@nithin@TAXIQ.IN Thank you everyone for providing such comprehensive information. It has saved me significant time and effort that would have otherwise been spent researching online for satisfactory feedback.
Based on the thread, it appears that trading Equity & F&O through LLP/PVT LTD without an NBFC license from RBI is not permitted. However, is it permissible to engage in Equity, Currency, Commodity, and F&O trading through a Partnership firm using partners’ funds w/o NBFC license?
Secondly, If NBFC license is must for Equity investment under any company types then can I buy Stocks (Equity) in Partner’s personal DMAT Account to avoid NBFC license requirement and Partnership firm utilize only for F&O (Index, Stock, Currency, Commodity) trading?
Additionally, can borrowed funds from relatives/banks be utilized solely for trading within the Partnership firm across these segments?
Does Zerodha permit the opening of a trading account in the name of a partnership firm without requiring an NBFC license?
@nithin Thank you for your response; much appreciated.
Considering your influential position, may we seek your support in advocating for an exemption from NBFC licensing for companies solely utilizing personal capital, particularly those engaged in share market investment and trading, without involvement in external borrowing or lending?
Brokerage firms can facilitate DMAT and offer trading to company without requiring an NBFC license. However, governmental regulatory bodies, including the Income Tax department, mandate the possession of an NBFC license for conducting business in this domain.
What if trading or investment gains extra 20-30% due to a policy change or political event, inadvertently becoming the primary source of income, comprising 51% of total earnings by the end of the financial year? If the company lacks an NBFC license during this period, it could render all transactions illegal, potentially leading to undue scrutiny and harassment from various government bodies for the business owner. Please correct me if my assumption is incorrect.
I’ve come across numerous online references to traders exclusively conducting F&O transactions through their company accounts without possessing an NBFC license.
At present, it seems to be a deliberate trap for small-scale traders, unless the respective government bodies recognize and treat companies with more than one partner or director as individual entity, allowing them to use their own funds for investment and trading purposes.
@nithin , what’s your opinion? Would you advocate for this requirement with the relevant government body? In my view, your support could greatly benefit the trading community, so please consider being a guiding light in this matter.
hii, I and my brother wants to form an llp with the object to trade in the shares of various companies (whether unlisted or listed) where only our own funds will be invested and not to avail funds from any third party. The only reason to form an llp is that the shares certificates shall be issued in the name of separate legal entity rather then in an individual name. The gain/loss shall not be encashed by any of us and it shall be reinvested in other shares only. Is it possible to do this activity in this form of legal entity and will I be require to avail any licenses or registration from RBI.
@nithin@TAXIQ.IN First of all thank you for the discussion on this hot topic
Question comes that has anyone created any company for such trading Equity & F&O, whereas the main object is something else but started doing F&O of his own funds with generating below 50% revenue of total revenue from business.
Hello folks,
After reading through the entire thread and doing my own due diligence, I have a couple of questions. I want to open a new firm specifically for investment of family funds. I do not intend to indulge into any advisory of any sort or even take deposits from public. I just to invest my own family funds through one single account. Opening a pvt ltd company and getting an NBFC ICC license is not a feasible option as it will attract double taxation when I wish to take the money out from the company.
Can I open a Partnership firm with a primary object clause as Investment of Partner’s money or does the 50:50 rule of RBI applies to Partnership firm as well?
HUF is also one of the options that I came across and which my CA suggested. Although my preference is towards a corporate structure.
How good is AIF Category III as an option for managing and investing family funds considering that I am able to achieve the INR 20 crore AUM requirement within first three years. What are the advantages and disadvantages of this option and any other implications, if any?
This could also be set up as a partnership firm to avoid the NBFC or SEBI registration requirement, but the issue with a partnership firm is that all partners have unlimited liability. In trading, where potentially there could be unlimited losses, partnership firms are not the right structure for investors.
