote and was published at MercatorNet.

But today, I found quite interesting the second and fourth points:

And the small shall act big. One way small companies flourish in the flat world is by learning to act really big. And the key to being small and acting big is being quick to take advantage of all the new tools for collaboration farther, faster, wider and deeper.

The best companies are the best collaborators. In the flat world, more and more business will be done through collaboration within and between companies, for a very simple reason. The next layers of value creation - whether in technology, marketing, biomedicine, or manufacturing - are becoming so complex that no single firm or department is going to be able to master them alone.

This is very important for starting entrepreneurs. Certainly, their company is still small as it is just beginning, but that shouldn't be a cause to feel cowed down and not try competing with the big ones... Do read that book, or at least that chapter, or at least that section from Friedman's: you'll find it quite useful.

The Entrepreneurship Process. Block #1

2010-01-22T12:30:00.003+05:30

I received the link to this video through a group of Mexican Entrepreneurs in LinkedIn. It is an interview with Mrs. Silvia de Torres Carbonel, the Director of the Entrepreneurship Centre at I.A.E. the leading business school in Argentina. It is in Spanish, but offer below a few notes in English in a point format.

The Entrepreneurship process is a process started at an individual level, i.e. in the person.
It is an attitude, not a characteristic of the person.
It takes you to be alert for opportunities, enthused about them.
The enterprise is born in the heart, mind... and hands of the entrepreneur. Which need to be able!
The entrepreneur is a person that generates employment.
Entrepreneurship is the key for generating employment, especially in developing economies like ours (referring to Argentina, but also applies to India and Mexico, of course)

A successful entrepreneur is:

A person that is open.
A person extremely flexible in the execution: we don't always have all the resources, we must get them.
Knows how to leadership the starting organization.

This is the first of 3 blocks.

UnPluggd – The Event for Entrepreneurs

2010-01-21T16:29:00.003+05:30

You must have heard of these statements (from startups/VCs/media/bloggers etc)

Consumer Internet is just not happening in India (i.e. one cannot build a profitable Internet company from India)
You can’t build a global technology company from India without spending a fortune [read: cash strapped startups cannot build one]
Global Brand from India? We don’t have many! [Read: startups cannot even think of this!]
You always need funding to make it big.

Started believing in these stories?

Give yourself a Hug! And Read on!

It seems to me that it is going to be quite an interesting event. Unfortunately, I won't be able to make it because I am booked for another event on that date. But I would appreciate that, if somebody attends it, can share some impressions with me!

Do visit the UnPluggd web-site for more information.

Japan Airlines files for bankruptcy!

2010-01-20T13:05:00.002+05:30

It is almost incredible to read this kind of news...

Japan Airlines filed for one of the country's largest bankruptcies, entering a restructuring that will shrink Asia's top carrier and its presence around the world. (BBC)

But what this article says, somehow confirms what I had been told by a friend living there for the past 5 decades:

La aerolínea emblema de Japón cae víctima de sus fuertes inversiones inmobiliarias en los años 80 y de los altos gastos en pensiones. JAL, con una deuda de 15.200 millones de euros, suprimirá 15.600 puestos de trabajo, un tercio de los efectivos. Se trata de la mayor deuda en Japón para una empresa fuera del sector financiero. (RFI)

For those who don't speak Spanish, it says that the reasons are the heavy investments on real estate the company did in the 80's and the high expenses on retirement plans.

The later part is what my friend had told me is a very important problem hitting Japan at the moment: too many old people and retired... and too few young people ready to take the burden of sustaining the retired ones!

I hope other countries will learn the lesson.

Investors: Family and Relatives

2010-01-20T10:21:00.002+05:30

At times, some of us are a little ashamed of asking "daddy" or "antie" for support in our business. Others of course, think is the most natural thing to do. And it seems that somehow is the majority of people that think that way...

Jan 14th 2010
From Economist.com

FAMILY, friends and foolhardy strangers are the individuals who often make the important investment needed to start a business. The amount of “informal capital” that can be raised from those close to entrepreneurs varies across countries. Peruvians, for example, are relatively poor so cannot cough up as much as people in richer countries. There was a significant decline in informal investments in the G7 group of rich countries in 2009 according to the latest Global Entrepreneurship Monitor Report. Investors are more wary of risky entrepreneurial ventures as a result of the economic downturn. Although almost a quarter of entrepreneurs in developed countries that are in the early stages of their start-ups thought that their businesses would grow.

I guess there is nothing wrong in asking our family and relatives to invest in our ventures, after all, if they don't trust us and are ready to risk on our ideas... who will?

At the same time, I do think that we should not take advantage of their good faith. So far, I haven't come to the point of needing to ask for an investment of that kind... I wonder what will happen when I have to.

Letters for registration at FRRO Mumbai

2009-11-20T18:13:00.001+05:30

As I said in my previous post, here I give you the links for downloading the templates of letters for registration at FRRO Mumbai. I hope somebody finds them useful:

Request letter for registration at FRRO Mumbai:

http://www.ecam.co.in/EntrepreneurBlog/RequestLetter_Template_FRRO_Mumbai.doc

Undertaking letter for registration at FRRO Mumbai (as per format given to me a couple of days ago):

http://www.ecam.co.in/EntrepreneurBlog/UndertakingLetter_Template_FRRO_Mumbai.doc

They may change one day, but at least for the time being these should work well and you may not need to go more than once if you have everything prepared.

By the way, I forgot to say in my previous post, you need to bring three sets (i.e. two extra copies) of all the papers.

Registration at FRRO

2009-11-20T17:59:00.003+05:30

This may not be very useful for most entrepreneurs in Mumbai, but it is part of my life as an Entrepreneur here because of not being an Indian citizen. Besides, I think it can be useful to many other people.

