On October 31, 2023, the Reserve Bank of India (RBI) issued a master circular on the import of goods and services titled <a href="https://m.rbi.org.in//Scripts/NotificationUser.aspx?Id=12561&amp;Mode=0">Regulation of Payment Aggregator – Cross Border</a>.&nbsp;&nbsp;

According to the circular, the RBI will regulate all Indian entities facilitating online cross-border payments for the import and export of permissible goods and services. Moreover, these entities will be collectively termed Payment Aggregators Cross Border (PA-CB).

The circular comprises guidelines to streamline the existing cross-border payment framework in India. Previously, cross-border transactions were carried out through Online Payment Gateway Service Providers (<a href="https://www.skydo.com/blog/online-payment-gateway-service-provider-opgsp?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">OPGSPs</a>) as per a circular issued by RBI in 2015.

OPGSPs operate by partnering with an Authorised Dealer (Category I) Bank (AD Bank) and notifying the RBI. According to RBI guidelines, no formal license is needed to function as an OPGSP.

Hence, RBI has issued a circular to establish a concise and clear framework for cross-border payments. RBI will now oversee all cross-border payments in India related to the import and export of goods. The circular applies to PA-CB, PAs, authorised banks and OPGSPs.&nbsp;The PA-CB circular also denotes that there can’t be any new OPGSP.

This blog discusses the key provisions related to the latest RBI circular on the import of goods and services, RBI guidelines for payment gateway, and OPGSP guidelines.

Master Circular on Import of Goods and Services: RBI Bank Guidelines

The following are the key guidelines mentioned in the circular.

The following entities need to adhere to RBI guidelines/instructions provided in the circular.

Here are the key developments included in the new PACB circular.

Categories of Authorisation as per PA-CB Activity&nbsp;

Based on the cross-border payment activity undertaken by the PA-CBs, they can seek authorisation for one of the following three categories.

PA-CB, facilitating cross-border payments for Indian exporters, has to open an Export Collection Account (ECA) with an AD bank.&nbsp;

ECAs can be opened in either Indian currency or foreign currency. In the case of the latter, various ECAs have to be opened for different currencies.

The PA-CBs will credit all export proceeds in the respective ECAs. Additionally, export PA-CBs need to follow the below guidelines:

Similar to export PA-CBs, import PA-CBs have to open an Import Collection Account (ICA) with an AD bank.&nbsp;

They will collect the payment from importers in an escrow account managed by the payment aggregator. It will then be transferred to ICA and will eventually be transferred to the bank account of the foreign merchants.

These entities are allowed to directly onboard foreign merchants, e-commerce marketplaces, or other overseas entities that offer payment aggregation services.&nbsp;

Here are the guidelines Import PA-CBs need to follow.

Those PA-CB who engage in both import and export activities have to comply with the requirements for both Import PA-CB and Export PA-CB.

They also need to ensure that the maximum value per unit of exported or imported goods or services should be ₹25,00,000.

Non-banks who want to provide PA-CB services will have to seek authorisation from RBI. However, before seeking RBI authorisation, it is necessary to register with the Financial Intelligence Unit-India (FIU-IND).&nbsp;

However, RBI has issued the following net-worth criteria for non-banks providing PA-CB services.

The accounts of existing non-bank PA-CB who are unable to meet the net worth requirement will be closed by banks by 31 July 2024.

Snapshot Comparison Between OPGSP Circular (2015) and PA-CB Circular (2023)&nbsp;

Here are the key differences between the OPGSP Circular (2015) and the PA-CB Circular (2023)

Here is the process of seeking approval from RBI for existing or new PA-CBs.

Step 1: Draft the application through Form A, which includes the following parts.

Step 3: The RBI will process the application.

(RBI may raise queries related to various aspects such as shareholding, product processes, etc.)&nbsp;

Step 4: In principle approval from RBI.

Step 5: Filing of system Audit Report

(RBI may raise queries related to SAR audit observations)&nbsp;

Step 6: Final authorisation(state additional conditions that must be complied with)&nbsp;

The evolving cross-border payments environment and the emergence of several OPGSPs and other fintech entities encouraged RBI to issue the circular. Its main purpose is to ensure seamless and more transparent cross-border payment transactions.

