Your address will show here +12 34 56 78
Start up Lessons, TAXATION
Income tax department is planning to tax startups whose valuation has been slashed. Section 56 of the Income Tax Act confers the tax department the ‘power to tax the excess consideration’ (more than the fair value) against issue of shares in the last round of funding.


Fair value is the actual value of the Company. Few startups valuation has been slashed on parameters such as profitability, growth, and intense competition, which was not considered before, thus making the company overvalued in earlier rounds of funding. The income tax department is of the opinion that considering the current slashed down valuations as the fair price of the company, the differential amount of the funds raised in earlier rounds at a higher valuation are taxable.


How it Impacts Startups Raising initial funding is not easy for startups and this extra tax only adds to the problems. Valuation of startups is based on only assumptions as there is no past data for assurance. This tax will cause fear in term of valuation in startup world. In the initial stages, startups struggle with fund requirements at every step and the extra tax burden is going to increase the pressure further. Startups are too vulnerable and the money crunch can lead to hampered operations or even shutting down shops.    

It is a summarization of an article from Your Story. For more information, visit http://yourstory.com/2016/06/startup-tax/



Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to help you. Let’s Connect! 🙂
0

Start up Lessons
Ravi Gururaj, one of the most well-known faces when it comes to the startup ecosystem in India, has found his latest startup Qikpod in legal mire. Qikpod is a smart locker system that can be used by e-commerce companies for smarter deliveries.


To know more about the fallout, read http://www.wazzeer.com/articles#ravi-gururaj-s-qikpod-faces-legal-trouble-over-equity-issues


Earlier the Bangalore Civil court passed an order retraining Gururaj from launching the product and also from allotting new shares. But Gururaj approached High court and got permission to launch his product. Sources say that the reason for the fallout between Gururaj and Ray was a lack of legal documentation of equity shares, etc, and relying solely on e-mail correspondence. This, experts say, is a trend that is plaguing many start-ups, and causing their downfall. Ravindra MK, co-founder of BHive, said “Often startup founders do not do documentation work early on. They believe they should start work on the product first and look at documentation later. However good a friend the co-founder is, it always makes sense to have share-holder agreements and agreements between the founders done at the very beginning.” However, Bharathi Jacob, co-founder Seedfund, believes that the most important thing between co-founders is trust. Jacob said, “It is very important that the co-founders discuss and decide each and every function of the company: From how to hire, whom to hire, what investments, what equity, etc. Everything needs to discussed and known to the founders. They should jointly take decisions.


However, making a legal document shows that complete trust between the founders is not present. I do not believe that a legal document is important. I feel that an e-mail conversation is more than enough.” It is a summarization of an article from Bangalore Mirror.

For more information, visit http://www.bangaloremirror.com/bangalore/others/Lesson-1-from-Qikpod-scrap-Put-everything-in-black-and-white/articleshow/52719329.cms



Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to help you. Let’s Connect! 🙂
0