Blog by Quicko

Can you Incorporate a Company for Trading Markets?

Capital market participation in India rose by a record high of 10.4 million in 2020. As trading and investing become more accessible, more and more people are participating in the stock market. With growing participation in Capital Markets, we have been getting this question lately, is it possible to incorporate a company for trading? And if yes, how so?
Let’s weigh our options.

One might think that incorporating a company is beneficial as it allows you to claim expenses, but that could also be done if you are trading in your individual name using ITR-3. So, why are traders keen on incorporating a company for trading in capital markets? These could be some of the possible reasons:

Although, trading income is treated as business income for income tax purposes, they are not required to have the same compliances as businesses from MCA or GST perspective. Here, MCA does not require traders to incorporate a company for trading. Similarly, traders are not required to have GSTIN.

Now, the question is – can a trader have a company for trading?

Yes, you can still open a demat account for trading as Private Limited Company, similar to registering any other company.

But, does it make sense to have company for trading in capital markets?

When a  company is incorporated with the main objective of trading, it comes under the purview of RBI since the  company would be deriving more than 50% revenue from its financial assets, hence such company would have to take an NBFC license.

There are some other points too that come in the picture while going for incorporation of a company:

So ultimately, it is upon the trader and their trading perspective to call the shots about whether to incorporate a trading company by balancing out the pros and cons ¯\_(ツ)_/¯

Got a question? Shoot’em on TaxQ&A and we promise to answer them all in the simplest way!

Considering incorporating a company? Quicko is here to help 🙂

Private Limited Company (PLC) Registration
CS Assisted incorporation of Private Limited Company (PLC) in India.
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Private Limited Company (PLC) Registration
CS Assisted incorporation of Private Limited Company (PLC) in India.
[Rated 4.8 stars by customers like you]
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