startups

Is It Time To Migrate to LLP Structure?

The Union Budget 2009 presented by the Hon’ble Finance Minister, Mr. Pranav Mukherjee today, inter alia also provided the much awaited tax treatment for the new corporate business vehicle viz., Limited Liability Partnerships (“LLP”). With this proposal, the unclear picture surrounding the tax aspects of LLPs seems to have been cleared.

As expected, the announced taxation regime for LLPs is similar to that presently applicable to partnership firms registered under the Indian Partnership Act, 1932. This is a clear demarcation from the general global practice, where LLPs are exempt from tax (or in other words are treated as pass through) and the partners are directly taxed. Similar recommendations were made by the Naresh Chandra Committee Report. Under the proposed regime in India the LLPs would be taxed at entity level and the share of profits to be received by the partners would be exempt from tax. Nonetheless, owning to the structural and operational flexibility coupled with clarity on tax aspects, LLPs could be a suitable vehicle for investment by venture capitalists and private equity players, which presently operate through a domestic trust – could be registered or unregistered. 

This article provides an overview of key tax & regulatory aspects relating to migration to LLP structure.

SEBI (Venture Capital Funds) Regulations

SEBI (Venture Capital Funds) Regulations, 1996 permits a body corporate to be registered as DVCF, if such body corporate is set-up or established under the laws of the Central or State Legislature. There is no clarity on how one has to read the terms “under the laws of the Central or State Legislature” and whether LLP set-up under the LLP Act 2008 could be covered.

Foreign Investors

Since LLP would be treated as a non-transparent entity for tax purposes, the foreign investors may not able to enjoy the tax treaty benefits (if any) of investing in India through such LLPs. Thus the unified model which arguably may have worked for a trust would not be available for LLPs.

Incorporation of LLP

As per section 11 of the LLP Act, 2008, for a LLP to be incorporated, two or more persons associated for carrying on a lawful business with a view to profit shall subscribe their names to an incorporation document. The language suggests that LLP necessarily needs to be incorporated with a view to profit – the term is very wide and it may also include profit on account of capital nature. Typically, funds are structured to make long term investments and characterise the gains / losses on such investments as capital gains / losses. One therefore needs to consider on whether such characterisation would be available to LLPs.

Procedure for conversion

The LLP Act, 2008 provides a procedure for conversion of a firm, a private company and unlisted public company into a LLP. However, it does not provide the procedure for conversion of trusts into LLP.

Further, the proposals by Union Budget in its provisions relating to direct taxes (i.e., memorandum explaining provisions of the Finance Bill) states that the conversion from a general partnership to a LLP will have no tax implications if the rights and obligations of the partners remain the same after conversion and if there is no transfer of any asset after conversion. In case of violation of these conditions, the provisions of section 45 of the Income Tax Act, 1961 (“the Act”) shall apply. However, there is no corresponding mention about such amendment in the Bill. Further there seems to be a prohibition on transfer of assets after conversion – there needs to be a time limit for such prohibition and there cannot be a blanket prohibition. These provisions may not be applicable to conversion of trusts and hence tax aspects of such conversion should be addressed.

Section 10(23FB) of the Act provides exemption in respect of the income of a venture capital company or venture capital fund. A “venture capital company” has been defined as a company which has been granted a certificate of registration under SEBI regulations. A “venture capital fund” is defined as a trust. LLP being neither a company nor a trust, such exemption under section 10(23FB) of the Act may not be applicable to them.

Considering the above practical difficulties, there is a need to make representations both to SEBI and the tax department to clear the ambiguity surrounding the LLP pertaining to some of the issues pointed above. 

By Vikram Bohra, Senior Manager, Jignesh Desai, Assistant Manager and Namrata Doshi, Associate, PricewaterhouseCoopers, India
 

AVP Investment Banking Group - Intellecap

Experience/ Education:

• 7 -10 years in Investment Banking
• Chartered Accountant / MBA (Finance) from a premier B-School
 

Skills:

• Demonstrated ability of leading independent business units including accountability for unit’s revenue targets and profitability;
• Track record of independently closing investment transactions on the buy and/or sell side;
• Strong network with venture capital funds/private equity investors;
• Sound knowledge of corporate finance principles and practices;
• Experience of leading a team of professionals;
• Excellent communication skills;
• Understanding of social investment space.
 

