Embarking on a start-up is exciting and equally challenging at the same time. Start-ups are gradually changing the corporate face of India by not only modifying the conduct of business but also the manner in achieving positive results. Managing a start-up however required countless hours of hard work, rigorous planning and compromises.
One of the most important things to be aware in running a start-up is taxation. Many entrepreneurs either ignore intentionally or non-intentionally about the cruciality of taxation. You cannot afford to neglect taxation if you are operating a start-up. The matter of fact is that filing tax returns will instead help in the growth of your start-up.
Filing for tax return will vary on the type of start-up, depending on whether it is registered as a Partnership Firm, Limited Liability Partnership (LLP) or a Private Limited Company. For Sole Proprietorship start-ups, you must file tax returns as an individual. Sole Proprietorship start-ups can also avail the benefit of the Rs. 2.5 Lakhs exemption limit that is applicable to individual taxpayers. For all other types of start-up, there will be no exemption limit and you would have to pay the income tax on any income earned by the company.
Here are a couple of reasons why start-ups should e-file Income Tax Returns.
For Redeeming any Losses
The initial years of every start-up is the building phase where you will somehow experience losses in the company’s fund. This case is pertinent to every business. It will eventually take a few years of establishment and operation for a start-up to begin seeing profits in its balance sheet. There is, however, a way to manage these losses. These losses can be paid off in the coming years when your start-up catches up and starts bringing-in profits. Although to avail this benefit, the start-up must e-file its income tax return citing the losses so that it can be redeemed later-on. Immigration servicesManaging your business or personal tax file successfully is best handled with the assistance of competent professionals for maximum financial benefit. Protect your assets against unnecessary tax penalties. Remain informed on the latest tax incentives.
Loan Application for Start-Ups
Like for individual taxpayers, a start-up must also submit its income tax return if it wants to apply for a loan. Submitting the income tax return verifies the authenticity and existence of the company. All the financial institutions that sanction loans for start-ups will ask for the submission of your company’s income tax returns from the previous years’.
For Availing Funding
For a start-up to grow, a growth in the capital is required and this is achievable through funding. Start-ups generally approach investors, venture capitalists etc. for raising their funds. The investors would require you to submit your company’s income tax returns from the previous years to gain a perspective of your business’s book value and decide on the amount which will be funded. This is another fact which will encourage a start-up to e-file income tax return. LLP IncorporationWithin few years, LLP has gained a wide popularity in India. The latest business type came into existence in the year 2008. Since then, lots of firms are registered as Limited Liability Partnership.
For Resolving Disputes between Partners
If the founding members or partners of the start-up end up experiencing differences or facing clashes on the way of operating the business and decide to part ways, income tax return becomes very helpful. The company’s income tax return will even solve disputes between the start-up and its external parties on monetary issues.