A handy guide for entrepreneurs on starting up and building up. Smart advice on how to Manage their business and how to make things happen. Startups and tech entrepreneurs who are unaware of the business side of the coin can use this guidebook to their benefit.

1. E NTREPRENEURS
GUIDEBOOK
2011
So you have a dream? You have been day dreaming of kicking that nasty job
goodbye and ruling the world? Or have you started on the voyage already
but need a navigator to help you? This guidebook will provide you the
basics that you need to know and will point you in the right direction, to
follow your dreams

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STAY HUNGRY, STAY FOOLISH
The following transcript is from a speech given by Steve Jobs, CEO and
Cofounder of Apple to graduating students from Stanford university -2005
I am honored to be with you today at your commencement from one of the finest universities
in the world. I never graduated from college. Truth be told, this is the closest I’ve ever gotten
to a college graduation. Today I want to tell you three stories from my life. That’s it. No big
deal. Just three stories.
The first story is about connecting the dots.
I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in
for another 18 months or so before I really quit. So why did I drop out?
It started before I was born. My biological mother was a young, unwed college graduate
student, and she decided to put me up for adoption. She felt very strongly that I should be
adopted by college graduates, so everything was all set for me to be adopted at birth by a
lawyer and his wife. Except that when I popped out they decided at the last minute that they
really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the
night asking: ―We have an unexpected baby boy; do you want him?‖ They said: ―Of course.‖
My biological mother later found out that my mother had never graduated from college and
that my father had never graduated from high school. She refused to sign the final adoption
papers. She only relented a few months later when my parents promised that I would
someday go to college.
And 17 years later I did go to college. But I naively chose a college that was almost as
expensive as Stanford, and all of my working-class parents’ savings were being spent on my
college tuition. After six months, I couldn’t see the value in it. I had no idea what I wanted to
do with my life and no idea how college was going to help me figure it out. And here I was
spending all of the money my parents had saved their entire life. So I decided to drop out and
trust that it would all work out OK. It was pretty scary at the time, but looking back it was
one of the best decisions I ever made. The minute I dropped out I could stop taking the
required classes that didn’t interest me, and begin dropping in on the ones that looked
interesting.
It wasn’t all romantic. I didn’t have a dorm room, so I slept on the floor in friends’ rooms, I
returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles
across town every Sunday night to get one good meal a week at the Hare Krishna temple. I
loved it. And much of what I stumbled into by following my curiosity and intuition turned out
to be priceless later on. Let me give you one example:
Reed College at that time offered perhaps the best calligraphy instruction in the country.
Throughout the campus every poster, every label on every drawer, was beautifully hand
calligraphed. Because I had dropped out and didn’t have to take the normal classes, I decided
to take a calligraphy class to learn how to do this. I learned about serif and san serif
typefaces, about varying the amount of space between different letter combinations, about
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what makes great typography great. It was beautiful, historical, artistically subtle in a way
that science can’t capture, and I found it fascinating.
None of this had even a hope of any practical application in my life. But ten years later, when
we were designing the first Macintosh computer, it all came back to me. And we designed it
all into the Mac. It was the first computer with beautiful typography. If I had never dropped
in on that single course in college, the Mac would have never had multiple typefaces or
proportionally spaced fonts. And since Windows just copied the Mac, its likely that no
personal computer would have them. If I had never dropped out, I would have never dropped
in on this calligraphy class, and personal computers might not have the wonderful
typography that they do. Of course it was impossible to connect the dots looking forward
when I was in college. But it was very, very clear looking backwards ten years later.
Again, you can’t connect the dots looking forward; you can only connect them looking
backwards. So you have to trust that the dots will somehow connect in your future. You have
to trust in something —
your gut, destiny, life,
karma, whatever. This
approach has never let
You have to trust in something — your
me down, and it has made gut, destiny, life, karma, whatever
all the difference in my
life.
My second story is about love and loss.