Job responsibilities:

• Working with the team to build the Investment Banking Group and practice;
• Working with the team during the selling stage and delivery part of multi-stage engagements;
• Building on relationships with potential and existing national and international clients;
• Managing multiple roles that includes business development, client relationship management, team building and mentorship, and project delivery;
• Relevant national and international field travel and exposure as and when required;
• Work closely with the Group Vice Presidents.
 

Company Description:

Established in 2002, Intellecap is one of the fastest growing strategic services firm in the international development sector. Intellecap aims to build intellectual capital dedicated to facilitating investments into socially motivated businesses and to assist these businesses in becoming more profitable and achieving greater scale through consulting and advisory inputs. Working in both indirect strategic advisory roles and direct design and execution modes, Intellecap leverages its understanding of mainstream, profit oriented business models to create unique solutions that generate both financial and sustainable social returns. Intellecap connects to the social space through its emphasis on field exposure to its team, as well as by ideating and incubating innovative adaptations of mainstream, profitable solutions to address the broader challenges of businesses in development.

Intellecap values success across various parameters: social, environmental and financial, thus attempting to achieve a multiple bottom line itself. The company is fast expanding its presence in areas such as provision of clean water, education, organic produce, green energy and clean technology to name a few others. Please visit www.intellecap.net to know more.
 

If you are motivated to join the Social Enterprise space and are looking for suitable opportunities, please address your applications to Ms. Shree Ravindranath with a cover letter and detailed up-to-date resume to: jobs@intellecap.net

 

Smibs.com - A New Take On Business Networking

In their own words

"Software and Networking for businesses that aim to grow smart."

Why it might be a killer

The company offers a very interesting take on professional networking that emphasizes providing users a framework where they can connect and interact in an agile manner.

Some questions

How many users can already be found on the network? Which heavy-hitting companies are already there?

What it does

Smibs has just launched a full range of business network and software products that aim to let entrepreneurs connect and collaborate with each other like never before. These products are all provided on a SaaS basis. This means that there is no need to install anything, nor check periodically for new updates.

The software products developed by Smibs include a contact manager/address book named Doorbell and a networking solution that caters both for creative professionals and service providers as well as freelancers and consultants. This network is where entrepreneurs promote themselves and showcase their work and portfolios. Great emphasis has been placed on making navigating the network a smooth task, and profiles with brief bios and examples are easily accessible. For its part, Doorbell is great for keeping track of deals and contacts made there.

In addition to these web-hosted software solutions, the website includes practical lessons from up-and-coming entrepreneurs. The site also includes a blog and live streaming in the section named (appropriately enough) "SmibsTV". Check it out in order to see some interesting interviews with current shakers and movers, and learn how the latest technology can be employed to solve modern business challenges.

Link: http://www.smibs.com
Our Review: http://www.killerstartups.com/Social-Networking/smibs-com-a-new-take-on-business-networking

 

Augmented reality finds you organic food, London tube stops

A few more augmented reality applications came out after we published a primer on the space last week. Augmented reality blends real-world video feeds with 3-D graphics or information overlays. Imagine taking your iPhone or Android phone’s camera out while traveling abroad, panning around in a town square and seeing history, photos and video from the past superimposed over the viewfinder. Here are two of the latest such apps to appear:

FoodTracer helps you learn about the origin and production of food products while browsing a shopping aisle. Giuseppe Costanza, who designed it as part of his master’s thesis at Central Saint Martins in London, created the concept to let shoppers know if they’re buying local and organic produce. FoodTracer can also pull up info on the carbon footprint of the food and whether its packaging is recyclable.

FoodTracer concept+demo from gusepo on Vimeo.

And iPhone application developer acrossair, which created TVGuide U.K., just released its first augmented reality program called Nearest tube. When a user holds the iPhone flat, it shows all 13 lines of the London Underground system. Then as you tilt the phone up, the application shows what direction the stops are in and their distance.

(Via Bruce Sterling on Wired, Augmented Reality Times)

NeatlySaid.com - Social Investing At Its Finest

In their own words

"A new perspective to social investing."

Why it might be a killer

Sites such as this one do nothing but turn the Stock Market into a more understandable (and as a result accessible) entity.

What it does

The Stock Market has been truly demystified by the social web. Just a couple of years ago it would have been unthinkable to approach such a financial institution without having an adviser on each side. Now everything is different, and the many games, guides and (most notably) social sites devoted to the stock market out there signify that anybody can have a good understanding of the way it operates. To have a good understanding and actually leaving a mark there are completely different matters, of course, but a healthy start is a healthy start.

