I am going into a joint venture with my relatives for a Construction Project. The land is their ancestral land. I am going to finance the project and we both are going to look after it and share the gains 50:50.
What is the best way to start the business, i.e incorporating a Company, making a Partnership deed, etc. so that Capital Gains can be saved for now?
Partnership will do. But the problem is as it is ancestral one, you have to add all the legal heirs as parties to thedocument, otherwise in future there are chances of some of the legal heirs filing partition suit and your whole construction will be stalled.
I would like to give you some ideas regarding the company incorporation procedure in india. In India, company can be incorporated either as a Private Limited or Public Limited. The incorporation procedure all over India is same. First one hasto get the name approval of the proposed company from Registrar of Companies (ROC). After name approval, along with the application for incorporation, the Memorandum and Articles of Association in addition to other necessary prescribed documents has to be submitted with the ROC. The Memorandum of Association stipulates the constitution and objects of thecompany. The Articles of Association contains the rules and regulations of the company for the management of its affairs. After examining the documents theROC issues a Certificate of Incorporation. Thereafter a private company becomes entitled to commence its business and a public company after obtaining the certificate of commencement of business from ROC.
Thanks for the reply. All the legal heirs can become the parties to the contract. That is not an issue. The issue is that if we start a partnership firm, they will have to transfer the land in the partnership firm which will attract capital gains tax on the date the property is transferred. Now the construction project will take 3 years to complete. So I was thinking of taking benefit of the cost inflation index of the future years so that capital gains can be saved. Someone has advised to sign just a promotion agreement with them. This way incidence of tax can be postponed. Is it advisable?