Even though regulatory authorities are constantly working on making cross-border payment transactions seamless, transparent, secure, and quicker, businesses often face difficulties in receiving timely payments.&nbsp;

Skydo aims to simplify the cross-border payment landscape for businesses by automating various tasks and helping businesses open foreign bank accounts. <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Join Skydo today</a> to streamline your invoicing and financial management activities!

Q1. RBI’s master circular on the import of goods and services and cross-border payments applies to which entities?

Ans. AD banks, PAs, and PA-CBs involved in the online processing/settlement of cross-border payment transactions related to the import and export of goods and services have to comply with the guidelines mentioned in the circular.

Q2. What are various compliances according to RBI payment aggregator guidelines for cross-border payments?

Ans. All PA-CBs have to follow the guidelines provided in the circular dated October 31, 2023. Additionally, they also have to follow the various guidelines for payment aggregators mentioned under a circular issued by RBI on March 17, 2020.&nbsp;The circular includes guidelines related to customer grievance redressal and compliance with Baseline Technology Guidelines to ensure fraud prevention and risk management.

Q3. How can PA-CB seek authorisation for facilitating cross-border payment transactions?

Ans. AD banks do not need to seek authorisation to facilitate cross-border payment transactions. However, a non-bank PA-CB can seek authorisation from RBI by sending the application to the Department of Payment and Settlement Systems (DPSS), RBI, Central Office (CO), by April 30, 2024. PA-CB entities must fulfil the minimum net worth criteria before applying to RBI.

 Know more about RBI's circular that mandates payment aggregators to seek authorization for facilitating cross-border transactions by April 30, 2024.

BI’s PACB Circular: Key OPGSP Updates of 2024 to Note 

RBI’s PACB Circular: OPGSP Update 2024 th

Sukanya

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You've just bagged a project with an international client, and now it’s time to get hustling. However, you need to raise an export invoice for 50% of the advance amount. How should you present your charges? Should you opt for the comfort of your native Indian Rupee (INR) or invoice in foreign currency?

The quick answer to this is you should invoice in the currency of your client - say if your client is based in the US, you should invoice in USD, however there are other considerations which can significantly affect costs, fees, tax compliance, and financial management.&nbsp;

Let’s delve into the complexities of international transactions and explore factors to consider when deciding whether to invoice in Indian Rupees (INR) or a foreign currency. Additionally, we will shed light on the relevance of SWIFT, LUT, FIRA, and FIRC in navigating the payment process for international transactions.

Before deciding on the invoicing currency, you must consider the costs and fees associated with international transactions.&nbsp;

As the volume increases, your business may benefit from <a href="https://www.investopedia.com/terms/e/economiesofscale.asp">economies of scale</a>, enabling you to negotiate better rates with service providers and suppliers. Higher transaction volumes can also justify investments in streamlined processes and technologies that enhance efficiency and reduce costs.

If you are servicing clients from the US or UK, it is more straightforward and convenient to bill in that currency as it provides better financial stability and credibility. However, you can bill in your local currency if it is stable.&nbsp;

International payments generally include intermediary bank fees, transaction fees, conversion fees, and other administrative charges levied by financial institutions or payment service providers for additional transactions or payment-related services&nbsp;

Let's say you are a tech export business based in India sending an invoice to clients in the United States. Suppose your invoice is in USD, and your bank charges high fees for currency conversion. In that case, it may be more cost-effective to invoice in INR with an export payments partner like Skydo to minimise transaction costs and ensure that you receive the maximum possible amount. Skydo charges a flat fee for each transaction.

4. Tax Implications of Charging in Different Currencies

Sending an invoice in INR may subject the trade to Goods and Services Tax (GST) based on the nature of the transaction and relevant thresholds. As an IT services exporter, accepting foreign payments in INR will be subject to 18% GST. Therefore, you will need to add that tax amount to your invoice.

Conversely, invoicing in a foreign currency might have different tax implications, such as potential exemptions or other GST treatment. For example, if you accept the payment in USD, you must submit a Letter of Undertaking (LUT) (explained further in the article) per government regulations. Read more about the taxation rules and regulations concerning foreign transactions <a href="https://www.skydo.com/blog/understanding-gstin-requirements-for-export-businesses-in-india">here</a>.&nbsp;

International transactions expose businesses to currency exchange rate fluctuations, which can impact the value of transactions and profitability. Swings in exchange rates can result in potential gains or losses, affecting the overall cost of the transaction and financial performance.