I was lucky — I found what I loved to do early in life. Woz and I started Apple in my parents
garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two
of us in a garage into a $2 billion company with over 4000 employees. We had just released
our finest creation — the Macintosh — a year earlier, and I had just turned 30. And then I
got fired. How can you get fired from a company you started? Well, as Apple grew we hired
someone who I thought was very talented to run the company with me, and for the first year
or so things went well. But then our visions of the future began to diverge and eventually we
had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out.
And very publicly out. What had been the focus of my entire adult life was gone, and it was
devastating.
I really didn’t know what to do for a few months. I felt that I had let the previous generation
of entrepreneurs down – that I had dropped the baton as it was being passed to me. I met
with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a
very public failure, and I even thought about running away from the valley. But something
slowly began to dawn on me — I still loved what I did. The turn of events at Apple had not
changed that one bit. I had been rejected, but I was still in love. And so I decided to start
over.
I didn’t see it then, but it turned out that getting fired from Apple was the best thing that
could have ever happened to me. The heaviness of being successful was replaced by the
lightness of being a beginner again, less sure about everything. It freed me to enter one of
the most creative periods of my life.
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During the next five years, I started a company named NeXT, another company named
Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to
create the worlds first computer animated feature film, Toy Story, and is now the most
successful animation studio in the world. In a remarkable turn of events, Apple bought
NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of
Apple’s current renaissance. And Laurene and I have a wonderful family together.
I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was
awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head
with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I
loved what I did. You’ve got to find what you love. And that is as true for your work as it is
for your lovers. Your work is going to fill a large part of your life, and the only way to be truly
satisfied is to do what you believe is great work. And the only way to do great work is to love
what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the
heart, you’ll know when you find it. And, like any great relationship, it just gets better and
better as the years roll on. So keep looking until you find it. Don’t settle.
My third story is about death.
When I was 17, I read a quote that went something like: ―If you live each day as if it was
your last, someday you’ll most certainly be right.‖ It made an impression on me, and since
then, for the past 33 years, I have looked in the mirror every morning and asked myself: ―If
today were the last day of my life, would I want to do what I am about to do today?‖ And
whenever the answer has been ―No‖ for too many days in a row, I know I need to change
something.
Remembering that I’ll be dead
soon is the most important tool I’ve ―If you live each day as if it was
ever encountered to help me make your last, someday you’ll most
the big choices in life. Because
almost everything — all external
certainly be right.‖
expectations, all pride, all fear of
embarrassment or failure – these
things just fall away in the face of
death, leaving only what is truly important. Remembering that you are going to die is the
best way I know to avoid the trap of thinking you have something to lose. You are already
naked. There is no reason not to follow your heart.
About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it
clearly showed a tumor on my pancreas. I didn’t even know what a pancreas was. The
doctors told me this was almost certainly a type of cancer that is incurable, and that I should
expect to live no longer than three to six months. My doctor advised me to go home and get
my affairs in order, which is doctor’s code for prepare to die. It means to try to tell your kids
everything you thought you’d have the next 10 years to tell them in just a few months. It
means to make sure everything is buttoned up so that it will be as easy as possible for your
family. It means to say your goodbyes.
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I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an
endoscope down my throat, through my stomach and into my intestines, put a needle into my
pancreas and got a few cells from the
tumor. I was sedated, but my wife,
There is no reason not to follow who was there, told me that when
they viewed the cells under a
your heart. microscope the doctors started crying
because it turned out to be a very rare
form of pancreatic cancer that is
curable with surgery. I had the surgery and I’m fine now.
This was the closest I’ve been to facing death, and I hope its the closest I get for a few more
decades. Having lived through it, I can now say this to you with a bit more certainty than
when death was a useful but purely intellectual concept:
No one wants to die. Even people who want to go to heaven don’t want to die to get there.