This social site lets users interact with each other and try to predict the outcome of different stock markets. Trends are followed closely, and risks are spotted by those who take part of the site.

Such an online resource will be perfect for any person who has even a fleeting interest in such financial entities. This includes not only budding traders but also financial hobbyists and related individuals.

Lastly, it is important to mention that full Twitter integration is duly accounted for. This way, those who are keen on tweeting can take part of the site`s activity through such a channel.

Some questions

Do you have to pay anything to join this site?

Link: http://www.neatlysaid.com
Our Review: http://www.killerstartups.com/Web20/neatlysaid-com-social-investing-at-its-finest

 

Enbargain.com - A New Way To Look Up Coupons & Deals

In their own words

"Deals, coupons and freebies."

Why it might be a killer

There are many sites like it, but this one has all that one could look for in such a resource. Plus, every social service is taken into consideration.

What it does

This is a new site that is bound to have penny pinchers coming back for more and more. As you can tell by the title of the review, it is one of these popular online resources where bargains are listed and coupons are provided along with freebies.

The many categories to browse through include perennials such as "Health & Beauty" "Apparel", "and "Electronics". Of course, categories like "Movies & Music", "Home & Garden" and "Jewelry & Watches" are prominently featured along with the obligatory "Computers" section.

As it is also the norm, you can learn about the most popular deals and coupons on the main page. The same goes for the freebies that are meriting the most attention among the ones who visit the site regularly.

There is not really a lot more to add. The site is nothing revolutionary, but since money is at the back (and front, I am afraid) of our minds so much recently knowing you can resort to it if needed does no harm at all.

Some questions

How often is the site updated?

Link: http://www.enbargain.com
Our Review: http://www.killerstartups.com/eCommerce/enbargain-com-a-new-way-to-look-up-coupons-deals

 

ArticleBuff.com - A Marketplace For Written Work

In their own words

"The premier marketplace for written work."

Why it might be a killer

It connects writers and those who could need their skills in a setting that benefits both of them.

What it does

Exactly what the title of the review says. You can count on this site if you are either a writer who is looking for an assignment, or if you are at the other end of the spectre and need to procure the services of someone who has writing skills.

The actual dynamics of the site are not that hard to get to grips with. In general terms, there are sections where projects are posted, and then writers do their part and submit their work. Once the work has been submitted, you (as the one who posted the project) can view all the submissions as well as previewing all entries at a glance. Upon choosing the entry that best suits your needs you can pay the writer using your own method, and then you will retain full rights to the work itself.

As you can see, it is all very clear, easy to use and transparent. Registration to the site comes at no cost, so that if you want to arrive at your own conclusions you will be able to do so almost instantly. Visit www.articlebuff.com in order to get going. And keep your pencils sharp.

Some questions

Which fees are there to be paid?

Link: http://www.articlebuff.com
Our Review: http://www.killerstartups.com/Web20/articlebuff-com-a-marketplace-for-written-work

 

Tweeps.info - Tracking Your Tweeps

In their own words

"Tracking your tweeps!"

Why it might be a killer

Twitter users old and new will put such a service to the task right away.

What it does

New Twitterers have a distinct advantage over the original users of the by now massive micro-sharing service: they have such a range of tools and apps for knowing exactly who is who and what everybody is up to all the time that they step into the scene better-equipped than old-timers could have ever imagined. The Tweeps site is a case in point. It empowers any twitterer to know who tweets about what, how often and whether or not they use hashtags, share URLs and more.

Based on these statistics, the main page includes a comprehensive list of "Top Twitter Addicts" (the ones who have the most tweets per day on average), the "Top Socialites" (those who employ Twitter`s social features more thoroughly) and so on.

The analysis itself can even reveal whether a user is displaying bot-like behavior, and also if a Twitterer is set for prospective stardom judging by the way he or she is headed. So, if you are looking into having a full chart detailing who is who in the Twitterverse you could do much worse than giving this site a glance.

Some questions

How long does a regular analysis take?

Link: http://www.tweeps.info
Our Review: http://www.killerstartups.com/Web-App-Tools/tweeps-info-tracking-your-tweeps

 

Web-Connected Light Sensors With Pachube & Arduino

Two of the more interesting products in the 'Internet of Things,' a.k.a. real world objects connected to the Internet, are Pachube and Arduino. We profiled Pachube (pronounced "patch-bay") in May; it's an open source platform enabling you to connect sensor data to the Web. Arduino is an open-source electronics prototyping platform, which we briefly profiled in February. So far both services have spawned some geeky and quirky - and in truth not overly useful - trial apps. For example Pachube has been used to monitor house plants and a recent Arduino creation monitors a teapot's tea level. However this is not to undersell the potential of either service - it's just that both are currently in the experimental stage.

