Step-by-Step Process for Starting a New Business in India

The Government of India is promoting startups in India to give a boost to the Indian economy. In this lock-down period you may have got some amazing business startup ideas to work with, but are you wondering where to start? This is the right place to get an idea of where to start! Here we will discuss various modes/forms of business entities to register for your new startup idea along with all other registrations needed to get your business platform ready.

So let’s dive in!

Step 1: Deciding & Evaluating the Idea

First things first: Decide upon the idea and write it down with complete details on what are you upto. Answering some basic questions may help you:

What is your product/ service & how does it solve any problem?
Who will be your target customers?
How differently will you address to the issue/problems in the market?
What is your competitive advantage over others?
What is the scope of expanding?

While formulating & evaluating your idea, come up with a business name and/or your brand name. It should be a good brandable name.

Step 2: Selecting the type of Business Entity

After you finalize your idea and frame out your business strategy, now you need give legal shape to your business! That’s the next step!

You have to select what type of business entity suits you best! There are various options to choose from, all of them have their own benefits and drawbacks. Let us discuss various forms of business entities to choose from:

1. Sole Proprietorship:

This is the basic & simplest form of business entity to start with. Unlike other forms of business there is no specific procedure prescribed for setting up sole proprietorship business. It is a form of business entity which is owned & managed by a single person. In India many individual people run their business as Sole Proprietor as its the easiest form of business to setup. No separate PAN Number is required for Sole Proprietorship. Registrations under Shop & Establishments Act (Gumasta), GST Act, or under Department of MSME shall be sufficient proof of existence.

Advantage:

Easy to setup with the least compliance requirements.
Benefit of basic exemption limit & tax slabs under Income Tax.

2. One Person Company (OPC):

One Person Company (OPC) is a new concept introduced by the Government under the Companies Act 2013. Here you can register a private company with only one member. This form provides you the benefit of limited liability & separate legal existence different from its member (i.e. you). But this type of entity has more compliance requirements than sole proprietorship concern. You have to file annual ROC returns as applicable to a Private Company. Taxation will also apply as per company rates.

So if you are starting small, it is recommended to go for Sole Proprietorship rather than OPC as the compliance requirements are higher, and when you grow big you have to convert an OPC into a Private Limited Company (i.e. when your turnover exceeds Rs. 2 Crores).

3. Simple Partnership Firm:

Then comes the partnership firm, where if you have a team of two or more people into your startup idea, this is the simplest form of business entity you can think of! Here, you have to formulate a Deed wherein you decide the operating terms & conditions for your business, capital contribution and the ratio of profits/losses that you will be sharing. This deed shall be adequately stamped in proportion to the contributing capital.

A partnership firm can be formed with or without registering it with the Registrar of Firms. A partnership firm need not be registered and is equally valid in the eyes of law. The only disadvantage of not registering is that you cannot file a case against any partner or any third party in the business.

Requirements:

A Partnership Deed

Advantages:

Easy to set up with less compliance requirements
Best for small & medium sized businesses

4. Limited Liability Partnership (LLP):

A Limited Liability Partnership Firm is an advanced level of Partnership Firm, which provides an added shield of Limited Liability to the firm. In normal partnership firm, all the partners are personally liable for all the dues to the firm, whereas, in LLP the liabilities of partners is limited to the capital contribution agreed. LLP enjoys the hybrid benefits of a partnership firm & a private company.

Requirements:

LLP Agreement (Partnership Deed)
Digital Signature Certificates of Partners
PAN & Aadhar Card of Partners
Electricity/Utility Bill along with Rent/Lease Agreement for Principal place of business

Advantages:

Limited Liability of Partners
Separate Legal Entity distinct from partners
Less regulatory compliance as compared to company
Best suited for medium & large sized business

5. Private Limited Company:

Best for medium to large sized businesses. If you want to get funding from investors, venture capitalists or banks this is a good choice for you! It has a separate legal existence different from its owners. You need minimum 2 and maximum 200 people to form a private limited company.

Requirements:

PAN & Aadhar Card of Directors
Digital Signature Certificates of Directors
Articles & Memorandum of Association (Legal documents binding on the company, its directors & shareholders)

Advantages:

Limited Liability of promoters
Separate legal entity distinct from its owners
Improve credibility by being registered as a corporate entity

6. Public Limited Company:

This form of business structure is best suited for large sized businesses. By incorporating a public limited company, you can raise funding in various forms. If you are planning to raise capital from general public through a public offer than this is the form of organisation which allows you to do so. This is the highest form of legal structure.

