Comment on Account Opening Process - Corporate,Partnership Firm, & HUF

Rahul commented on 02 Apr 2018, 02:19 PM

Hello Zerodha Team,

We are four-five people want to start a partnership firm which will be managing partners’ fund by investing in shares (long-term investment – maybe more than a year or two), trading stocks (could be intraday or holding for less than a year) or trading futures and options (intraday or positional trading).

Let’s assume, the name of partnership firm – XYZ and Partners’ capital – Rs 3 Lakhs

Since we have a lot of doubts, we would like to know the following –

1. Is there any problem, from legal point of view, if we use words like Capital, Investments, Funds etc while naming the partnership firm (for instance, XYZ Capital, XYX Investments, XYZ Funds)? Does that create any problem while opening XYZ’s trading and demat account with Zerodha?

2. From the details it is clear that ‘investment clause’ must be mentioned in the partnership deed if one wants to trade in stocks, indices and its derivatives. What is the appropriate “investment clause”? Is it possible for you to help us by sending the snapshot of investment clause via email?

3. Can XYZ open a trading account in its name and trade in index, stocks, futures, options?

4. Can XYZ open a Demat account in its name and hold shares for 2-month period, 6-month period or more than a year? If not, then how can XYX make long-term investment?

5. Suppose a few members already have their individual trading and demat account with Zerodha. Is it still possible to open an account in the name of XYZ, given that these members are now partners in XYZ?

6. As individual is managing XYZ’s fund, can he still trade or invest in his own account?

7. From taxation point of view, will the turnover/profits of an individual be combined with turnover/profits of XYZ?

8. In QA section here, it is mentioned that Demat account cannot be opened in the name of the firm but any one partner. Suppose, in any given year, of the total initial capital of Rs 3 lakhs, we use Rs 50k for trading and Rs 2.5 lakhs for investment (10-months period). Our profit from trading is Rs 10k and profit from investment Rs 30k (partner’s demat). As a partnership firm, XYZ will have to pay tax on profits.
In order to calculate firm’s tax, which amount will be considered as “profit from investment is from a partner’s demat”? Is it going to be a tax on XYZ’s profit or a Partner’s (~who holds Demat) profit or both combined?
Since both XYZ and a partner will have their own PAN numbers, which one will be used?

9. What if a partner already has his own trading and demat account with Zerodha and if XYZ’s demat is being assigned to this partner (-by remaining partners)? Is it possible to have two demat account? Need more information on this.

Please reply as I believe this guidance will provide more clarity on the and solve many of our doubts.

Thank you so much in advance!!

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