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@Quicko ,
Someone called me from Quicko 10 days back and said that an expert will get in touch with me to discuss the annual compliance cost for partnership firm. However, nobody reached out to me.
@nithin Is it legal for 4/5 partners to come together form a partnership firm purely for trading equities+FnO, open a partnership demat on zerodha and trade using the pooled money of partnership. What are the possible implications? Can the trader(one of the partners) be paid an additional remuneration(apart from profit share) while others get only profit share? Also considering a 20L profit on 1cr capital what will be taxation on individual partners?(30% will be on firm’s profit I presume). Will be greatful if u reply. TIA.
30% tax is charged on the partnership’s profit. The partners don’t have to pay any more tax on their share of profits.
20 lakhs * 0.3 = 6 lakhs. [Tax liability for partnership]
The trader who is paid remuneration should pay tax on it according to the individual tax slabs that is applicable to him.
But is this arrangement legal as the firm will purely trade and no other activities atleast at the outset. Also how easy/hard is it to add capital every quarter or so and eventually even close the firm a few year down the line assuming a shift to llp/pvt co offering other services as well?
Forming a partnership to only trade is legal. There is an article written by @nithin on this. You can close the firm after few years.
But a shift to LLP or private company with an objective to only trade is either not legal or too costly.
@nithin - is it true that a prop-trading pvt ltd co will now need 10cr capital to register with RBI as an NBFC-ICC or does the 2cr limit still apply?
In my case, the intent is to donate all the profits, so the tax saving between 39% and 25% is substantial.
I think it will be 10 cr capital for all NBFCs.
@TAXIQ.IN @Ca_Omprakash_Jain @Quicko would you guys know?
Hello @nithin @Venkat_Krishnan,
The limit of minimum Net Owned Funds to register with RBI as NBFC is ₹10 Crores.
Read more about it: Non-Banking Financial Companies (NBFC)
Hope this helps!
You will get the shares at Rs.50.
Yes, the clearing corporation will settle the shares. If suppose shares are not available, the exchange will conduct the auction and deliver to the buyer. even after the auction if the shares are unavailable they will do a closeout. (cash settlement which is very rare).
Had a post on this.
What if your analysis is 100% accurate and is making money for the clients all the time, does the analyst require a SEBI registration?
One thing I noticed is clients complain when they lose money. And then SEBI debars or fines that analyst.
What if things are working and no complaints??
in 2023 which option is best to reduce tax if ones fno profit is over 50lakh. as per google search LLP tax rate is 30%, so its same as individual.
If you are just trading for your own money, I think it is best to show it as an individual itself. You can claim all expenses for trading as an individual as well, no need to set up a partnership or company for that purpose.
@nithin The maximum surcharge & cess is lower in partnership. Individual max tax rate is 39% and partnership is 34%. So don’t you think, partnership is the best way? It is quite simple, no grey area. Trading is allowed in partnership 100%.
The maximum surcharge rate for Partnership firms if the income crosses ₹1 crores is 12% and cess is 4% making the effective rate 34.944%. However, in the case of individuals, the highest surcharge rate if the income crosses ₹5 crores in old regime is 37% and cess is 4% making the effective rate 42.744% while under the new regime, if the income crosses ₹3 crores, the maximum surcharge is 25% making the effective rate 39%.
From the above, it can be seen that the effective rate is lowest in partnership firms but there is no slab rate benefits and the limits of the surcharge are also different.
Hope this helps!
Hi Nithin. Highly appreciate the time taken out by you to reply to these posts.
I intend to form an LLP between my mother and me, for the purpose of investing in equities (not trading). Unlike other posts, my purpose for this is not taxation or profit sharing (although I might draw a salary). I’m interested in applying for a SEBI PMS license. The first main requirement I’m working on currently, i.e. getting a 2 yr postgrad degree in finance. The 2nd main requirement is having 5 yr experience in related fields (RIA, RA, MFD etc), out of which 2 yrs must be in fund management. I wanted to know if forming an LLP with a decent capital base and having its audited track record of 5 yrs would qualify as relevant experience?
Hmmm… This is what SEBI says.
An experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.
I don’t think self-trading or trading on your company/partnership firm account will count as experience.
@somnath248 @Meher_Smaran can we speak to the legal team that we interact with for licenses and figure this out?