Part of the information that I am going to give here can be found at http://www.immigrationindia.nic.in/

Every person living in India with a visa which lasts for more than 180 days needs to register at the Foreign Regional Registration Office or FRRO. FRRO Mumbai is located very near VT and behind St. Xavier’s college. The exact contact details are:

Telephone No.: 022-22620446 (O) 022-22620721 (Fax)

E-Mail Address:  frromum@nic.in  dcpsb2.frro@indiatimes.com

Address: 3rd Floor, Special Branch Bldg., Badruddin Tayabji Lane,
Behind St. Xaviers College, Mumbai-400001.

This registration must be done within 14 days from landing in India and must be done at the city where you have your residence.

They often change the papers required, just as it happened this month, and this is what inspired me to write this post in the blog so that those registering can have the latest information. The site http://www.immigrationindia.nic.in/ gives some information in the “Registration Req” link, but is not updated and they don’t give you any templates there which they do give when you are there. Currently, the documents required for Employment Visa are:

4 recent passport size photographs;
Photocopy of photo page and valid Indian Visa page of the passport;
Proof of residential address in India;
Request letter
Undertaking letter
Contract agreement from employer

The undertaking letter is what has changed recently. Before they had a very small format which was required, later on they added the requirement of an Indian person signing the letter (and you must accompany the letter with an identity proof of that person, such as passport copy), and now they are giving a new template for the letter which must be printed in the Company’s letter head. I will be uploading that template in a future post.

The request letter is for the company to request the registration of its employee. It should mention the passport number and address of the foreigner. I like to include other information as well, just in case, such as visa number and nationality. I will also upload that in the same post as the other.

Make sure you know where the time period of the contract agreement is specified in the document and where are the details regarding salary as this is what they look for and you could save them some valuable seconds by finding it for them.

People wanting to register who have other types of visa, such as student visa, need other documents such bonafide certificates from their institute. I guess they won’t need a contract agreement, but I assume that they also need the undertaking and request letters.

TDS on salary

2009-07-24T16:40:00.002+05:30

Calculating the TDS to be deducted from an employee receiving monthly salary could be a little more complicated than doing it for external professional services.

First, it is required to forecast what will be the total gross income of an employee during the whole year. This calculation should include the earning he or she may have got from a previos employeer if the recruitment has been done in the middle of the financial year.

Then, you will need to calculate the liability of tax payment based on the income. For example, a person earning from 1.5 lakhs to 3 lakhs is liable to 10% tax on the amount above the first 1.5 lakhs. Subsequently, there are other slabs at different rates which every year may vary therbexact figures. Thus, it is important to check those slabs while calculating.

Once you know the total tax liability, then you should divide that amount by the nuber of months remaining in the financial year (12 if it is the beginning of the year) and deduct that amount every month.

Remember to file the TDS payments every quarter before the 15th of next month!

Education cess to be removed from TDS payments

2009-07-22T16:36:00.002+05:30

Until now, whenever you made a deduction at source for tax (TDS) you also had to deduct an additional percentage which would be destined directly for education budget in India.

This extra percentage would somehow complicate calculations by producing odd figures. For example, the TDS for professional services is 10% plus a 3% for education cess on that, which would take it to a total figure of 10.3%. It doesn't sound like a big deal, but in fact it makes calculations and filling up of forms more tedious than they should be, as you have to specify them separately.

I have been told that the education cess figure will be removed from the payments on 1 October 2009 onwards. Thus now it will be only the 10% in the case of professional services, which makes it quite easy for the fomalities.

I understand this will not apply to all TDS concepts, but I will get to know more details only once we are closer to October 1.

TDS Calculation for professionals abroad

2009-07-22T16:36:00.001+05:30

After a few hours at the C.A.'s office today, dicussing this and various issues, I have clarified the following with respect to tax deduction at source (TDS) for payments to professionals outside India.

As I said in my previous post, the TDS should be calculated depending on the country to which the money will go. The percentage will vary from country to country based on the treatise India may have with them.

However, those payees which do not carry out their service in India and will not do it throughout the financial year are excempted from this TDS. That means that, if the payee will not come to India to carry out its service, and always does it remotely, you will not need to deduct any tax and you can make the payment in full.

TDS for Payments Abroad

2009-07-20T20:04:00.001+05:30

During all this time with my company being part of an international group of companies we have always been doing jobs for them and receiving their payments without any problem, just like the payments of other clients abroad.

But short time ago we got something done from one of our collaborators abroad, and realized that it is not that easy to do payments the other way around. For payments to other parties abroad you also need to calculate TDS and it could be quite complex.

India has different treatises with different countries, thus a different TDS applies for each country and each concept. Furthermore, there are some countries with which there is no treatise, and it is not very clear what TDS should be deduted (e.g. Argentina, which is my case).

Be careful before making payments abroad, ask your CA to do some research. Otherwise you may end up being disallowed that payment and having to pay tax for it as if it were your profit.

There seems to be an exception in case your payee is an individual who never has been to India and you are paying for professional services... But my CA is still doing research on that.

Back to business

2009-07-17T15:36:00.001+05:30

It has been a long time from my previous post. The reason for that is a combination of several factors that made it really impossible to have any time, not so much for writing, but for thinking... which is what I need most for writing! I went in a business cum pleasure trip to Mexico... that involved a lot of preparation, and a lot of catching up with pending work upon arrival (one month trip makes many things pile up!).

Besides that, we have lunched a new service at Encyclomedia i.e. my company, thus I had to spend a lot of time setting up that, and at the same time helping out the person who is now in charge of the other services of the company. Some projects have finally started to come on this and work seems to be rolling, so now I'm somehow more at peace... of course, that doesn't mean I am without working a lot.

