Can you go through full thread, Nithin already answered above.
Sorry for the wrong phrasing sir
I meant in case we want to show trading as a business income and the income is more than 50% then do we need to have a license
And whether we can hire employees trading on our behalf
@siva @mohitmehra @nithin
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If you are trading in your individual account, you donât need a license. But if you are doing this as a company, you will need NBFC license.
Yes, you can hire employees both if you are individual or a company.
Thank you sir
Sir if I want to show an income of an employee as an IA or RA does he need to be registered?
If you are trading your own money with out pooling from any one then I think it is not required to have RA/RIA license, also RA/RIA canât place trade on behalf of others, they can just advice.
Whether an employee can trade on my behalf?
I ask NSE about Alpha membership and they told me that the whole procedure takes two months.
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I doubt if it can happen in 2 months. Have seen multiple people apply and take much longer. Now that NSE Now has stopped, if you want a trading platform you will need to go tie-up with a vendor for trading (OMS, RMS) and backoffice (reporting, etc). This will take much more time than 1 year.
The alternate for NOW is the platform that BSE offers called BEST. But for this, you will need to take membership on BSE as well, only NSE wonât work. You will still need a backoffice platform.
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What is effective income tax rate for corporate trading directly with NSE as a member ?
Individual having more that 10 cr income has tax rate of 42%.
One Person Company can apply for NSE membership alpha/normal ?
This contradicts your previous reply - âAh. If you want to be a Pvt ltd company doing only trading, you will need an NBFC license (more than 50% of revenue from financial activities) or an alpha membership on the exchange. Best to be a partnership/LLP if you want to avoid this.â . Please clarify.
Hmm⌠how does it contradict?
If you create a company, a pvt/public ltd, you will need to get yourself a NBFC license if more than 50% of revenue is from financial activities. Or else you would need to get a membership on the exchange.
If you trade in your individual account or a partnership/LLP (not a pvt/public ltd) then this NBFC requirement doesnât come into play.
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If you trade as a company, you will have two level of taxes. One is the corporate tax and second is dividend distribution tax. If the company makes money and you decide to withdraw using dividends or salary, there will be taxes as per the applicable income tax slab of the person taking salary.
One person company canât be a member on the exchange
https://www1.nseindia.com/membership/content/FAQsfornewmembershiponNSEwebsite.pdf
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Thanks Nithin for clarifying. I considered LLP also as a company, hence the confusion.
I have been researching for the past few months about starting a Prop Trading firm with 4 of my close friends. The plan is to pool money from all partners of the firm and hire some employees to do the actual trading based on the strategy we give them. Here are my findings based on the discussions happening in this forum.
- RBI NBFC issue - This can be solved by forming an LLP
- SEBI regulations on hiring employees for the firm - Nothing illegal and not an issue based on the discussions happening here.
- SEBI registrations and certifications are not needed.
- Demat & trading account can be opened in the name of the LLP. Have already talked to a Zerodha representative.
But I am now in a dilemma whether to start the firm after reading a comment by Nithin in Forming A Prop Trading Firm (LLP)
"You canât have the objective of an LLP as âinvestment/Tradingâ. You can potentially start an LLP with a different objective and still trade/invest. But this opens up potential future issue"
We do not want to get into any legal trouble after registering the company. Can you please advice what would be the right way to go about this? What all can be the potential future issues?
I can see a lot of people discussing here about starting a Prop Firm, but I cannot see anyone saying they have successfully started one. Is it because they do not want to openly disclose about starting a Prop Trading firm because of some grey areas?
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For your case, the only way is to set up a partnership firm (not even an LLP). Partnership firms can be set up to trade/invest. The only issue with a partnership firm is that the partners have unlimited liability. This means that if for some reason the partnership loses more money than what is put in business (owes others money), then the liability will come on all the partners.
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Thanks Nithin for the advice. We do not want to get involved into anything which have unlimited liabilities. Dropping the plan for now.
There was a limit of paid up capital in One Person Company.
In budget this threshold limit has been removed. I think NSE should allowed OPC to become member/alpha member.
Unlimited liability will arise only if you allow losses to mount beyond your capital. It can occur only in Futures and options which can be avoided by hedging, especially with new margin rules.
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What I meant is, I always prefer Limited Liability firms (LLP, Pvt Ltd etc) than proprietorship and partnership. It is in the context of future legal issues which may arise and not about the stock market in general.
@mohitmehra I have carry forward losses from previous years (in my individual account). Now, I want to change my trade name (i.e. map my proprietorship bank account and act as a Sole prop trading firm). Can I still use my offsets (the carry forward) losses accumulated in my individual trading account while now working as the proprietorship trade name? (the PAN will be same in both cases. I am just changing my Trade name)
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