6. Competitive Positioning in Foreign Market

Business in foreign markets often entails additional costs to establish and maintain a competitive position. These costs can include market research, advertising and marketing expenses, customisation of products or services to suit local preferences and investments in distribution channels. Such expenditure is necessary to penetrate and compete in foreign markets effectively.

7. Accounting and Reporting Considerations

International transactions necessitate compliance with accounting and reporting standards specific to each jurisdiction. It involves additional administrative efforts, such as preparing financial statements according to local regulations, adhering to tax reporting requirements, and potentially engaging with local accounting professionals to ensure compliance.

Engaging in international transactions requires businesses to navigate various legal and regulatory frameworks in different jurisdictions. It may include understanding and adhering to foreign trade regulations, customs requirements, import/export laws, intellectual property protection, and other legal obligations. Non-compliance with these regulations can lead to penalties, legal disputes, or reputational damage.

Assess the preferences of your international clients. Some clients may prefer invoices in their local currency to simplify accounting and budgeting processes. Others may be open to invoicing in your local currency. Understanding your clients' preferences will help you determine the most suitable invoicing approach that’s also profitable for your business.

Once the decision regarding the invoicing currency is final, the next step is determining the appropriate payment methods for international transactions.

Payment Methods for International Transactions

Several payment options are available, each with its advantages and considerations.&nbsp;

Businesses should evaluate <a href="https://www.skydo.com/blog/navigating-payment-platform-headwinds-to-stormproof-your-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">payment methods</a> based on transaction fees, processing time, safety, and customer preferences to make informed decisions.

Bank transfers, credit cards, online payment platforms, and letters of credit are among the popular choices.

This payment method often involves transaction fees (flat rates or percentage-based), which can vary depending on the banks involved and the nature of the transfer (domestic or international). Bank transfers typically require some processing time, especially for international transfers, which may take a few business days to complete.&nbsp;

They offer a level of safety as they typically require authentication and verification processes to initiate the transfer, reducing the risk of fraudulent transactions.

Businesses and individuals favour bank transfers if they have established relationships with their banks, for larger transactions, or when payment needs to be directly transferred to a specific bank account.

They are popular among consumers for their simplicity, ease of use, and convenience. Credit card payments usually involve transaction fees, which vary depending on the merchant's agreement with the financial institution and the type of credit card used.

Credit card payments are processed quickly, often settling within seconds or minutes. This makes them suitable for time-sensitive transactions or situations where immediate payment confirmation is required.

They also provide a certain level of safety as they are protected by fraud prevention measures and dispute resolution mechanisms provided by credit card companies.

These platforms charge transaction fees that can vary based on the platform and the type of transaction, either as a fixed amount or a percentage of the transaction value.

Online payment platforms enable fast processing of payments, with transactions often settling instantly or within a few minutes. This makes them suitable for efficient and time-sensitive transactions.

These providers also prioritise security and employ encryption technologies to protect sensitive financial information.&nbsp;

Online payment platforms have gained popularity due to their global accessibility, secure transactions, and ease of use. They cater to diverse customer preferences, particularly e-commerce transactions, international payments, and peer-to-peer transfers.

Letters of credit entail fees charged by banks for their intermediary services, which can vary based on factors such as the transaction's complexity, value, and the agreed-upon terms and conditions.

Processing letters of credit may take longer than other payment methods due to the comprehensive document evaluation and adherence to agreed terms. The processing time can vary from days to weeks, depending on communication efficiency and document exchange.

By involving banks as intermediaries, they mitigate the risk of non-payment or non-delivery of services by ensuring that funds are held in escrow until specified conditions are met.

Letters of credit are frequently utilised in international trade, especially for sizable transactions or when enhanced financial security is desired. They are preferred by businesses operating in regions with limited payment infrastructure or when trust and assurance play vital roles.