I have left several doubts unanswered from some readers, but I think I will better go ahead to discuss things about taxes. But if the doubt still there, you can ask me again.

The photo is the view I had from the beach-house at which I was studying and resting near Hermosillo, Mexico: at Bahía de Kino. By the way, this is my first post to the blog through e-mail.

Relationship between Domain Name Registration and Company Name Registration

2009-05-08T17:22:00.004+05:30

A blogger, in a comment to a previous post about the legal process to set up your company, asked with respect to the name registration through Form 1A and later on Form 1, the following:

Another issue is to register your domain name over www under W3C.Mean when we register our company then MCA(Ministry of company affairs), provide a domain name for our company or we need to process it by our own.
If yes,then when we get the authorization to register a domain name directly after getting
Apply for ROC for the name of company or After the submission of form 1,8,and 32.

Maybe it makes sense that we would like the domain name of our web-site to be the same of our company, however, it is not a requirement and many times, because of lack of availability, it won't be possible. Thus, I really think the best is to register your domain name as soon as possible, without waiting for your Company Name registration, and even less, waiting for the Company Incorporation.

What you could do to make sure that they somehow match is to use for your domain name, only the main word or the acronym. For instance, my company is Encyclomedia Communication and Marketing Pvt. Ltd. Certainly, I would not have tried calling my web-site www.encyclomediacommunicationandmarketing.com: who would remember that?

I tried getting www.encyclomedia.com, or .co.in, but wasn't available. So, I chose www.ecam.co.in which is the acronym for the full name of the company.

Imagine my Company Name had been rejected... I don't really think it would have been a big problem. In the worst of cases, I would have setup another domain (even if totally different) and re-direct it towards the IP where www.ecam.co.in is stored. But by that time, there would already be more visitors than I would have had if I had never opened the web-site, thus I would have more prospect clients from the very beginning.

A note about DIN for foreign nationals

2009-04-30T20:10:00.002+05:30

When I was getting my DIN (I'm Mexican) I tried just submitting my papers notarized in India, with the notaries outside Bandra High Court. However, my application was rejected. Later on, I got my documents attested by my embassy in New Delhi, sent them again to MCA, and got them approved. I thought this might be a rule, but it seems I was wrong.

Raju, a reader of the blog, sent me the following message:

[...] I also had a quick question for you with regards to applying for DIN as a foreign director. We are currently facing some issues with getting the documents for DIN attested by the right person/people. My business partner is from the US and it might be difficult for him to travel back to New York to get the documents notarized. On your post on DIN, you mentioned something about embassy charges. Did you get your documents notarized/attested at an embassy in India? If not, is there no other option but to get the documents attested from the US?

After telling him my story, and him trying it out, he came back with the good, but confusing (for me) news:

Just wanted to drop you a note to say we finally managed to get the DIN approved. It was our 4th attempt. :-) The notarization from the US Consulate was rejected but we were told by the MCA DIN Cell that if the foreign director is in India, an Indian notary can do the attestation as long as a notarized copy of a valid Indian visa is also submitted.

Well... I guess it is matter of trying out different things until it works!

Thanks to Raju for telling me his experience and allowing me to post it here.

This article was also posted as a clarification into the original post about DIN.

How much TDS I should deduct?

2009-04-27T19:44:00.004+05:30

I think it is nobody's cup of tea to pay taxes, nor to deduct taxes from anybody else. But as an employeer or business person who subcontracts job or gets services from other people it is our duty to deduct taxes from them. If we don't we could be penalized as well.

For each type of payment there is a different slab and different rate of TDS (Tax Deducted at Source) we should deduct. Of course, I haven't dealt with all types of payments, and will write here only about those I know but they all share the following characteristics.

The amount deducted in any given month from the total invoiced should be paid in the first seven days of the next month.
If a payment is delayed to the next month (from day 8 onwards) or more months, an interest of one percent per month delayed should be paid.
The TDS payments should be filed quarterly, within the first fortnight of the next quarter.
Delay in filing is more heavily penalized, at Rs. 100 per day of the delay, thus it could be a very expensive delay if you were to delay filing the TDS payments for any reason.

We can take an example. Let's say you have made a payment of Rs. 25,000 to a freelance developer on the 5th of April. The TDS applicable would be for Professional Services at 10.3%. The payments and dates would be as follows:

5th April, Rs. 22,425 (Rs. 25,000 - 2,575 TDS).
The Rs. 2,575 should be paid before 7th May.
And this payment should be filed along with all other TDS payments of April, May and June before 15 July.

Imagine that for some reason, you delay the TDS payment and you do it just before 7th June. Then you will have to pay Rs. 25 extra (i.e. 1%)... If one month later Rs. 50 (i.e. 2%) and so on and so forth 3%, 4%, 5%, etc.

By the way, I have some pending comments to reply to... sorry, lately I haven't had much free time. In fact, I wrote this post while traveling on my PDA (greatly helpful devices!). But I will surely get back to that soon.

Start working ASAP

2009-04-15T20:01:00.003+05:30

At my post Legal process to start the company, I had said the following:

When setting up a new business you would like to start giving your service or selling your product immediately so as to begin receiving returns very soon. And it is in deed possible (at least that's what I did)...

And Chitra, a reader of the blog, said in a comment at Final Submission to register your company:

You are right in some sense but clear me one thing if we r going to develop a software company or some what a web development company,then do u think it is possible to start the service(or starting a project)exactly before registration of the firm.
Or in general, for a product based firm it will be tough to set up the machinery before any legal process.

I guess there are two options.

