Startup Valuation related notice scenario
Your new genuine and innovative business raises money.
To ensure compliance, it also obtains a DCF valuation for the investment based on future projections – who isn’t optimistic? You aren’t looking to evade taxes either – your angel investor genuinely sees the high risk high return potential, the future revenues, the market size, blah blah. Like 9 out of 10 other startups, you realise 18 months down the line that things haven’t quite worked out like you expected. Soon, your tax man notices that they haven’t. He sends you a letter asking you if your DCF projections were really off and if they were – tax is being demanded. By this time, you have spent down the investor’s capital and you are now staring at a tax demand for 30% of that amount (which your company most likely doesn’t have). ”
Hence needless to say while the IT department’s intention may be genuine but not only it increases litigation costs for startups, but also questions valuation experts of startups where genuine investments have been made. This would only add to further compliance headaches for startups, which anyways have to face an uphill battle to try to be compliant with every prescribed measure.
The Govt needs to find a solution to this... more
To ensure compliance, it also obtains a DCF valuation for the investment based on future projections – who isn’t optimistic? You aren’t looking to evade taxes either – your angel investor genuinely sees the high risk high return potential, the future revenues, the market size, blah blah. Like 9 out of 10 other startups, you realise 18 months down the line that things haven’t quite worked out like you expected. Soon, your tax man notices that they haven’t. He sends you a letter asking you if your DCF projections were really off and if they were – tax is being demanded. By this time, you have spent down the investor’s capital and you are now staring at a tax demand for 30% of that amount (which your company most likely doesn’t have). ”
Hence needless to say while the IT department’s intention may be genuine but not only it increases litigation costs for startups, but also questions valuation experts of startups where genuine investments have been made. This would only add to further compliance headaches for startups, which anyways have to face an uphill battle to try to be compliant with every prescribed measure.
The Govt needs to find a solution to this... more
Viewed by 533
View all 7 comments Below 7 comments
Forget about the Startup Valuation related notice scenario and the ease of doing business in India. The best would be to know from Hon'ble P.M. Shri Narender Moldi ji what procedure had he adopted as CM of Gujarat in clearing hurdles for Tatas to shift his factory from WB to his State within a few days. If he could spell out the procedure, he will be really serving the country and its entrepreneurs in the start-up. more
Dec 15
"For a Builder " 'Finances" the Banks also ask same,and toa BOT-PPP Contracting firm also they need same estimates.The bubble bursts,because-these things are now out of "syllabus"for Managers[MBA]. What they now need to look at is insolvency in case of failure-and then finance. more
Dec 15
It has become non-enterprising persons when the start business - they shall get every doubt. It is better for them to have some knowledgeable persons as advisers formally or Informally. First generation entrepreneur will get all sort of Doubts. For doing Business One needs Knowledge in the business, Experience, Guidance, support in the last Money. Marketing is one tough area for any business and most of the first generation Business persons. more
Dec 15
The original policy of Financial Institutions and Banks also is to workout feasibility based on the projections of repayment period. Even for a Proprietory, such projections only will confirm him the reasonable returns on his investment Banks for renewals of even working capital investment, demand at least 2 years projections . In no case, such declaration will be mandatory but depend on the quarterly management of the enterprise and the profit margins in the general market . Any conditions newly set after having had 6 and 1/2 decades experience will definitely to promote industrialism with positive achievement of profits simultaneously addressing the issue of Evasion of Tax . NONE WILL DEMAND INCOME TAX ON LOSSES . more
Dec 15