Requirements:

PAN & Aadhar Card of Directors
Digital Signature Certificates of Directors
Articles & Memorandum of Association (Legal documents binding on the company, its directors & shareholders)

Advantages:

Limited Liability of promoters
Separate legal entity distinct from its owners
Improve credibility by being registered as a corporate entity
Can raise capital from general public
Shares are freely transferable

Step 3: Registration with Tax Authorities

After you have incorporated your business entity, now is the time to get your business registered with the Tax Authorities.

• Getting Your PAN Number:

Firstly, you need to apply for Permanent Account Number (PAN) for Income Tax, as it’s the starting point! In every other registration with tax authorities, they will demand your PAN number. It will also be needed in filing your Income Tax returns, opening bank account, etc. PAN number can be applied online through Income Tax Department’s websites. It usually takes 15 to 30 days to get your PAN Card delivered at your place.

Note: You don’t need separate PAN number in case of Sole Proprietorship!

Get your Personal PAN Card online within 10 Minutes! Click here to apply!

Requirements for PAN Card:

For Individuals – Just your Aadhar Card
For Partnership Firm – Copy of Partnership Deed
For Company & LLP – Copy of Certificate of Registration issued by Registrar of Companies/LLP

• Getting TAN Number:

If you think you will be liable to deduct or collect Tax at Source, then you have to apply for TAN (Tax Deduction & Collection Account Number). It is recommended to get TAN for Companies, LLP and Partnership Firms. TAN number can also be applied online, Click here!

• Getting GST Number:

You need to register under GST if you think your annual turnover will exceed Rs. 40 Lakhs (Rs. 10 Lakhs for North East & Hill states). Note: No such threshold for certain specified class of businesses. Under GST normally a business has 2 choices:

Requirements:

PAN & Aadhar Card of applicant/promoters
Proof of Business Registration/Incorporation Certificate
Address proof of Place of Business (Utility Bill + Rent/Lease Agreement/Consent Letter)
Digital Signature Certificate (In case of Companies & LLP)

• Professional Tax Registration:

After getting your PAN number you have to apply for registration for Professional Tax under respective state. You can apply for Professional Tax online via respective State Commercial Tax websites. You have to pay professional tax annually (Approx Rs. 2500 per employee)

Requirements:

PAN number
Proof of Business Registration/Incorporation Certificate
Address proof of Place of Business (Utility Bill + Rent/Lease Agreement/Consent Letter)

Step 4: Opening Current Account with Bank

After obtaining PAN number, you need to open a current account in the name of your business with any bank (Recommended to open account with Nationalised Banks).

Requirements:

PAN number
Proof of Business Registration/Incorporation Certificate
Address proof of Place of Business (Utility Bill + Rent/Lease Agreement/Consent Letter)

Step 5: Other Government Registrations & Licenses

There are various other registrations & licenses required from the government to enable you to run your business. Let us discuss them in brief:

• Registration under Shops & Establishment Act:

You have to register your business under the Shops & Establishment Act of the respective state, which is better known as Gumasta License. You can get its form from the Municipality of your city. In case you are located in a village, you have to approach the Gram Panchayat for the same.

• Registration under the Department of MSME (Udyog Aadhar):

If you are manufacturing concern or a service provider, you can register under the Department of Micro, Small and Medium Enterprises (MSME) which provides various benefits for new businesses. Such as waiver of stamp duty & registration fees, reduced rate of interest from banks, concession in electricity bills, preference in allocation of government tenders and many more!

Udyog Aadhar can be applied online through Udyog Aadhar website.

Requirements:

Aadhar Number of proprietor/authorized person

• FSSAI License:

If you are into food business, then you have to get FSSAI license. FSSAI stands for Food Safety and Standards Authority of India. There are basically three types of registration under FSSAI viz.

(1) FSSAI Registration (For Petty Food Business),

(2) FSSAI State License (For Medium Food Business), and

(2) FSSAI Central License (For Large Food Business).