As of 2021, SWIFT has enabled immediate processing between <a href="https://www.swift.com/news-events/news/swift-reports-strong-annual-growth">over 4 billion accounts</a> and 11,000 institutions across more than 200 countries while upholding unmatched security, dependability, and robustness. Thus, businesses prefer to use SWIFT for money transfers and here’s all you need to know about it.&nbsp;

Understanding SWIFT in International Money Transfers

<a href="https://www.skydo.com/blog/why-was-a-certain-amount-deducted-from-my-swift-payment?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">The Society for Worldwide Interbank Financial Telecommunication (SWIFT)</a> is a messaging network that enables global secure and standardised communication between financial institutions.&nbsp;

SWIFT assigns a unique identification code (or the SWIFT/BIC code) to each financial institution, allowing for accurate funds routing. It also utilises the SWIFT message format, which includes various fields containing transaction details. The syntax/interpretation is as follows.

First four characters: the institute code&nbsp;

The Next two characters: the country code

The Following two characters: the location/city code&nbsp;

The Last three characters: these are optional, but organisations use them to assign codes to individual branches.

One required field in the SWIFT message is field 71A, which highlights handling intermediary bank fees.&nbsp;

International money transfers through SWIFT typically take several business days due to factors such as time zone differences, intermediary bank involvement, and potential manual processing steps. The processing time can vary depending on the participating banks and the specific requirements of the transfer.

Additionally, SWIFT transactions involve fees charged by the participating banks. The sender is usually responsible for covering these fees, which can vary depending on the institutions involved, the transfer amount, and the transferring currency.

Payers have three options when making a SWIFT international transfer: SHA, BEN, and OUR. These options determine the distribution of charges between the sender and the recipient.

Deciphering these options is crucial to understanding the cost-sharing arrangement and making an informed decision based on the transaction value, relationship with the counterparty, and cost considerations.

However, once these transactions are successful, you need to ensure tax compliance with the FIRA/FIRC document.

<a href="https://www.skydo.com/blog/automated-firc-simplifying-international-payments-compliance">FIRA (Foreign Inward Remittance Advice)</a> and <a href="https://www.skydo.com/blog/all-you-need-to-know-about-FIRC-a-complete-guide?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">FIRC (Foreign Inward Remittance Certificate)</a> are vital documents in international business transactions. They are often used interchangeably to refer to documents that serve as proof of inward remittance.

This document provides details such as the beneficiary, remittance amount, and purpose of payment. These documents are essential for maintaining transaction records, ensuring compliance with applicable laws, and facilitating the monitoring and regulation of foreign exchange transactions.

While FIRA and FIRC may have slight differences in terminology and format depending on a country's specific banking practices or regulatory requirements, their primary purpose remains – to provide evidence of foreign inward remittances receipt.

Per the <a href="https://rbidocs.rbi.org.in/rdocs/notification/PDFs/11MDEGS1205163428383952204B77831A3A086E82FDDF.PDF">RBI rulebook on the Export of Goods and Services</a>, “AD bank should be satisfied with the bona fides of the transaction and export documents, such as export invoice / FIRC”. Additionally, “Further, AD Category – I banks need to report the electronic FIRC to EDPMS wherever such FIRCs are issued against inward remittances.”

Skydo simplifies obtaining GST-compliant FIRA and LUT by allowing you to download this vital document from its online platform, eliminating manual paperwork, streamlining the submission process, and ensuring compliance with GST regulations. This convenience and efficiency save time and resources, allowing you to focus on core activities and improve operational efficiency.

The Importance of Letter of Undertaking (LUT) in International Transactions

The <a href="https://www.skydo.com/blog/everything-you-need-to-know-about-lut?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Letter of Undertaking (LUT)</a> holds significant importance for GST-compliant-registered businesses supplying services outside India. LUT is a document that exempts your company from paying GST on export services and allows for a smooth flow of transactions. It serves as a legal undertaking by the exporter to fulfil specific obligations and comply with GST regulations.&nbsp;

Obtaining a valid LUT is essential for businesses engaged in international transactions as it enables them to provide services without charging GST, making their offerings more competitive in the global market. Failure to provide a valid LUT may lead to unnecessary <a href="https://www.skydo.com/blog/gst-format-matters-heres-why-and-what-it-includes?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">GST liability</a> and compliance issues, impacting the financials and overall business operations.