One is dedicate yourself full time to do the process of setting up the company. This way, the process will be quicker and you will perhaps do it better because you will be fully concentrated on it. However, there will be quite a few idle times because you will be just waiting for some of the approvals.

The other option is to work as if the company already existed. You can work in a sole proprietorship basis (which does not require any legal work). Or you can associate with another already setup company which belong to a friend and do the services through that. Or you can start offering the service to clients, invoicing them, if required, in a personal basis, as a professional does. Or you can just tell your clients that you are about to open the Pvt. Ltd. ("I'm just waiting for the final approval") and you will send the invoice at that time. There are countless things you can do.

Besides, during this time, since you are starting, you can have a main focus on the marketing. The only fear could be that you build brand name of a company for which you are not yet the owner, but I think there is little to fear in this respect. You can check availability of the name in the MCA web-site, and besides you will get the approval for the booking of the name (form 1A) in just a few days or maximum weeks. I don't think there are very high probabilities of loosing the name (perhaps the full name yes, but not the main keywords).

A new beginning... taxes

2009-04-07T11:44:00.005+05:30

I have somehow finished writing about my experience on setting up the company legally. Most probably, there are quite a few things I have forgotten to write... if I remember, I'll do it later.

Now, the new Financial Year is beginning and I thought it would be a good opportunity to start writing about my experience with this issue. Most probably, what I will write will not help for the year that has just ended, but I hope it will help you for this year 2009-10.

I will be making posts about things such as:

TDS (employees, contractors, professional services, etc)
Personal tax
Corporate tax

Nobody likes giving money just like that to the government in taxes. Thus, we always look at ways of reducing our liability. But before you do anything, don't forget to ask the experts as otherwise you may get into serious trouble.

I have also found a few good websites and blogs for this topic of taxes. I'll be sharing them as we move ahead of course: they know much more than I do.

Final submission to register your company

2009-04-01T12:38:00.004+05:30

By now, if you have followed all the process to register your company you will have finished with quite a few things. You decided you wanted a Private Limited company. You got your DIN (Director Identification Number) and your Digital Signature. You have already received your confirmation for the name you chose for your company. Also, you drafted your MoA and AoA, of course with the proper legal advice. You have shelled out some money for stamp duty and registration fees. Finally, you are ready to give the last step and soon afterwards get your Incorporation Certificate for your newly approved Private Limited Company.

The last step is to submit form 1, form 18 and form 32. Of course, this will go along with the MoA, AoA and all the colourful rubber stamps you got in your papers at the time of the stamp duty and paying the registration fees.

Form 1: Application and declaration for incorporation of a company.
Form 18: Notice of situation or change of situation of registered office.
Form 32: Particulars of appointment of managing director, directors, manager and secretary and the changes among them or consent of candidate to act as a managing director or director or manager or secretary of a company and/or undertaking to take and pay for qualification shares.

There are just a few things to take care while doing this.

First, that they are quite important forms for the future. For instance, when you want to open a bank account or do a similar procedure, you will be asked for copy of these forms (at least 18 and 32).

The other issues, since by this time you will be doing it with legal advice you need not worry much about it. But they are such as making sure you have the latest form, etc.

As usual, I like to tell people that is important you get to know about those things before meeting your CS (Company Secretary) so that the meeting is much more efficient and you are somehow in the same "frequency". Thus, it is better if you try downloading those forms and read what all information they ask for there. You can get them from the MCA website.

Ethics and business

2009-03-30T09:47:00.003+05:30

I firmly believe that ethics and morality go before business, any time, even if at times it may be difficult.

If you had visited my blog earlier, you may have noticed there was a video at the bottom. It came from an application which gave an advertisement and then a video from a "channel". For my blog I had chosen Times Now, the TV news channel, because it had interesting news and some pieces about culture or Indian cooking I thought could be interesting for the readers as well.

But a few days ago I received an e-mail from a reader telling me the video being shown was a little "off", meaning immoral. I wrote to the providers asking them not to publish such videos but it seems it was not possible. I thought of giving it a few days...

This morning, when I opened my blog to see a comment which had been posted, I found another video which I thought was not apt for all public... I have removed the widget. It's a pity because there were also interesting news, and in theory I was earning some Rupees through that advertising (perhaps after 10 years I would have been able to buy a new keyboard out of that money!). Goodbye videos on my blog!

Talking about Business Ethics, perhaps you would like to visit and subscribe to this other blog. I subscribed a few weeks ago and seems to be good stuff: Business Ethics Blog, by Chris MacDonald.

Sorry for the pause in posts about the legal process, but the last two posts have come out somehow spontaneously. Next post will be about the forms 1, 18 and 32.

Outsourcing and lifestyle

2009-03-26T17:38:00.004+05:30

I came across (not by chance) this article today at MercatorNet: Is outsourcing exploitation?. And I think it is quite an interesting read for those of us working in India and who have somebody working under us. Especially of course, if our clients are abroad. And even more importantly, if we have other companies as providers for us.

Outsourcing is definitely helping the life of many people. Slowly the lifestyle is improving in many parts of the world, and the gap between developed and developing countries is becoming smaller.

Some would like it to be quicker: let's work for that. We are the ones supposed to be helping the people working with us or for us to improve society in general.

Problems with re-submitting

2009-03-12T17:58:00.010+05:30

Have I written about re-submission of e-forms earlier? I think I did, but I was quite optimistic. A few weeks back, I submitted a form 1A (to register the name of a new company which we are incorporating). However, it was rejected because a non-compulsory field was not filled up (if it is actually compulsory why they don't mark it as compulsory? I don't know).

At first, I tried re-submitting but the status of my SRN was "to be clarified" thus I couldn't re-submit. I contact the support of the MCA website and they quickly and efficiently changed my status.

