CS Executive: Setting Up of Business cheat sheet

Sole proprietorship: single owner, unlimited personal liability, no separate legal personality, business income taxed as owner's income.

Partnership (Indian Partnership Act, 1932): created by agreement, no separate legal personality, partners jointly and severally liable; registration is optional but an unregistered firm cannot enforce contractual rights in court against third parties.

LLP (LLP Act, 2008): body corporate with perpetual succession, separate legal entity, partners' liability limited to agreed contribution; at least 2 designated partners, one resident in India.

Private company (Companies Act, 2013): minimum 2 members, maximum 200; public company minimum 7 members, no maximum; one person company has exactly 1 member.

Hindu Undivided Family and cooperative society are non-corporate forms; cooperative societies are governed by state cooperative laws or the Multi-State Cooperative Societies Act, 2002.

Company is a separate legal person (Salomon v Salomon), has perpetual succession, limited liability, and can own property and sue in its own name.

PESTLE analysis classifies macro-environment factors into Political, Economic, Social, Technological, Legal and Environmental categories.

Choice rule: unlimited liability and low compliance favour proprietorship/partnership; access to capital and limited liability favour company or LLP; tax pass-through favours LLP or partnership.

Incorporation steps: name reservation (SPICe+ Part A / RUN), preparation of MOA and AOA, filing SPICe+ Part B with AGILE-PRO, DIN, and fee payment, then certificate of incorporation with PAN and TAN.

Name reservation is valid for 20 days from approval; if the company is not incorporated within that period the name lapses.

MOA clauses: name clause, registered office clause, objects clause, liability clause, capital clause, and subscription (association) clause.

AOA contains internal regulations; Table F of Schedule I applies to companies limited by shares where articles are silent.

Minimum subscribers: 2 for private company, 7 for public company, 1 for OPC; minimum directors: 2, 3 and 1 respectively.

Public company must file a prospectus, or a statement in lieu of prospectus, before making a public offer; private companies are exempt from prospectus requirements.

Certificate of incorporation is conclusive evidence of the existence of the company (Section 35); conversion of a firm or LLP into a company follows Sections 366-374.

Companies (Incorporation) Rules, 2014 prescribe forms INC-1 to INC-35; SPICe+ is the integrated web form for most incorporations.

Board composition: minimum 3 directors for public company, 2 for private, 1 for OPC; at least one woman director for prescribed classes of companies.

Independent director criteria (Section 149(6)): no material pecuniary relationship with company, promoters or subsidiaries; not a KMP or employee in preceding 3 financial years.

Maximum 15 directors unless increased by special resolution; at least one director must be resident in India for 182 days in the financial year.

Mandatory committees: Audit Committee and Nomination and Remuneration Committee for listed companies and prescribed classes; Stakeholders Relationship Committee where shareholder base exceeds 1,000.

Board meetings: minimum 4 per calendar year with gap not exceeding 120 days between two meetings; first board meeting within 30 days of incorporation.

Related party transactions require Audit Committee approval and, if exceeding prescribed thresholds, shareholder approval by ordinary resolution.

SEBI LODR Regulations, 2015 require at least one-third independent directors for listed companies and separate roles of Chairperson and MD/CEO for top 500 listed entities.

Corporate Social Responsibility (Section 135): applies where net worth ≥ ₹500 crore, turnover ≥ ₹1,000 crore, or net profit ≥ ₹5 crore; spend 2% of average net profit of preceding 3 years.

Share capital types: authorised, issued, subscribed and paid-up; paid-up capital = face value plus premium actually received.

Private placement (Section 42) limited to 200 persons in a financial year; rights issue (Section 62) offered to existing shareholders in proportion to holding.

Buy-back limit: up to 25% of aggregate paid-up capital and free reserves, or 10% of paid-up equity capital plus free reserves if approved by board only; debt-equity ratio after buy-back must not exceed 2:1.

Deposits from members: up to 35% of paid-up share capital plus free reserves for non-eligible companies; eligible companies up to 100%.

Financial ratios: current ratio = current assets / current liabilities; debt-equity = total debt / shareholders' equity; return on equity = net profit / average shareholders' equity.

Working capital = current assets − current liabilities; net worth = paid-up capital + reserves − accumulated losses − intangible assets.

Non-financial resources include human capital, intellectual property, brand goodwill, and information systems; they are typically not recorded as balance-sheet assets unless internally generated IP meets recognition criteria.

