Mother-Daughter Home Decor Business

Client Profile

• Business: Handcrafted home decor items
• Founders: Mother (55) and daughter (28)
• Current Structure: Partnership firm
• Stage: 2 years old, ₹1.2Cr revenue

The Challenge

Sunita and her daughter Ananya had been running their home decor business successfully for 2 years as a partnership firm. They sold on Amazon, Flipkart, and their own website. Now they faced limitations:

• Partnership structure limiting growth potential
• Unable to raise funding (investors wanted Pvt Ltd structure)
• Personal liability concerns as business scaled
• High personal tax burden (no corporate tax benefits)
• Succession planning concerns (Sunita wanted clarity for family)

Our Solution

Phase 1: Structure Analysis & Planning (Week 1)

Evaluated options:

1. Continue as partnership: ❌ Limited fundraising, unlimited liability
2. Convert to LLP: ⚠️ Better liability protection but still funding limitations
3. Form new Private Limited: ✅ Best for fundraising, limited liability, professional image

Recommended approach: Form new Pvt Ltd company, transfer business from partnership

Phase 2: Incorporation & Transfer (Week 2-4)

Step 1: New Company Formation

• Incorporated
• Share capital: ₹10 lakhs (1,00,000 shares at ₹10 each)
• Shareholding: Sunita 60%, Ananya 40%
• Directors: Both appointed

Step 2: Business Transfer

• Slump sale agreement from partnership to company
• Transferred all assets:
  • Inventory: ₹18 lakhs
  • Furniture & fixtures: ₹3 lakhs
  • Brand name, customer database, IP
• Assumed all liabilities:
  • Vendor payables: ₹8 lakhs
  • Working capital loan: ₹5 lakhs

Step 3: Regulatory Transfers

• Transferred GST registration to new entity
• Updated all marketplace seller accounts (Amazon, Flipkart)
• Changed bank account signatories
• Updated vendor and customer contracts
• Professional Tax, TDS, and other licenses updated

Step 4: Closure of Partnership

• Filed for partnership firm dissolution
• Cleared all partnership liabilities
• Final accounts and tax returns filed
• No tax incidence due to slump sale treatment

Phase 3: Post-Conversion Setup (Week 5-6)

Corporate Governance

• Board meeting structure established (quarterly)
• Clear role division:
  • Sunita: MD, product development, artisan relations
  • Ananya: Director, marketing, eCommerce operations
• Hired virtual CFO services for financial planning

Fundraising Preparation

• Clean cap table created
• Shareholders agreement drafted
• Prepared for potential investor round
• Financial statements restated in company format

Legal & IP Protection

• Trademark application for brand name
• Employment contracts for 8 team members
• Vendor agreements standardized

The Results

Immediate Outcomes:

✅ Pvt Ltd company operational in 6 weeks
✅ All business transferred seamlessly (zero customer impact)
✅ Professional structure attractive to investors
✅ Limited liability protection for personal assets

Business Impact (12 months post-conversion):

** Fundraising Success:**

• Raised ₹50 lakhs from angel investors (3 months after conversion)
• Valuation: ₹3.5 Cr pre-money
• Investors specifically cited professional structure as confidence factor

Tax Efficiency:

• Partnership tax burden: 30% + surcharge on Sunita's income
• Company tax: 25% + lower dividend tax for shareholders

Growth Acceleration:

• Revenue grew to ₹2.8 Cr (133% growth)
• Expanded to 120+ SKUs from 45
• Launched Amazon Global (export) program
• Hired professional CEO (Ananya moved to CMO role)

Succession Clarity:

• Clear ownership structure protects family
• Ananya's path to majority ownership defined
• Professional board established for governance

Cost-Benefit Analysis:

Investment in Conversion:

• Professional fees: ₹75,000
• Stamp duty & registration: ₹25,000
• Total: ₹1,00,000

Returns in Year 1:

• Tax savings: ₹3.5 lakhs
• Fundraising enabled: ₹50 lakhs
• Credibility with suppliers: Better payment terms
• ROI: 350%+ in year one

Client Testimonial

“We were nervous about the conversion - would we lose customers? Would Amazon delist us? Task360 managed everything so smoothly that not a single order was affected. The best part? Three months later, we closed our first investor round. The CA who did due diligence said our clean structure made the process 10x easier. That ₹1 lakh we spent on conversion probably saved ₹5-6 lakhs in fundraising hassles.”

Key Takeaways

✓ Partnership → Pvt Ltd conversion enables fundraising and growth
✓ Slump sale structure minimizes tax impact on transfer
✓ Professional structure matters to investors, banks, and platforms
✓ Proper planning ensures zero business disruption during conversion
✓ Investment pays for itself through tax savings and fundraising access
✓ Family businesses need clear succession structures