Then, again I tried re-submitting. After downloading the latest e-form, filling it up (which in this case does not need digital signature), pre-scrutinizing it and trying to upload it, I was told: that I needed the latest version of the e-form. I thought: "this must be a small programming mistake which will be corrected in a few days time". So, I waited. After a few days, I tried again, but didn't work. So, I again sent an e-mail to same highly efficient people that had helped earlier... this time I wasn't so lucky. They didn't reply.

I decided to try again uploading after a few days... nothing. I wrote again to the support people, and no reply. Finally, the time for re-submitting is due. I have been sent an e-mail telling me that, if I want to submit the form again, I will have to do it afresh (i.e. paying the fee again). I've written to the support team complaining about this, but I only get silence... this is really quite disappointing!

I guess I could try fighting for this out, but perhaps the most efficient and less costly way of getting my things done is simply to spend again the Rs. 500 for submitting the form and forget about the issue (hopefully this time it will work fine). Perhaps I shouldn't forget so easily about this and claim my rights... but unfortunately I don't think I have the time, nor the patience to do so.

Stamp duty and registration fees

2009-03-02T18:25:00.004+05:30

I've always been amused by the amount of signatures and colorful stamps that the people in the government offices like. The process of registering a company is not an exception.

Once you have got drafted the MoA and AoA, and the forms 1, 18 and 32 are filled up (my next post will be about those forms) you will need to get them stamped, paying stamp duty and registration fees.

Unlike the other expenses which are fixed and relatively low (in the range of 500) this fees are slightly different.

The exact amount keeps varying. I don't know how often (may be every few months) and is directly proportional to the authorized capital which you request.

There are several sites which give you the ranges, some more updated than others. Sorry I don't give a link this time but I'm writing from my PDA where it is rather difficult to surf and the info I have is in my laptop. But to give you an idea, for a company with authorized capital of Rs. 5 lakh, the registration fees are about Rs. 17,000.

(For those who are not in India, Rs. 5 lakh is equal to Rs. 500,000)

By the way, I don't think it would be a good idea to try doing this without your Company Secretary's advice.

Drafting Memorandum and Articles of Association

2009-02-18T13:09:00.008+05:30

When I first started setting up the company, I wanted to do as much as possible (I hoped everything would be) on my own, until I reached the point for drafting the Memorandum of Association and Articles of Association. That's what made me decide that I needed professional help.

The MoA and AoA (short forms for Memorandum and Articles of Association respectively) are drafted by solicitors. I think the best way to do it, is through your Company Secretary who already knows well what you want and what you need, and for sure will be in contact with a good solicitor who can do the job within your budget (considering the fees of the CS are already within your budget, of course).

The MoA and AoA are quite important for the future development of your company. They will state what your company does. Hence, if the panorama of the MoA and AoA is not wide enough, you will find yourself into trouble when you plan to expand the services or products offered by your company, as in theory, your company should not be doing that stuff. Thus, when drafting the MoA and AoA ask the solicitor to try to include as many services and products as you can think of, which of course, are in a way related to the main service you are starting with.

For instance, if you are planning to set up a company to sell pencils, don't write just pencils in your MoA and AoA. It would be better if you write manufacturing and selling of stationery items, paper making and recycling, printing, publishing, etc, i.e. all kind of related activities which one day may fall in your sphere. The idea is that, when more business opportunities come your way, you do not be constrained by something as small as this. I guess you would just have to re-draft the MoA and AoA, but why to take the trouble if you can avoid it?

Re-submitting an eForm

2009-01-27T17:44:00.011+05:30

In the latest form I submitted I've been asked to clarify certain points. Now what do I do?

This happened to me this week after submitting Form 1A the other day. Few days after submitting I checked the "Transaction status" and found out that it was "Waiting for Clarification". As far as I had read, it was required to re-submit the form. However, when I tried doing it, the system didn't allow me.

I contacted via e-mail the MCA people and they replied very quickly and to the point after one or two days. Now they had changed my status and I could re-submit the form.

Today, while trying to do so it took me a while to find out how to do it, but finally got it: in the home landing page there are three tabs below the main horizontal menu which say: Services, eForms and MyDocuments. My mistake was to think everything I could do in the site was under the tab services. For re-submit you have to go to "eForms", where you will find a button "eForm Upload". There, if you enter the SRN (Service Request Number) and click the Re-Submit button you will get a Java app window through which you will be able to upload.

Again, make sure you have downloaded and filled up a fresh Form 1A before you re-submit, otherwise, the system will reject you automatically.

e-Filing: Submitting forms at Ministry of Company Affairs

2009-01-08T00:18:00.010+05:30

Submitting a form has always scared me as something being a waste of time: filling up a form without knowing for sure what to write, standing on a queue for a long time, getting a challan and go to pay it at another place, go back with the receipt and get the acknowledgment, etc. Or get a middle man who would do this for you and twenty other people at a much quicker pace but opening a wide space for illegalities and corruption which ultimately harm the whole system.

Thank God, the Ministry of Company Affairs decided to do away with all that not very long ago. Now-a-days, you can only submit forms through their e-Filing system at www.mca.gov.in. From there you can do everything, from downloading the pdf form to paying the fees and getting your approval or whatever you are trying to get.

Today I submitted my application for a new company which I’m opening with my friend.

First, you need to register in the site. At least, for submitting Form 1A it is enough to register as a “Registered User” (the other option is “Business User”).

Once you are inside, do read the steps for filing forms. An interesting warning they give there is that you should download the latest form every time you want to submit a form as they change often (in my case I had filled up an old Form 1A I had saved from last year, and had to do it again in a newly downloaded form).