Navigating the complexities of international transactions requires careful consideration of various factors, such as costs, fees, tax implications, payment methods, and regulatory compliance. Deciding whether to invoice in INR or a foreign currency can significantly impact a business's financial management and profitability.&nbsp;

Understanding the role of SWIFT, LUT, FIRA, and FIRC in international transactions is essential for businesses engaged in cross-border trade. By comprehending these concepts and their interplay, you can streamline payment processes, minimise costs, ensure tax compliance, and establish healthier financial controls.&nbsp;

Q1. What is a valid currency for an invoice in India?

Ans: In India, an e-invoice for export must be issued in Indian Rupees (INR) as the official currency. Foreign currencies are not accepted for domestic transactions, ensuring compliance with the country's legal and financial regulations.

Q2. Could I prepare an invoice using any currency in an export business?

Ans: Yes, in the export business, invoices can be prepared using any internationally recognised currency. This flexibility allows exporters to adapt to the preferences and regulations of their international clients.

Q3. Do exporters want to invoice in the importers' currency?

Ans: Exporters often prefer invoicing in the importers' currency to simplify transactions and accommodate the preferences of their international clients. It helps in avoiding currency exchange rate uncertainties and making transactions more transparent.

Ans: An export invoice is a document issued by a seller to an international buyer detailing the products or services sold, their quantities, prices, and other relevant information. It serves as a formal request for payment and is a crucial document in international trade and compliance.

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“I am an entrepreneur, and I own a business”.&nbsp;

This statement has become common due to the ease of registering and operating businesses. However, the answers vary when you ask the type of business structure for their business.&nbsp;

An entrepreneur could also be a freelancer who wants to create a legally registered business and streamline all operations. For such a business, most people consider sole proprietorship for its simplicity in formation. It often involves minimal paperwork and costs, making it an attractive option for those starting a small business on a tight budget.&nbsp;

If you are currently a freelancer looking to legitimise your offerings through a <a href="https://www.skydo.com/blog/pvt-ltd-partnership-proprietorship-what-should-you-choose-and-why?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">business structure</a> or considering a business idea, choosing a suitable structure is a critical success factor for your future business or company. It affects your enterprise’s revenue and profit potential in the long run, as explained further in this article.

While sole proprietorship is the simplest business structure, it may or may not be the most suitable for your business. You may ask–what other options do I have? How do I choose among them?&nbsp;

Understanding sole proprietorships vs. other business structures in detail through this blog will be key to answering these questions.&nbsp;

A sole proprietorship is a business structure owned, managed and operated by a single individual.&nbsp;

Picture your local kirana shop owner who operates completely by themselves and is liable for managing the sales and the finances. A sole proprietorship is the simplest of all business structures, as the owner and the business entity are not considered separate from a legal and tax perspective.&nbsp;

Although this simple business structure comes with a host of advantages, it is not without certain disadvantages.

Here are the most common alternative business structures to sole proprietorships.

This type of business structure involves two or more individuals who come together to form a legal business entity. The partners create a partnership deed, which details the profit or loss sharing ratio of each of them. They must also report the business income in their tax returns. 

Let’s consider a partnership example of "Smith &amp; Johnson Law Firm."&nbsp;

John Smith and Sarah Johnson have come together to form a partnership for their law practice. They share ownership, responsibilities, and profits equally. However, it's important to note that in a general partnership like this, both partners have unlimited personal liability for the firm's debts and legal obligations. This means their assets could be at risk if the firm encounters financial difficulties.&nbsp;

A Private Limited Company is a business structure where the business is privately held by two or more stakeholders. It ensures that the owners have limited liability protection in case of financial obligations with all the advantages of a partnership firm. Being a separate legal entity, PLCs can enter into contracts, own assets, and incur debts in the company’s name.&nbsp;

PLCs in India are taxed based on their annual turnover. If the annual turnover for a <a href="https://instafiling.com/private-limited-company-tax-rate/#:~:text=1.,annual%20revenue%20exceeds%20400%20crores.">PLC is under Rs 400 crores, a 25% tax is levied</a>. If it exceeds Rs 400 crores annually, a tax of 30% is applicable. However, after the Budget 2019, PLCs can now opt for a new tax rate of 22% (for existing companies) or 15% (for new companies) if the companies do not want to enjoy certain deductions and exemptions.