It's fun to look at what is being developed now, because it gives us a glimpse of the Internet of Things of the future. For example a site called The Daily Duino recently experimented with a project involving two light sensors.

Sponsor

Morgellon from The Daily Duino set up two light sensors in his room - one mounted on the wall and the other taped to a window (facing outside).

Morgellon explained why he did this:

"The idea is to compare inside light levels to outside light levels and adjust for energy consumption. If the light level outside is equal or greater than inside, then perhaps I should open the blinds to let in more light... or maybe even go outside... *gasp*

The two light sensors are connected to an Arduino running the Standard Firmata. The Arduino is connected to a PC running a Processing sketch that sends the sensor data to Pachube."

This is the kind of project that Pachube encourages, as it wants users to interact with sensor data and use it to actively engage with their environment. Morgellon's example is simple, but it illustrates the point: that web-connected sensors help him optimize his living environment. Here he is explaining the set-up, including showing his interactions with Pachube on an Android phone:

Pachube + Arduino from Morgellon on Vimeo.

Below are a couple of graphs generated from the sensor data on Pachube. The higher the number, the less light is present. The aim, according to Morgollon, is that "the Inside Light Sensor will stay a nice high number as I sleep [...] while the Outside Light Sensor should lower over the course of the day."

As the Internet of Things evolves, experiments like this show its potential. Having your household lighting system hooked up to the Web for optimization and interaction? It's not too far away.

Discuss

Excel Venture Unveils $125M Fund to Make Life Sciences Ideas Cross Over to IT, Energy

Luke Timmerman wrote:

Here’s a rare bit of good news from the venture capital world. Boston-based Excel Venture Management has nailed down a $125 million fund to invest in new life sciences companies that it hopes will have broad potential to shake up a variety of industries, including information technology and alternative energy.

Excel has been operating for the past 18 months, but has been tight-lipped about its strategy because it hadn’t yet closed its fundraising. The fund is led by a group of managing directors that formerly worked together for years at CB Health Ventures—including Rick Blume, Enrico Petrillo, and Steve Gullans, as well as Juan Enriquez, the founding director of Harvard Business School’s Life Sciences Project. I got an up-close look at what the firm is trying to accomplish from Enriquez.

The fund’s strategy is to look for ideas that have their roots in life sciences, but have broad potential as “platforms” that can be applied in other industries like IT, energy, agriculture, textiles, and chemistry, Enriquez says. This is becoming possible as biology is becoming more of a digital science, he says. The opportunities in life sciences are already starting to make an increasing impact on the financial statements of industrial giants like General Electric (a big maker of medical devices), DuPont (owner of Pioneer Hi-Bred International seeds), and even classic tech companies like Microsoft, IBM, and Google, which are betting big on digitizing healthcare and life sciences.

“About one-fourth of GE’s earnings come from healthcare and life sciences companies, which is getting larger, while the share of financial services is getting smaller,” Enriquez says. “At DuPont, the single largest driver of earnings is Pioneer seeds. For a lot of companies in a lot of industries, life sciences is the place they are looking for future growth.”

So that’s the lofty vision, but how is this supposed to work out financially? Plenty has been written about how the life sciences venture model is broken, partly because new drug development typically takes a decade or more, costs hundreds of millions of dollars, and has about a one-in-10 success rate in clinical trials. Excel’s answer to that? It will strictly invest in companies …Next Page »

UNDERWRITERS AND PARTNERS

Qliance Raises $4M To Expand New Primary Care Model, Circumvent Health Insurers

Luke Timmerman wrote:

Qliance Medical Management, the Seattle-based company that doesn’t accept health insurance for primary care medical services, has raised $4 million in venture capital to expand its practice in Washington and to other states around the country.

The financing was led by Seattle-based Second Avenue Partners, and also included New Atlantic Ventures and Clear Fir Partners. Qliance, founded in 2006, has now raised a total of $7.5 million since it started.