You will see it is quite a simple procedure: download the form, fill it up, pre-scrutinize it (correct any errors you may get), add your digital signature to the form, submit it… all of this through a Java applet (get ready to wait for few seconds/minutes while the whole thing is uploaded). Then, you will be re-directed to the payment get-way which may be through net banking (there are only a few options of banks), credit card or printing a challan and paying at the bank physically (I guess this is in case you want to remain in the old good times).

After you have paid you will get a confirmation message, but which disappears in almost no time. Thus, just in case, check the payment status. If it says PAID, then great, otherwise you will have to use the re-submission facility (you should have taken note of your SRN) and pay again.

All of this is, of course, for Form 1A, where you don’t need the signature of a Company Secretary or Chartered Accountant. Later on, for other forms you will need it and most probably they will do the for you.

By the way, as a correction to my previous post a name through Form 1A is now only for 60 days, instead of 6 months as it used to be earlier. For renewing you have to pay Rs.250 in case you haven’t incorporated your company yet.

You name it: book a name for your company

2008-12-29T20:20:00.008+05:30

If you have not read the summary of steps in my November post you can see them here. The third step in that list is to apply to the Registrar of Companies (ROC) for a name for your company.

To avoid any kind of legal confusion, there cannot be two companies with the same name in the country. As a matter of fact, if you wanted to borrow a name from a foreign company you would need to get a NOC (non-objection certificate) from them allowing you to register your company with that name in India.

To apply for a name, and book it temporarily for 6 months (if you have not incorporated your company by then, you will need to apply again) you need to fill up and submit the Form 1A. This is a simple form where no much information is required… the only really relevant information are two things:

First, the DIN (Director Identification Number) of the directors (minimum two) for the proposed company (you can read about this in my previous post)

Second, the proposed names: you will have to give a few options (in case they reject the first one or two) and generally you will have to make it a little longer than a one-word name. For instance, instead of being just “Compusoftex” (just a single name), you would have to call it “Compusoftex solutions” or “Compusoftex networks”, or even longer “Compusoftex networks and solutions”… The idea is that you have to give more than one option and usually you would like to keep the name you have come up with plus adding other words which describe your activity.

While submitting this you will have to pay a fee of Rs.500 and you will get a reply to it after a week or two. Before submitting the form, to make almost sure they want reject it (at least not in the basis of availability) you should check whether the name is available. You can do that at the MCA (Ministry of Company Affairs) web-site: go to “Other Services” on the left-hand-side menu and click on “Check Company Name”. The tool does not work perfectly well, but it is useful: if there is a company which matches the name you have entered, you will get a list; but if there is no company with such name or similar you will not get any result at all, not even a message telling you so.

Legal: DIN. Director Identification Number

2008-12-09T18:10:00.012+05:30

We always have heard or read about the “board of directors” and “directors’ meetings” of different companies… but who are the directors? How many directors a company can have?

Every Private Limited company must have at least two directors and one of them is the Managing Director (MD). Later on in the process, you will have to submit a series of forms (1A, 1, 18 and 32) in which the details of directors will be given. An essential detail for each Director is the Director Identification Number (DIN).

The DIN is a number provided by the MCA (Ministry of Company Affairs) to each director in India. This number identifies the director and once you have it, you can use the same DIN for as many companies as you wish.

The process is not very complicated, but being almost the first step and not knowing much about these issues I went about it rather cautiously. It involves to submit a series of forms sequentially, DIN1, DIN2, DIN3 and DIN4. However, only DIN1 is essential in the case of a new company and new director.

First, you will have to download the DIN1 form from the MCA web-site. Then, apply online to obtain a so-called “provisional” DIN for the director. In fact, eventually this DIN becomes the definitive one, but they want people first to apply online and then send their papers to the MCA.

Once you get the provisional DIN, you fill up DIN1 and get all the documents required there (identity proof, residence proof, etc) along with the form attested by a Notary (they will charge some Rs.200 for sticking all kind of colourful stamps and rubber stamps). All the documents must be in English or Hindi, otherwise, you must get them officially translated and certified by an embassy, this especially in the case of foreign directors.

When all this is ready you will send these documents to MCA DIN Cell. The address is given in the form. After a few days you will get to know online through the MCA site whether your application has been approved and you have been granted the DIN. Mine was rejected in the first attempt due to one paper which was not well certified according to them. In case of this rejection, you get a letter telling you about it and you also can call to ask the specific reason so that when you apply again, you don’t commit the same mistake. Hence, I again collected all my papers and sent the application which was finally approved.

Due to the embassy certificates which are rather expensive, the total cost of this process was high. Otherwise for an Indian citizen it will be just a few hundred Rupees to apply for the DIN.

A note about DIN for foreign nationals, added on 30 April 2009:

When I was getting my DIN (I'm Mexican) I tried just submitting my papers notarized in India, with the notaries outside Bandra High Court. However, my application was rejected. Later on, I got my documents attested by my embassy in New Delhi, sent them again to MCA, and got them approved. I thought this might be a rule, but it seems I was wrong.

Raju, a reader of the blog, sent me the following message:

[...] I also had a quick question for you with regards to applying for DIN as a foreign director. We are currently facing some issues with getting the documents for DIN attested by the right person/people. My business partner is from the US and it might be difficult for him to travel back to New York to get the documents notarized. On your post on DIN, you mentioned something about embassy charges. Did you get your documents notarized/attested at an embassy in India? If not, is there no other option but to get the documents attested from the US?

After telling him my story, and him trying it out, he came back with the good, but confusing (for me) news:

Just wanted to drop you a note to say we finally managed to get the DIN approved. It was our 4th attempt. :-) The notarisation from the US Consulate was rejected but we were told by the MCA DIN Cell that if the foreign director is in India, an Indian notary can do the attestation as long as a notarised copy of a valid Indian visa is also submitted.

