Sales before incorporation of comapnay
This query is : Resolved
06 August 2012
Dear experts,
Company has incorporated in April 2011 but it has started commercial operations from Dec 2010 onwards. It has raised invoice for the services provided from Dec 2010 to March 2011 to the customers.
Nature of industry of the company is Service Industry.
Please tel me what will be the legal implications in this regard?
Also suggest the accounting treatment for the profit earned and income received during the pre incorporation period?
Company has incorporated in April 2011 but it has started commercial operations from Dec 2010 onwards. It has raised invoice for the services provided from Dec 2010 to March 2011 to the customers.
Nature of industry of the company is Service Industry.
Please tel me what will be the legal implications in this regard?
Also suggest the accounting treatment for the profit earned and income received during the pre incorporation period?
06 August 2012
Hi
Preliminary contracts are contracts purported to be made on behalf of the company before its incorporation. Before incorporation, a company is not in existent and has no capacity to contract.
Consequently, nobody can contract as agent on its behalf because an act which can be done by the principal himself can not be done by him through an agent. In {Kelner v. Baxter (1866) L.R. 2 C.P. 174} it was held that a pre incorporation contract can not be retified by th company after incorporation.
Preliminary contracts are contracts purported to be made on behalf of the company before its incorporation. Before incorporation, a company is not in existent and has no capacity to contract.
Consequently, nobody can contract as agent on its behalf because an act which can be done by the principal himself can not be done by him through an agent. In {Kelner v. Baxter (1866) L.R. 2 C.P. 174} it was held that a pre incorporation contract can not be retified by th company after incorporation.
06 August 2012
Dear Ajay Mishra,
Thanks a lot for our valuable reply.
The company has given services without any contract before incorporation. After the incorporation only company has entered into the contract and continued given services.
Only thing is that company has raised an invoice for the period before incorporation.
In the above circumstances please tell me what are the consequences?
Thanks a lot for our valuable reply.
The company has given services without any contract before incorporation. After the incorporation only company has entered into the contract and continued given services.
Only thing is that company has raised an invoice for the period before incorporation.
In the above circumstances please tell me what are the consequences?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Tax implications of gift to maternal uncle
- Closure of a PVT LTD company
- Input Tax Credit Puf panels
- 26QB correction - no data available error for fully consumed/processed with default
- Real estate business by a partnership firm where both of the partners are SC/ST
- ROC filings for the first year of incorporation
- When I Login E-invoice portal with waybill user id and pw, it is showing 3011 error data
- TDS on Purchase of Immovable Property in case of Co Owner
- How to open attachment in 23ac xbrl
- Liability to RCM in case where Power of attorney is given.
- Income tax planning
- Please help with SAC Codes (6 digits) for below mentioned services provided by Chartered Accountant
- Printing Press under Composition Scheme
- 140-A Tax Wrongly Paid PAN No
- CSR funding for private limited companies
- Professional tax deduction monthly
- Cross charges verses Isd methof
- Refund Application in RFD 01 for Export without payment of tax
- Ewaybill bill to ship from
- Fail to issue gst invoice from last 46 months
CAclubindia