And yet death is the destination we all share. No one has ever escaped it. And that is as it
should be, because Death is very likely the single best invention of Life. It is Life’s change
agent. It clears out the old to make way for the new. Right now the new is you, but someday
not too long from now, you will gradually become the old and be cleared away. Sorry to be so
dramatic, but it is quite true.
Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma —
which is living with the results of other people’s thinking. Don’t let the noise of others’
opinions drown out your own inner voice. And most important, have the courage to follow
your heart and intuition. They somehow already know what you truly want to become.
Everything else is secondary.
When I was young, there was an amazing publication called The Whole Earth Catalog, which
was one of the bibles of my generation. It was created by a fellow named Stewart Brand not
far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the
late 1960′s, before personal computers and desktop publishing, so it was all made with
typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35
years before Google came along: it was idealistic, and overflowing with neat tools and great
notions.
Stewart and his team put out several issues of The Whole Earth Catalog, and then when it
had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On
the back cover of their final issue was a photograph of an early morning country road, the
kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the
words: ―Stay Hungry. Stay Foolish.‖ It was their farewell message as they signed off. Stay
Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate
to begin anew, I wish that for you.
Stay Hungry. Stay Foolish.
Thank you all very much
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STEP 1: KNOW WHAT YOU The Do’s and the DO'S
DO’s
ARE DOING  Prepare a complete
business plan
 Research (use search
engines) to find business
Prepare a Business Plan plans that are available on
the Internet.
 Package your business
Once you have that brilliant business idea in place, take care plan in an attractive kit as
and some time to formalize it into the form of a business plan. a selling tool.
A business plan helps you give shape to the idea and gives it a  Submit your business plan
to experts in your
tangible form in the guise of numbers and figures. intended business for their
advice.
A business plan forces you to systematically plan out your  Spell out your strategies
on how you intend to
venture, it is a blueprint for your venture and will help you handle adversities.
course correct if ever you find yourself deviating from your  Spell out the strengths and
weaknesses of your
objectives. Your business plan is not a one-time document but management team.
a living roadmap to your success. Put some effort into  Include a monthly one-
year cash flow projection.
preparing one.
 Freely and frequently
modify your business
How to create a business plan? plans to account for
changing conditions.
 Understand your industry
 Write out your basic business concept
DON’T’s
 Gather data on the feasibility and the specifics of your  Be optimistic (on the high
business concept side) in estimating future
 Focus on the what, why, where and how sales.
 Be optimistic (on the low
 Put the plan into a set format side) in estimating future
 Read, revise, review costs.
 Disregard or discount
weaknesses in your plan.
What Should you business plan contain? Spell them out.
 Stress long-term
The contents of a business plan are as follows :
projections. Better to focus
on projections for your
 Executive summary first year.
 Overview of the industry and the company, its  Depend entirely on the
uniqueness of your
products or services business or the success of
 Market research and analysis an invention.
 Project yourself as
 The economics of the business someone you're not. Be
 Financial plan brutally realistic.
 Marketing plan  Be everything to
everybody. Highly focused
 The Design and development plan
specialists usually do best.
 Manufacturing and operations plan  Proceed without adequate
 The management team financial and accounting
 Overall Schedule know-how.
 Base your business plan on
 Critical risks, problems and assumptions
a wonderful concept. Test
 Proposed company offerings it first.
 Appendices  Skip the step of preparing
a business plan before
starting.
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What does the financial plan constitute?
The financial plan includes the following statements which help gauge a potential investor
of the health and prospects of your business.
 Income statement, current ( for existing businesses) and projected
 Balance sheets, Current and projected
 Cash flows, Current and projected
 Break even charts
 Sources and uses of fund
Resources :
www.score.org | www.techsmall.com | www.gin.sme.ne.ip | www.loc.gov | www.bplans.com
www.pipdic.com | www.opportunityindia.net |www.msme.gov.in | www.enterweb.org
Contact us at +91-9910124927 | +91-9818014509 or mail us at
info@arkayandarkay.com for help with researching and writing a business
plan for your business.