Well... I guess it is matter of trying out different things until it works!

Thanks to Raju for telling me his experience and allowing me to post it here.

Legal: Digital Signature/Certificate

2008-12-01T18:19:00.008+05:30

Going back on how to set up a Private Limited company... The first step is to get a digital signature or also called digital certificate.

Not knowing exactly what a digital signature was, before starting to research on it, I got a quite amusing reply from a friend. He told me is just to scan your written signature, save it as a jpeg or gif (an image format) edit it for clarity and finally paste it to whichever document or email you are about to submit. It would have been difficult to be much farther from reality!

The digital signature is a system by which the party receiving your document will be certain that you are the one signing. This is done through a third party who will certify you are the one doing so. Of course, the third party must be a certified company which is well known and reliable to everybody. Some companies offering this are, for instance, TATA or MTNL.

The full process is not too difficult to understand, and you can see it here. I'm sorry, but I can't find a great graphic display which MTNL had in their web-site which would make it easier. However, in few words, when you attach your digital signature to a document and submit it (for instance, the e-forms submitted to ROC), a file is sent to MTNL, which receives it, decodes it and sends another file to ROC telling them, hey, this guy is in deed whom he says to be or at least he has in his computer the key I have given him to tell is himself.

There are several types of Digital Signature (or certificates) and I remember I was rather confused to which I should get. If you are an individual and need to sign the e-forms as the Managing Director of your company (which is what you need for a Pvt. Ltd), then you want a Class 2 Individual Certificate. According to the MTNL site cost for this certificate is Rs.600 for 2 years. Sincerely, I don't know how difficult is to do it on your own because I was short of time at the moment I did it and gave it to the CS (Company Secretary) to do it for me. In that case, the bill came to Rs.1,600 or so.

MTNL seems to be the best option for Digital Certificate because is easier to get it and is less costly than other options, but you may always compare with other companies.

Terror attacks in Mumbai

2008-11-27T14:30:00.008+05:30

Last night I happened to be working late on e-mails, while waiting for Peter. He was supposed to check out from the Taj Mahal Hotel in Colaba by 10 pm; we would then come to my house to drop a parcel and from here go to the airport to catch his plane back to his country. Then, we got a call from another friend, informing us of the events going on in the city and it was not hard to guess that Peter was still trapped in the hotel. After a very intense night, thank God now he is safe and resting.

It is really sad to see the amount of terrorism that is going on in the world and very particularly in India itself. Violence cannot be justified by any reason and especially terrorism is a form of violence which goes beyond any limit.

I don't know which their reasons for doing this were, and you can be sure that I do not agree with what they have done. But, if something should be learnt from the terrorists, is their capacity and efficiency with which they planned and executed their attack. I'd wish that all of us were able to work with the same intensity and effort as they did, but for good causes and through good and legal means.

I really hope I'm not misunderstood here. What I mean is that, if there were many more entrepreneurs in the world who worked with the same eagerness to achieve their goals as the terrorists do, but using means which are legal, charitable, socially responsible, and full of other values, I'm sure the world would improve in matter of no time.

Similarly, I'd like that entrepreneurs would learn from the policemen last night; especially of course, those who gave their lives in combat. Certainly, entrepreneurs will not go to die in an encounter, but we should be willing to spend our lives working hard to create more business. If this effort is done not thinking just of oneself, but thinking of society as the policemen were doing last night, their reach in helping society would be as great, even if less known to others.

I know this post is a little off the line of the other posts, but I thought it would be great if all of us bloggers came out to say how we condemn terrorism and what should be done about it... this is my small contribution towards that.

Legal: About Sole Proprietorship, Partnership Firm and Private Limited

2008-11-26T19:05:00.016+05:30

Last Friday, after posting on the blog, I had a meeting with my college-friend with whom I'm setting up the new business. We were deciding whether to go directly for a private limited, or to start by a partnership firm or sole proprietorship for some months before registering the company at the ROC.

Prior to this meeting I had read some information about the two proposed forms of business but still had some doubts, hence we went to visit his CA.

This meeting again proved is important to do your homework... I could understand everything thanks to what I had learnt in the morning.

Either partnership firm or sole proprietorship have the same unstable or shaky or at least non-corporate look to other companies, while a private limited looks more reliable to your possible clients.

However, the difference in costs is quite significant. The upfront cost to set up a Private Ltd is at least Rs.15,000 to 20,000 (very minimum); for a partnership firm is about Rs.8,000; finally, for a sole proprietorship is nil: you just need to go to the bank and open your account in the company's name.

This is, as you can read here, because the sole Proprietorship depends directly on its owner, both for liability as well as taxes; in fact, the company and its owner are one. The same way, it is very similar for a partnership firm but the profits and liability is distributed among the partners.

Our conclusion is that for a business which is beginning and a large amount of investments has already been done, you should go for the Sole Proprietorship or Partnership Firm. But if you have time and money is better to go for Pvt. Ltd. as it will give a much more reliable outlook to your enterprise.

Update on 23-02-11: Would you like to see the Spanish translation? Click here!

Legal process to start the company

2008-11-21T13:05:00.006+05:30

When setting up a new business you would like to start giving your service or selling your product immediately so as to begin receiving returns very soon. And it is in deed possible (at least that's what I did), but you must take care that your legal frame is in place as early as possible; if you don't, you will have one more worry (and perhaps a headache) to cope with when your project is already running.

Mainly, what you will need is to register your company with the ROC (Registrar of Companies) of your city. Or, if you would like to start in a smaller (and more economical) scale you may register a Partnership Firm or a Sole Proprietorship (in fact, I'm about to start a new business this way... later on will be converted into a Private Limited).