FSSAI Registration is required if your annual turnover is upto Rs. 12 Lakhs. But if your turnover exceeds Rs. 12 Lakhs per annum, then you have to apply for FSSAI State License, and if you plan to operate in more than one state, then you have to obtain Central License.

Requirements:

Passport Photo
Id Proof (Aadhar Card, PAN Card, etc)
Declaration Form

• Import Export Code (IEC):

If you are into import – export business, then you will require an Import – Export Code (which will be your PAN number only) to import goods in India and to avail benefits under export scheme for exporting goods outside India.

According to the notification of DGFT, now the merchants importing/exporting goods, registered under GST shall quote their GSTIN, the PAN of the merchant shall be construed as new IEC code.

For merchants who are not liable to register under GST, shall have to apply for IEC code for importing/exporting goods.

Requirements:

Pan Card & Aadhar Card copy
Cancelled cheque copy of Current Bank A/c
Address proof of Place of Business (Utility Bill + Rent/Lease Agreement/Consent Letter)

Step 6: Building your brand & protecting it

Branding is very essential now-a-days to stand out from the crowd! While finalizing your business idea, you should have come up with your business name/brand name. Now, after registering your business and alongside getting all the necessary registrations you should focus on building a brand for your business. The first step to this is getting your logo!

• Get Your Logo:

Logo is the most important part of your branding. People identify brands by their logos. You think of Coca-Cola, its logo will instantly strike on your mind. Think of Tata, you will remember where you last saw its logo on a car/truck or maybe you own one. Sometimes some commodity is particularly demanded by its logo/brand name (For example Colgate is demanded in rural areas instead of toothpaste).

We can help you get your logo designed!

• Register Your Trademark:

Building a brand takes a lot of effort and time, so by registering your brand name/logo protects your brand from any unauthorized usage. When you grow big, many people may start using similar brand names/trademarks as of yours to get undue advantage of your reputation. To make sure this does not happen, you must register your trademark. Registering your trademark will also boost confidence in your customers. Trademark can be filed for logo or for the word (Wordmark).

Requirements:

Copy of Logo, if logo not provided, application can be filed for the word
Signed Form 48
Proof of Business Registration/Incorporation Certificate (For other than Individuals)
Udyog Aadhar Registration Certificate (If registered)
Copy of Pan & Aadhar card of Individual/Authorized Signatory

Step 7: Getting Digital

In today’s times digital existence of your business is very important. It helps you to build your brand, it is vital in spreading awareness about what do you do, it can bring more business, help customers find you, book appointments with you, provide feedbacks to you and a lot more! There are many ways of getting digital, but the three main ways are (1) Getting your business website, (2) Listing your business on Google, and (3) Building Social Media presence. Let us discuss each of them:

• Getting Your Business Website:

A Website for your business can provide a lot of information to your stakeholders and save your time. A business website helps you to build credibility amongst your customers. A website can help your customers to know more about you, book appointments with you, find where are you located and can contact you. You can provide testimonials to attract your potential customers, or can also sell your products/services to them online.

We can help you to get your business online with an amazing website!

• Listing your business on Google:

Google is the biggest and most used search engine worldwide. For anything you want, you search it on google and it will provide results matching your search. Google also provides Local Business listings. Sometimes you may be searching for a restaurant nearby, and a list of restaurants near your locale would show up! That is Google Local Business Listing. It helps people find/contact you easily!

Google business listing provides many leads to your business and it’s completely Free! You just need to go to google business listings, point out your location, add your complete address, your contact information and a small intro on your business along with some pictures of your place or the products you are offering and it’s good to go.

We can help you set up your business listing on Google!

• Building Social Media Presence:

Social media is rapidly growing in India and has become very popular amongst youth and middle – aged group! People tend to spend much time on various social media platforms and that’s where you can attract their attention to your business. By making a business page on social media platforms such as Facebook, Twitter, Instagram, etc. you can create brand awareness, showcase your products/services and get business leads & feedback from your customers. You can also do paid advertising for promoting your business on these platforms. People can find & learn more about you and can interact with you on social media which helps creating bond with you & your customers!

We can help you set up your business pages on Facebook, Twitter & Instagram!

I hope the steps provided here, gave you the clear idea of the process for starting and registering a new business in India and getting your business digital in this ever growing digital world.

We help you in incorporating your new business along with all the registrations and licenses required for a new business. Leave all your worries on us; we will guide you at every step!