Dividend declared at AGM must be paid within 30 days; unpaid amounts transfer to the Unpaid Dividend Account within 7 days of expiry.

Essentials of a valid contract (Indian Contract Act, 1872): offer, acceptance, lawful consideration, capacity, free consent, lawful object, and intention to create legal relations.

Contract with a minor is void ab initio; a person of unsound mind cannot contract; consent is free when not caused by coercion, undue influence, fraud, misrepresentation or mistake.

Void agreement vs voidable contract: void agreements are unenforceable from the outset; voidable contracts are valid until rescinded by the aggrieved party.

Sale of Goods Act, 1930: conditions are essential to the contract, warranties are collateral; breach of condition may be treated as breach of warranty.

Negotiable Instruments Act, 1881: cheque validity 3 months from date; dishonour for insufficient funds attracts Section 138 with notice within 30 days of receipt of information.

Arbitration and Conciliation Act, 1996: arbitral award is final and binding; challenge under Section 34 within 3 months, extendable by 30 days.

Limitation Act, 1963: limitation period for a contract suit is 3 years from the date the cause of action arises.

Competition Act, 2002 prohibits anti-competitive agreements and abuse of dominance; combinations above thresholds require CCI approval.

Patents (Patents Act, 1970): term 20 years from filing date; subject to renewal; process patents and product patents both protected; compulsory licence available after 3 years from grant.

Copyright (Copyright Act, 1957): literary, dramatic, musical and artistic works protected for the life of the author plus 60 years; cinematograph films and sound recordings for 60 years from publication.

Trademark (Trade Marks Act, 1999): registration valid 10 years, renewable indefinitely for 10-year periods; unregistered marks protected by passing-off action.

Designs (Designs Act, 2000): protection 10 years from registration, extendable by 5 years; applies to shape, configuration, pattern or ornament of an article.

Geographical indications (GI Act, 1999): registered for 10 years, renewable; protects goods originating in a specific place with a given quality or reputation.

Trade secrets are protected by contract and confidentiality rather than registration; no statutory term.

Ethical frameworks: utilitarian (greatest good), deontological (duty-based), virtue ethics (character); corporate governance codes emphasise transparency, accountability, fairness and responsibility.

Whistleblower protection under Companies Act Section 177 and SEBI LODR requires a vigil mechanism for listed companies and prescribed classes.

Annual filings: AOC-4 (financial statements) within 30 days of AGM; MGT-7 (annual return) within 60 days of AGM.

AGM: first AGM within 9 months of first financial year end; subsequent AGMs within 6 months of financial year end and not more than 15 months apart.

Statutory registers: register of members (MGT-1), directors and KMP (MBP-1), charges (CHG-1/CHG-4), and minutes books must be maintained at the registered office.

GST registration threshold: ₹40 lakh for goods and ₹20 lakh for services (₹20 lakh and ₹10 lakh for special category states); composition scheme up to ₹1.5 crore turnover.

Income tax: companies file ITR-6; advance tax in four instalments (15 June, 15 September, 15 December, 15 March) at 15%, 45%, 75% and 100%.

TDS return filing quarterly in Form 24Q/26Q; PF and ESI returns monthly by the 15th of the following month.

Companies Act penalties: late filing of AOC-4 attracts ₹100 per day per form; adjudication by ROC under Section 454.

FEMA and RBI compliance for foreign investment: FC-GPR filing within 30 days of allotment; FLA return annually by 15 July.

Startup India definition: entity incorporated or registered as private company, LLP or partnership firm, up to 10 years from incorporation, turnover not exceeding ₹100 crore in any financial year.

DPIIT recognition enables tax benefits, self-certification under labour and environmental laws, and access to Fund of Funds.

Section 80-IAC: 100% income tax deduction for 3 consecutive years out of 10, available to DPIIT-recognised eligible startups.

Section 56(2)(viib) angel tax exemption available to DPIIT-recognised startups for share premium received, subject to conditions.

MSME classification (2020): micro (investment ≤ ₹1 crore, turnover ≤ ₹5 crore), small (≤ ₹10 crore, ≤ ₹50 crore), medium (≤ ₹50 crore, ≤ ₹250 crore).

Funding stages: bootstrapping, seed, Series A/B/C, IPO; venture capital and angel investors are the primary sources at seed stage.

Business Model Canvas has nine blocks: customer segments, value proposition, channels, customer relationships, revenue streams, key resources, key activities, key partners, cost structure.

Incubators provide physical space and mentoring; accelerators provide time-bound cohorts and seed capital in exchange for equity.