Registering your company is not really difficult and you can do great part of it on your own. But if you are willing to spend some few extra thousands of Rupees by giving out the work entirely to a Certified Company Secretary (or just CS) the process would be really smooth... in fact, it's the best thing to do. In my case the process was made longer because I didn't know about CS (which eventually becomes essential) and went instead through a lawyer. The lawyer I chose is a wonderful man but that was not the right way to go, hence the project got delayed.

In brief, the steps to registering your Private Limited company are the following:

Get a digital signature
Get a DIN (Director identification number) for your directors.
Apply to ROC for the name of your company (Form 1A). You can know availability here.
Draft MoA (Memorandum of Association) and AoA (Articles of Association)
Stamping and payments required for documents
Submit Forms 1, 18 and 32 along with the documents stamped and signed earlier.

I will go through each of these steps, mainly telling you about my experience as well as giving links to a site which I have found, written by experts which will help you further. To know about all these steps in general, do visit this other site by clicking here.

By the way, regarding experts (a CA, CS, lawyer or anybody else)... before you meet them, try to do your homework, i.e. read and learn as much as possible from other sources (Google searches, blogs, etc) on your own. This way, when you meet the expert you won't be lost in the many words and high-fi sounding terms which they will use.

From the rising to the first fall of this entrepreneur

2008-11-17T12:26:00.005+05:30

Yesterday, while drinking tea and listening to a CD of Carlos Santana, I was reading a chapter of The World is Flat by Thomas Friedman, where he talks about an African proverb which was posted by a manager translated into Mandarin in a Chinese Factory:

Every morning in Africa, a gazelle wakes up.
It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up.
It knows it must outrun the slowest gazelle or it will starve to death.
I doesn't matter whether you are a lion or a gazelle.
When the sun comes up, you better start running.

Being an entrepreneur is not easy for anybody and even the biggest guys fall down once in a while. I guess that if you managed not to be eaten by the lion, you will get up, learn from your fall and become stronger, hoping not to fall again.

From my previous post, we had said that the target was to hire some few people to work with us full-time and have many more freelancers doing work for us. This is a system which was working well in Argentina, where we have part of our team, and which we thought could also work in India.

My first year, i.e. 2007, was a great experience in which I learnt many things of which I had no idea (and I will eventually share in this blog). I learnt legal stuff, human resources, production, sales.... the list of the things I learnt could go on, but later on I'll keep on writing on this.

Anyhow, we started only with freelancers and soon afterwards we also got some people sourced by a company in Goa which provides IT man-power (or I should say women-power as they mainly had girls in their team). By the end of 2007 we already had some few people in our team and we started looking for a place on rent in Pune. Even though at the beginning only 5 people would be working from there, the office would fit at least some 25 to 30 developers.

By that time we were running a project on .NET which was supposed to be finished by December 2007 and it was being developed by the guys in Pune who would eventually join the office at the beginning of 2008. The project got delayed, and delayed, and delayed.... and delayed. These delays made me realize that those guys in Pune were wonderful people, but were not the right ones to start a new development office with. In the end, the project was not properly delivered, we cancelled it, I had to say goodbye to those developers, say goodbye to the office we were about to rent, and in fact, due to the loses that we had in that project, we had to say goodbye to many of the other people in the team as well. From here onwards I had to look for a new way to start all over again. This was mid-Jan 2008.
The gazelle tripped and fell, but it was not caught by the lion. It got up, it learnt from its experience, and now runs faster and hopefully will not fall again, at least not in the same way as it did before.

The beginning of the venture

2008-11-12T16:03:00.014+05:30

I graduated from Electronics Engineering in Mumbai University on June 2006. One year earlier, I had decided not to go for the placements offered at Campus in my College (CRCE), because sincerely, I thought I was not interested on the kind of jobs they were offering (basically, they were just about coding for big companies in which you become one more in the crowd of Engineers).

Admittedly, later on I went for the placement process of a couple of companies which came late for placements, but mainly so as to know what it all was about. I was called in for a couple of interviews and from the beginning I had to tell them I was not really interested in the job; then had good fun talking for a while to the recruiting people and answering their questions... after that, goodbye.

Few months after I left College (which I mainly spent studying and working with an NGO), I received an e-mail from Luis, a friend in Spain whom I met in 2003 when I went to Madrid for a studies trip. He was interested in opening a branch of his company in India (he had no clue about which city or anything of the sort) and had thought of me... after a long series of contacts he managed to get hold of my e-mail id and write me. Being an entrepreneur has been attractive to me since I was a child.

After a one-month trip in January 2007 to Madrid to know his company (which came up to be much smaller than I had thought, but growing a lot), I came back to Bombay ready to put up a team of developers to give technical support to Luis' company, which is specialized in the e-learning sector and has a leading LMS (Learning Management System) in Spain used by many of the largest corporations over there.

The target was that, by 2008 we would have a development office in India with about 30 full-time developers, plus some 70 people working as freelancers for us...

My first post

2008-11-10T16:30:00.003+05:30

This is my first post to my new blog. It is also the first time I'm writing for a blog and I hope it will be interesting and mainly, useful, for many people.

I'll be writing about my experiences as a young-entrepreneur in Mumbai, setting up a company in partnership with a friend from abroad, loosing a lot, gaining a lot, becoming independent... a great experience which I hope will help many other people to take courage and start their own ventures; I'm sure this (starting a new company) will help them and ultimately help society a lot; of course, not without difficulties. But well... I'll talk about this later.

My plan is to upload short articles at least twice a week, so, if you are reading this, do visit this link again in the next few days for my first article.