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STEP 2 :INCORPORATION
Give your business a name and a structure
Entrepreneurs in India may chose among the following three options with respect to
structuring their businesses, they may chose to incorporate a company, form a partnership or
form an LLP. There is also a option of a proprietorship but it is not discussed here since it
does not support business growth beyond a single owner, maintainer model.
Partnerships reign in terms of ease of establishment, the modalities and the costs involved in
forming a partnership firm are the least. You need a minimum of two partners with a
maximum limit set to 10 in the case of a banking business and 20 for other businesses. In the
case of an LLP the formation methodologies are similar except that you need to have two
designated partners and there is no limit to the number of partners that you may have.
The process for incorporation of a company is a little more elaborate, however a company is
the best model for a fast growing enterprise, particularly in the IT space. A private company
can be formed with a mimimum of 2 members and a maximum of 50 members. A minimum
capital of Rs 100000 is also required.
The minimum number of shareholders and directors required for registering a public limited
company is 7 and 3, there is no limit to the number of members and a minimum share capital
of Rs 500000 is required.
The following table illustrates the main differences between the three structures :
CRITERIA PRIVATE PUBLIC LIMITED LIMITED PARTNERSHIP
LIMITED COMPANY LIABILITY CONCERN
COMPANY PARTNERSHIP
REGISTRATION , MEMBERSHIP AND CHARTER DOCUMENTS
Applicable Companies Act, Companies Act, LLP Act 2008 Partnership Act,
Law
1956 1956 1908
Mandatory Yes, with Yes, with Yes, with Optional
registration
Registrar of Registrar of Registrar of
Companies Companies Companies
Charter Memorandum Memorandum LLP Agreement Partnership
Documents
and Article of and Articles of Agreement
Association Association
Charter Yes, with Yes, with Yes, with Optional
Documents
Registrar of Registrar of Registrar of
needs to be
filed with Companies Companies Companies
regulator
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CRITERIA PRIVATE PUBLIC LIMITED LIMITED PARTNERSHIP
LIMITED COMPANY LIABILITY CONCERN
COMPANY PARTNERSHIP
Identification Company Company LLP Optional.
number
Identification Identification Identification Partnership
number number granted number granted registration
granted by by ROC by ROC granted only to
ROC registered
Partnerships
Minimum Rupees 100,000 Rupees 500,000 Not specified Not specified
Paid-up
Capital
Number of Minimum - 2 Minimum - 7 Minimum - 2 Minimum – 2
members
Maximum - 50 Maximum - No Maximum - No Maximum - 20
Limit Limit
Identity of Mandatory, Mandatory, needs Mandatory, Not required
Partners /
needs to obtain to obtain Director needs to obtain
directors
Director Identification Designated
Identification Number Partner
Number Identification
Number
Liability of Limited Limited Limited Unlimited
Partners /
members
Legal Entity Yes , can sue or Yes , can sue or Yes , can sue or No, only
be sued in the be sued in the be sued in the Partners can sue
name of name of name of LLP or be sued.
Company Company
Perpetual Yes Yes Yes No.
Succession
COMPLIANCE
Prior approval Mandatory. Mandatory. Name Mandatory. Not required.
of Name
Name should should be in Name should
be in accordance with be in
accordance the Companies Act accordance
with the with the LLP
Companies Act Act
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CRITERIA PRIVATE PUBLIC LIMITED LIMITED PARTNERSHIP
LIMITED COMPANY LIABILITY CONCERN
COMPANY PARTNERSHIP
Board Mandatory, at Mandatory, at Depends upon Depends upon
meetings
least four in least four in every the procedure the procedure
every year. year. prescribed in prescribed in the
the LLP Partnership
Agreement. Agreement.
Shareholders Mandatory Mandatory Not applicable Not applicable
meeting
Preparation of Mandatory Mandatory Depends upon Depends upon
Minute Books
the procedure the procedure
prescribed in prescribed in the
the LLP LLP Agreement.
