Hi, We have started a small Pvt limited company on October. The directors and partners of my company are my mother and my friend. We have rented a property and building before starting the company. My wife and I paid around five Lakh as an advance for the property before the company come in existence. As we are working, we do not want any shares in company now. What is the best way to convent the amount (5 Lakhs) spend by us to shares to my mother? (Other than retuning the money to us and we gifted to my mother the same and transferring from mother’’ account to company account). Note : we have enough authorised capital to issue the shares
Dear sir,
In the given case it is not possible to directly convert the trasanction into shares.
However following can be done:
You can record the trasanction first as unsecured loan of your mother in the company which was paid by you on behalf of your mother.
Than company can repay the amount to mother unsecured loan and same day you can brought back that amount from your mother into company as her share acqusition money
Even I have given the money from my account , can we account it as an unsecured loan form my mother ?
Yes its respective effect you need to provide in your personal and mother account.
so the transaction will be like you have paid on behalf of your mother so in place of cheque payment to the third party your mother has use payment method of adjustment of your account.
Hi,
Hope you are doing well !!
No, you can not directly convert the transaction into shares.
Yes, you can account it as an unsecured loan from your mother.
Record the transaction as unsecured loan from mother and paid by you on her behalf.
Effectively, it will be treated as share acquisition money received from your mother.
- Company can issue shares to you against payment of advance rent and later on you can transfer shares to your mother.
Yes you can repay the loan given by you and your wife to your mother in the form of shares.
However it will raise two query one in the audit report of company as it would show repayment of loan by modes other than account payee cheque which can raise penalty issues and second you will have to show loan to be recovered from mom as originally you were not required to pay any money to her, so undertake the transaction keeping this points in mind.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you
Let it be shown as unsecured loan in company's book given by you. (Interest Free Loan)
In case if you decide to gift that money to your mom & show that your mom has invested it in company. It is quite possible that gain arising out of that money is taxed in your hand.
Safest bet will be to let in be shown in books of company as unsecured loan. (Even showing it as unsecured loan by mom wont be an issue. Provided you get a gift deed prepared that you have donated that money to mom.)
Hi
Showing it as unsecured loan from mother can be fine.