We first profiled Qliance back in December. The company is pursuing a simple and disruptive idea to the U.S. healthcare system. It runs what it calls a “direct practice” in downtown Seattle, which freezes out health insurers and deals directly with patients. The patient hands over a credit card, and agrees to pay a $39 to $79 monthly membership fee to Qliance for unrestricted use of its primary care medical services. The model allows Qliance to avoid spending excessive time haggling with insurers, and lets the doctors see fewer patients. That frees up the company’s physicians to spend 30 to 60 minutes with each patient instead of less than 15 minutes for their peers who accept insurance, CEO Norm Wu said in our original profile.

“We see the Qliance direct primary care model as an important transformational option to health care reform that is easily scalable for other communities across the U.S.,” said Nick Hanauer, managing partner of Second Avenue Partners, in a statement. “Their innovative health care model reduces costs dramatically for individuals and businesses while delivering exceptional care and access for patients.”

The Qliance model doesn’t cover all the specialized services that some patients …Next Page »

6 Travel Trends for the Weary Wanderer

There's only so much we can learn from the comfort of our computer screens. At some point, we've got to venture into the unknown, embark on something new and explore the world around us. Whether you're traveling for business or pleasure, below are a few different tools to aid you in your journeys:

1. What He's Having: There are moments in life when the stars align and you find yourself in Thailand during a full moon festival, Italy during an olive harvest, or Fiji for the biggest surf waves of the year. You could take your chances, or you could consult Joobili. Joobili is an event-based travel recommendation system where users enter their desired travel dates, country of travel and interests. From here the Joobili community suggests a variety of events with a map view of the results. Rather than planning your trip blindly, you can hit (or miss) every major festival, sporting event or concert tour on your travel route. TripSay and I Want to Go There also offer crowd sourced tips on favorite travel spots. Meanwhile, NextStop members entice your inner-adventurer using pictures and short 140-character descriptions.

Sponsor

2. The Whole Fam Damily: Are you traveling with a large group? Triporama lets users plan by committee. Similar to Evite, hosts create a group home page and invite friends and family members to contribute. Members can store and share travel research, assign tasks, conduct polls, build itineraries and integrate maps. While this is an extremely useful tool, be warned that if you ask for someone's opinion, you'll probably get it. TravelMob is another great tool offering similar group planning functionality.

3. A Clean Bed: With hostels, it's a crap shoot as to whether or not you're going to end up in a room with a drunk couple or a mentally unstable ex-pat. And if you're traveling on a budget, hotels can be expensive. Air BnB offers fantastic deals on nightly rooms, sublets or vacation rentals. Site members rent out their fully-furnished rooms, apartments and homes. For the price of a horrible hotel in New York, you can often get a luxury apartment with kitchen facilities. iStopOver is a similar service, but users can also rent out office space. This way you can extend your stay, finish some work and still have time to enjoy the sights.

4. Map Happy Directions: Whenever you see a travel brochure with the phrase, "The city's best kept secret" on it, you know this is an outright lie. Real secrets travel by word-of-mouth and are far from the noise of the tour buses and gift shops. AMap.to allows users to add links, videos, images, directions and comments to a map. This is a great way to share your favorite restaurants and parks and help others find them. The service offers the option to upload a shortened URL to Twitter, Facebook and Digg. Be choosy with what you upload, after all, it's only a matter of time before the cult of Lonely Planet travelers flock to online communities for new suggestions. If you're looking for spots in the US, TripCart offers travel mapping for drivers. Users can share and plan their routes and rest stops on the way to major and not-so-major attractions. Now you can get lost in that maize maze you've always wanted to visit.

5. Posse Up: Sometimes you've been on the road so long that you just want to see a familiar face. Dopplr lets frequent travelers share their location and travel plans with friends. Similar to TripIt, the service lets us upload itineraries and share them to schedule a rendezvous. While not specific to travel, Whrrl, Loopt and RWW's most promising company of 2008, Brightkite, are also great geo-based friend tracking tools.

6. Home is Where the Heart Is: Steven Tyler sings, "life's a journey, not a destination." But honestly, after 20 hours of connecting flights and airport food, sometimes the destination looks like a lifesaver. For five dollars FlightTrack ensures that we find our airport gates, catch our connections and make our way home. The premium version costs $10 and allows users to sync with their TripIt itineraries. NextFlight also tracks departures for more than 1,100 airlines. Meanwhile Flight Status tracks arrivals, departures and your baggage. And for those of us lacking a good sense of direction, Gate Maps helps us navigate confusing airport layouts and make it from gate to food court to gate.

Discuss