Agreement.
Appointment Mandatory Mandatory Mandatory Mandatory
of Auditors
Maintenance Mandatory Mandatory Not Applicable Not Applicable
of other
statutory
registers
Maintenance Mandatory Mandatory Mandatory Mandatory
of Books of
accounts
Filing of Mandatory Mandatory with Mandatory Not required
Annual return
with ROC ROC with ROC
and Balance
sheet with the
statutory
Authority
Invitation to Restricted Possible Restricted Restricted
the public to
subscribe for
any Shares or
debentures of
the Company
Listing on Restricted Possible Restricted Restricted
stock
exchange
Issue of shares Not Possible Not Possible Possible Possible
/ interest other
except sweat except sweat
than cash
equity equity / ESOP
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CRITERIA PRIVATE PUBLIC LIMITED LIMITED PARTNERSHIP
LIMITED COMPANY LIABILITY CONCERN
COMPANY PARTNERSHIP
Merger/ Possible Possible Possible Not possible
amalgamation
ACCOUNTING AND TAXATION
Obtaining PAN Mandatory Mandatory Mandatory Mandatory
/TAN
Audit Mandatory Mandatory Mandatory Mandatory
requirement
Filing of ITR Mandatory Mandatory Mandatory Mandatory
Accounting Applicable Applicable Not yet issued Not applicable
Standards
Tax Rate 33.21% 33.21% 30.90% 30.90%
MAT 19.93% 19.93% NA NA
DDT 16.61% 16.61% NA NA
Contact us to choose the ideal structure for your enterprise. We can help
you chose the most tax efficient structures that will help you save money for
years to come. We are available at +91-9910124927 | +91-9818014509 or
at info@arkayandarkay.com
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STEP 3: CAPITAL STRUCTURE
Decide how much capital you need and where it will go
A company's capital structure refers to its debt level relative to equity on the balance sheet.
It is a snapshot of the amount and types of capital that a firm has access to, and what
financing methods it has used to conduct growth initiatives such as research and
development or acquiring assets. The more debt that a firm carries, the more risk it is
perceived to carry. An ideal capital structure represents a balance of debt and equity on a
balance sheet.
On the equity side, common stock is the amount of shares held by common shareholders.
These stockholders own an equity stake in the business and obtain voting rights for
important company events. Preferred shareholders similarly obtain an equity stake in the
business, but are not entitled to vote.
A preferred investor receives ongoing dividend payments from a company's net income, or
profits, as do some common shareholders. Profits that a company does not distribute to
shareholders through dividend payments but instead are reserved are known as retained
earnings, and qualify as equity on a company's balance sheet. Any additional capital earned
from a stock offering similarly adds to equity.
Capital structure is what a company relies on to acquire the assets necessary to generate
future sales and profits at the firm. In order for the financial capital structure to work
efficiently, it will generate returns from the equity and debt that are higher than the cost of
servicing that debt and equity. Costs associated with servicing debt and equity may include
interest and principal payments to bondholders and dividend payments to shareholders.
Issuing debt tends to be a cheaper form of financing for companies versus equity issuance.
Although debt holders are entitled to ongoing payments tied to a loan, the expectations for
returns are not as high as they are for equity investors. This is because equity holders are
taking more of a risk than debt holders. Therefore, the burden is on a company to constantly
grow earnings and the stock price in order to retain equity shareholders. In the event of a
bankruptcy, bondholders receive priority for a company's assets over equity holders
The kind of capital structure in use depends upon the following factors :
 Funds required for fixed and working assets
 Ability to raise funds from internal and external sources
 Other means of project financing
 Cost of raising funds from different sources
 Procedural formalities and difficulties in raising money
 Expected fund inflow
 Form of ownership
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All forms of capital entail a certain cost, it is critical at the plan stage to understand the
potential inflows and accordingly select the capital structure. Cost of capital is generally not
given the due it deserves both at the time of establishment and at the time of expansion of a
current business. It is critical to seek advice of a professional in terms of capital structuring
to enable the business to function best.