The key advantage of PLCs is that members typically have limited personal liability, meaning their personal assets are shielded from the company's debts and legal issues. For example, ABC Tech Solutions PLC can choose its tax classification and management structure, offering versatility to adapt to its specific needs.

For example, ABC Tech Solutions PLC, a technology company, can choose its tax classification and management structure, offering versatility to adapt to its specific needs. Tax classification and management structures for a PLC could encompass options like the way you are taxed as a PLC, and determining management setups such as a board of directors or managerial hierarchy.

This allows its members to have limited personal liability, safeguarding their personal assets from the company's debts and legal issues.

Factors to Consider When Choosing a Business Structure

Choosing a suitable business structure is vital for the success and sustainability of the business. Here are the factors you should consider when choosing a business structure.

A sole proprietorship is ideal when the business is small and does not require extensive regulatory and tax-related compliance.&nbsp;

If your business requires the expertise or skills of two or more people but is smaller in scale, you may choose partnerships for better management.&nbsp;

A business with a larger scale than partnerships but limited offering can choose PLCs.&nbsp;

Sole proprietorships and general partnerships come with unlimited liability, while LLPs and PLCs come with limited liability. Based on the nature of the business and your personal risk tolerance, you can compare these business structures to determine your structural needs.&nbsp;

Some structures, such as proprietorships and partnerships offer pass-through taxation, while structures such as PLCs may force you to pay both corporate or personal tax.&nbsp;

Navigating corporate taxes can increase the complexity of tax compliance, and you should decide based on your convenience for each structure’s taxation requirements.&nbsp;

Before choosing a business structure, you should decide the level of control ownership you want over business decisions and management.&nbsp;

Sole proprietorships and partnerships offer more control to the owners than PLCs, which may involve a democratic decision-making process based on mutual agreement.&nbsp;

Business structures such as sole proprietorships face difficulties in raising external capital, making them less suitable for entrepreneurs seeking funding as opposed to private limited companies that can issue shares of stock to raise funds.

6. Regulatory and administrative requirements&nbsp;

Sole proprietorships and partnerships have the simplest compliance requirements, usually limited to basic tax filings. PLCs have higher regulatory and administrative compliance when compared to sole proprietorships and partnerships.&nbsp;

Decision-Making Process For Your Business

You’ve got the business idea, and it’s entirely up to you to decide how you want to convert it into reality. However, achieving business goals is based on their effective identification. Before you choose a business structure, you must analyse and assess the business goals extensively.

Once you have set your business goals, consider the following key steps to evaluate the business structure options.&nbsp;

Every business structure comes with its own set of advantages and disadvantages, and the choice to evaluate all and choose one depends entirely on your business’s future goals and needs.&nbsp;

Since business structures are the backbone of the entire business and come with specific regulations and taxation requirements, it is wise to consult a <a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Chartered Accountant</a> and a business advisor for a better structural approach.&nbsp;

Remember that the choice of business structure is not fixed and can be changed as your business evolves. However, making an informed decision from the start can save you time, money, and potential complications down the road.



Q1. How do I acquire funding to start a business?

Ans: If you want to obtain funding to start a business, there are several options available to you, such as–

<a href="https://www.skydo.com/blog/starting-a-sole-proprietorship-legal-and-regulatory-steps?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Click here</a> to read more about the legal and regulatory steps for starting a sole proprietorship.

It's important to create a well-crafted business plan that outlines your strategy and financial projections to attract potential investors or lenders.&nbsp;

Q2. Can you create a corporation business in India?&nbsp;

Ans: Under the <a href="https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf">Companies Act, 2013</a>, individuals can form various types of corporations, including private and public limited companies in India, subject to compliance with regulatory requirements and company formation procedures.

Q3. How to get the most back on taxes for your business?

Ans: Consider structuring your business effectively, whether as a Sole Proprietorship, Private Limited, LLP, or other entity, to optimise tax advantages. Consult a tax professional or <a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">an accountant</a> to stay updated on changing tax laws and develop a tax-efficient strategy tailored to your specific business needs.

