Hi, I am planning to start a Proprietary trading firm, which means trading one's own money in the stock market and generate profits. I wish to incorporate it as an LLP. However, I'm getting the required funding for the setup from my family and friends as a loan with interest. Is there any restriction to raise money like this? And as I have to pay interest to my relatives from the business profits, can I claim the interest paid as an expense? One more thing, should I as a person take the loan or is there any provision they can lend the money to LLP itself! Your help is much appreciated! Thanks in advance.
Hi,
- To incorporate LLP, you need at least two designated partners.
- Yes you can take loan from relatives and pay them interest but it should not be more than SBI rate. Further you need to disclose such transactions in financials.
- Yes you can claim the interest as an expense from the business Profits.
Thanks
You are setting up a proprietary concern or LLP as both are different and in your title you have mentioned proprietary concern and in question you have mentioned LLP?
In any which case you can take loan from relatives the only concern is you have to pay interest at same rate to relative as you are paying to outsiders otherwise their loan could be considered non legible. However there will be no effect on your business.
You can obviously claim interest as expense and an individual can also take loan there is no necessity of having an LLP.
Dear Sir,
1) Firstly, there should be minimum two persons to start a LLP. You can not start a LLP as "proprietary" trading firm.
2) For trading in stock market with one's own money there is no requirement of forming any company/LLP, you can very well do these activities in your own name and generate income/profits.
Need further more details like what all activities are you planning to do by setting up this LLP for giving you a better advice. Feel free to contact me.
Regards,
Praneeth Thunuguntla
Chartered Accountant
Hi,
There is no such restrictions but there should be minimum 2 persons to start a LLP.
Yes you can claim interest as business expenses.
You can take loans from relatives but please ensure that they are paid interest at the market rate and the same is disclosed in your financials.
Hope that clarifies.
Regards,
Nikhil.
if want to take loan then direct take in LLP not in your name
Dear Sir,
Hope you are doing well !
1. As such there is no restrictions but there should be at least two designated partners to start a LLP.
2.Yes you can claim interest as business expenses from business profits.
3. You can take loans from relatives but please make sure that they are paid interest at the market rate and the same will have to reported in your financials.
Thanks & Regards,
Payal Chhajed
Hi
For incorporating a LLP, you would require one more person.
Why do you want to incorporate a LLP? You can work as a sole proprietorship concern. There are less rules and compliances involved in a sole proprietorship concern.
Yes, you can take the loan but interest needs to be paid at least according to bank rate.
Interest expenses shall be allowable as deduction from Business profits.
If you are incorporating a LLP, the loan has to be given to LLP itself.
Hi,
Yes, LLP can take loan, pay interest and claim the same as business expenses. However, rate of interest should be prevalent market rate and not more than that.
LLP will have to take the loan.
Dear Sir,
1. For Incorporation of LLP, you would require one more person .
2.You can claim the interest as a business expenses.
3.Yes, you can take loan from relatives but interest needs to paid at market rate. Further you will have to report the same in your financials.
Hi
1.Proprietor business need one person and LLP need mimimum 2 person.
2.Yes you can raise loan from relatives and can claim interest as expenses,but Interest rate should not be more than market rate.
3.Loan will be given to LLP only.
Hope it helps.