An ideal capital structure ensures that the cost of capital, understood by collating the various
obligations that such capital entails, is always less than the returns from the business.
Contact us to choose the ideal structure for your enterprise. We can help
you chose the most tax efficient structures that will help you save money for
years to come. We are available at +91-9910124927 | +91-9818014509 or
at info@arkayandarkay.com
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STEP 4: FUNDING YOUR BUSINESS
Nothing comes for free, except this guide, of-course, here’s how you can
fund your business
A key element of the business plan is the financial section, where the inflows and outflows
have to be detailed. Before your business makes money it is important to understand how
you are going to meet those outflows. Some of the most important financing options
available are :
Bootstrapping
Bootstrapping is a term used to describe the act of starting a business without the help of
outside investors. In some cases, however, the term may be used to describe a business that
does use outside investments, but strives to keep them to a minimum. A bootstrapper may
also avoid loans from banks and lending companies in order to keep business debt under
control. Often, bootstrappers use their own savings and credit cards in order to get their
businesses up and running. Sometimes they seek start-up loans from family members and
friends, or even fund their new businesses with paychecks from their current jobs
Bootstrapping represents a risk to the owners of the business. Since they often put their own
money up to finance their businesses, they stand to lose their investments if the business
doesn't succeed. However, there is a major benefit to bootstrapping as well. Without outside
investors, business owners are free to develop their businesses as they see fit, without the
input or interference of others. Furthermore, they don't have to share their profits with
others or deal with repaying loans and struggling to pay sometimes-high interest rates.
While some people may view bootstrapping as a recipe for disaster, or at least a difficult road
to travel, many successful businesses have been founded with this approach. People who
have been successful at bootstrapping often list time and effort as their most important
investments in their companies. To be successful at starting and running a company with
little capital and no outside investors, an entrepreneur may have to work harder, at least
initially, at developing his ideas, finding customers, and meeting their needs, so they'll
continue to purchase his products and services.
in some cases, the lack of start-up capital may actually help the bootstrapper move towards
success. Since a bootstrapping entrepreneur may need to generate cash quickly in order to
keep the business afloat, he may be more aggressive in seeking customers, rather than
spending time on other details that may be important but can be tackled at a later time. He
may also seek out the most efficient and inexpensive ways of handling business-related
tasks, which may help him to stay out of debt. Likewise, a bootstrapping entrepreneur may
seek creative ways to get the word out about his business since expensive advertising may be
beyond his means. Though this creativity is born of necessity, it may catch the eye of his
target market and secure more customers than traditional, and perhaps less imaginative,
methods would
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Debt
Debt capital is the capital, usually money, raised through issuing bonds. Although most of
the time the capital raised is money, it could be other goods of value as well. The capital
raised must be paid back to those who finance the debt.
To raise capital, companies have a number of different options. Of course, the purpose of
most companies is to sell a product or service for a profit. However, some may need or wish to
raise money faster than the normal course of buying and selling will provide. To do that, they
may consider debt capital
Debt is usually raised by startups from banks , mortgage companies and financial
institutions. Debt may be raised in the following forms :
Bank loans : Bank loans are attractive because they don’t require the entrepreneurs to give
over control in the form of equity. However they do induce a fixed cost on a periodic basis and
can drain a company with a limited cash flow. Bank loans also require collateral in the form
and in the god forsaken event that the loan cannot be paid back such collateral may be seized
by the bank.
Debt financing
Debt financing is a means of raising funds to generate working capital that is used to pay for
projects or endeavors that the issuer of the debt wishes to undertake. The issuer may choose
to issue bonds, promissory notes or other debt instruments as a means of financing the debt
associated with the project. In return for purchasing the notes or bonds, the investor is
provided with some type of return above and beyond the original amount of purchase.
