how to compute the tax liabiltity for land development business

[Indudhar K]

Myself and other friends totally 20 members,are interested in doing the business of land purchasing and selling (land developing) real estate nature. whether we should form a partnership firm or Pvt Ltd Company, which is best suitable for our business and how is the tax computed on our business.. Please guide me..

[CA Rachit Agarwal]

If the business is on larger scale, company can be incorporated.

Consult your consultant for the incorporation of the company.

[rishi mohan]

Sir,

With the involvement of large number of members it is advisable to form a private limited company, where 20 members can perform easily. Company shall be a single legal entity and same shall have a separate identity in the corporate field. You may go for the incorporation of a private limited company.

Income of both the companies and firms are taxed at same rate 30%. Formation of Partnership Firm is quiet easy with drafting a deed and the same may or may not be registered with Registrar of Firms. But for Company, it involves a lengthy process and also u need to pay a lump sum depending upon your authorised capital. But depending upon the strength i.e 20 numbers, it is advisable to form a corporate.

[pawan yadav]

Formation of partnership firm instead of private limited is an easy  job while incorporation of firm takes shorter period as compare to company , there is similar tax affect  either incorporate company or forms partnership firm i.e. 30% tax rate

[DEV KUMAR KOTHARI]

many more factors are required to be considered like (a)  how much capital will be introduced by each of member, (b)  what will be forms of introduction of capital - cash and assets (land and other properties) and proportion of such capital introduced by various members, (c) the strength of friendship vis a vis commercial and financial aspects (d) the degree up to which friendship can be maintained and degree at which it may start cracking (e) joint business is to be managed by some of representatives, if all 20 put in their heads  then business will , most likely not run, there will be no decision making so - the group of working partners and there dependability  and confidence level are  to be considered

AI Summary

Choice of business entity affects governance and tax incidence for land development; prioritize management and capital structure over tax differences.
Choice of entity for a land development business affects legal personality and management: a private limited company offers a separate legal identity and centralized management suitable for many members but involves longer incorporation and higher initial costs; a partnership firm is easier to form but requires clear operational arrangements among active partners. Tax computation treats land purchasing and selling as business income and, per respondents, companies and firms face comparable tax incidence; therefore entity selection should be guided by governance, capital contribution form, management delegation, and member stability rather than by tax differential.