For more details, check out this <a href="https://www.investopedia.com/financial-edge/0312/how-to-get-the-most-money-back-on-your-tax-return.aspx">tax deduction and credit guide</a>.

Ans: A business entity is a legal structure of a business formed to conduct commercial activities. It can take various business types, such as Sole Proprietorships, Private Limited Companies (PLCs), Limited Liability Partnerships (LLPs), and more.&nbsp;

These entities define the structure, ownership, and liability of the business, affecting factors like taxation, personal liability, and management. The choice of a specific business entity depends on the nature of the business, its goals, and the legal and financial considerations of its owners.

Here is a <a href="https://www.forbes.com/sites/allbusiness/2020/11/23/rethink-your-business-structure/?sh=3bb3d94f47d1">reference article</a> to get more insights on business entities.

Q5. What is the best business structure to avoid taxes?

Ans: There isn't a single best structure to avoid taxes. The effectiveness of tax planning varies based on your business's objectives and your location.

Q6. What are the key differences between sole proprietorship vs partnership in a business context?

Ans: Sole proprietorships are solely owned, with the owner bearing unlimited liability, while partnerships involve two or more owners who share responsibilities and liabilities.

Q7. What is the difference between sole proprietorship vs individual business setup by structure and liability?

Ans: In a sole proprietorship, the business and the owner are considered the same entity, while an individual business setup doesn't necessarily blend personal and business entities. However, it doesn't provide the same liability protection as a PLC or LLC.

Q8. What is the difference between a sole proprietorship vs private limited company by ownership and legal structure?

Ans: A sole proprietorship is a business owned and operated by a single individual, whereas a private limited company is a separate legal entity with limited liability for its shareholders.

Q9. What is the difference between a sole proprietorship vs Limited Liability Partnership (LLP) in terms of governance and liability?

Ans: A sole proprietorship doesn't provide a legal distinction between the business and its owner, exposing the owner to unlimited liability. Conversely, an LLP offers limited liability protection to its partners, protecting personal assets from business debts and obligations.

Q10. What differentiates a sole proprietorship vs a company in terms of legal structure and ownership rights?

Ans: A sole proprietorship is inseparable from its owner, who has unlimited liability, while a company is a separate legal entity that provides limited liability to its shareholders and can have various ownership structures like partnerships or corporations.

Learn more: <a href="https://www.skydo.com/blog/pvt-ltd-partnership-proprietorship-what-should-you-choose-and-why">Pvt Ltd / Partnership / Proprietorship: What should you choose and why?</a>

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You're sitting at your favourite coffee shop, doodling your latest business idea on a napkin. You envision turning your passion into a full-fledged venture. Whether it is crafting artisanal jewellery, offering consulting services, or selling your signature baked goods, the appeal of starting a sole proprietorship is absolute.&nbsp;

The world of entrepreneurship beckons, and the journey begins with a single step – understanding the legal and regulatory landscape that comes with it.

A sole proprietorship is a <a href="https://www.skydo.com/blog/pvt-ltd-partnership-proprietorship-what-should-you-choose-and-why?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">business structure</a> in which a single individual owns and operates without the involvement of other individuals or partners. A sole proprietorship is the simplest form of business and is quite common among solo entrepreneurs and small businesses.&nbsp;

The owner has complete control and decision-making authority over the business. A sole proprietorship has no legal distinction between the owner and the business entity.&nbsp;

Some features that make sole proprietorship an attractive business structure include the following.

How Do You Start a Sole Proprietorship In India?

Sole proprietorships suit individuals and small businesses with limited risk exposure and relatively simple operations. However, the business has to adhere to the legal and regulatory framework set by the Indian government to ensure legal operations. The process starts with the regulatory and <a href="https://www.skydo.com/blog/ready-set-launch-8-key-elements-for-launching-your-tech-export-business-today?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">legal steps to start a business</a> with you as its sole owner.&nbsp;

Let’s start with the personal front for starting a sole proprietorship.

Developing your business concept involves refining your idea and creating a clear plan for operating your business. The business idea should emerge after you identify your interests, skills and passion. Find answers to questions like–

Choose the business concept that aligns the most with your interest and expertise.&nbsp;

You may create a business idea based on your passion, expertise and interest. However, backing it through extensive market research and analysis is equally important.&nbsp;