Debt financing is very different from equity financing. With equity financing, revenue is
generated by issuing shares of stock at a public offering. The shares remain active from the
point of issue and will continue to generate returns for investors as long as the shares are
held. By contrast, debt financing involves the use of debt instruments that are anticipated to
be repaid in full within a given time frame.
With debt financing, the investor anticipates earning a return in the form of interest for a
specified period of time. At the end of the life of a bond or note, the investor receives the full
face value of the bond, including any interest that may have accrued. In some cases, bonds or
notes may be structured to allow for periodic interest payments to investors throughout the
life of the debt instrument.
Equity Financing
Also known as share capital, equity financing is the strategy of generating funds for
company projects by selling a limited amount of stock to investors. The financing may
involve issuing shares of common stock or preferred stock. In addition, the shares may
be sold to commercial or individual investors, depending on the type of shares involved
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Both large and small business owners make use of this strategy when undertaking new
projects.
With the strategy of equity financing, the expectation is that the project funded with the sale
of the stock will eventually begin to turn a profit. At that point, the business not only is able
to provide dividends to the shareholders who purchased the stock, but also realize profits
that help to increase the financial stability of the company overall. In addition, there is no
outstanding debt owed to a bank or other lending institution. The end result is that the
company successfully funds the project without going into debt, and without the need to
divert existing resources as a means of financing the project during its infancy.
Because of the risks involved, equity investors can be extremely demanding and may fund
only a small percentage of the business plans they consider. Equity finance can be raised
from a number of sources, namely :
Angel investing : Angel investors are wealthy individuals or enterprises who invest in
companies at a very early stage in the life of the business.
Venture Capital : Venture capital firms provide capital, aptly called venture capital, to
businesses which show exception growth potential.Venture capital firms have stringent
investment criteria and invest in only specific high growth industries
Private equity : Private equity firms look to make investments in privately held firms
which hold the promise of growth but are at a more mature state than those seeking venture
capital money. VC’s take higher risks and expect higher returns as compared to PE
investors.
At Arkay & Arkay we can connect you with the best sources to raise capital
in whatever form it may be. Contact us at at +91-9910124927 | +91-
9818014509 or mail us at info@arkayandarkay.com for raising capital for
your business.
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STEP 5 : ACCOUNTING AND TAXATION
Because you need to measure your success and because the government
needs its share too
Accounting
It is important to have a system in place to measure all your inputs and outputs as far as the
business is concerned. This helps you get a grip on things. As the oft repeated adage goes,
you cannot control what you cannot measure, hence it is important for you to be able to
measure your business’s performance.
You should have a system of accounting in place, in the early days it is not necessary for you
to hire a full time accountant to do your books. You can use off the shelf packages and do
them yourself of you could hire outsource the task to service providers like ourselves for a
small fee.
The books will not only help you manage your business, you will also have ready evidence to
substantiate your success when the VC’s or the PE’s come knocking. All financial institutions
require that copies of books of accounts be submitted in one form or the other before they can
provide a loan to you.
Taxes
The tax spectrum of India is spread across the Direct and indirect tax spectrum. Direct taxes
are a levy on the profits/wealth of the company whereas the indirect taxes are borne by the
customer of services/goods sold by the business.
Direct Taxes
Direct taxes are the taxes levied on the income of the business from various sources, such
taxes include but are not limited to :
 Income tax
 Wealth tax
 Security transaction tax
 Withholding tax
Indirect taxes
Indirect taxes are levied both by the central and state governments, the following are some of
the indirect levies applicable in India :
 Custom levies
 Central excise
 Service tax
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 Central Sales tax
 Value added tax
 Research and Development cess
 Entry Tax
 Octroi
 Luxury tax
 Turnover tax etc
Please contact your Chartered accountant for complete details on
applicable taxes. Should you need our help we are available at +91-
9910124927 | +91-9818014509 or at info@arkayandarkay.com
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