The current economic climate of India is ripe with opportunity for individuals ready to strike out on their own with a business idea. Of course, a lot of groundwork has to come before the actual act of opening shop.
This includes creating a viable business plan, relevant market research, finalizing funding sources and pinning down the business model. Once you have validated your idea with these steps, it is time to delve into the legalities and paperwork involved in launching a business in India. We have listed the main parts of the process below based on a few reliable published sources.
This is not a step-by-step guide but it will give you a sense for the activities you need to complete before hanging a sign outside your door:
Company Incorporation – Initial Steps:
• File the desired company name with the Registrar of Companies and make sure it is available for use.
• Submit the main objectives of the company to the Registrar of Companies (ROC) for scrutiny. You will be informed of approval or any objections within 10 days.
• Obtain a Director Identification Number (DIN) online from the Ministry of Corporate Affairs portal. This process calls for submitting attested support documents as proof of identity and address.
• Obtain a Digital Signature Certificate – a requirement for all those who have to sign ROC forms and related documents. The certificate can be obtained from one of the private agencies authorized by MCA 21.
Stamping of Documents:
• Pay stamp duties and submit various incorporation forms and documents, including unsigned copies of the Memorandum and Articles of Association for stamping.
- Memorandum of association – This lists the main, ancillary, subsidiary and other parts of the company. It also lists the authorized share capital of the company and the names of its first directors.
- Article of Association – describes the rules and procedures for the routine conduct of the company.
- These documents have to be executed by the promoters in their own hand and in the presence of witnesses.
Certificate of Incorporation:
• Submit digital and physical copies of the following documents to the ROC in order to obtain your Certificate of Incorporation:
o Forms e-form 1 (stating that all requirements of the incorporation process have been completed), e-form 18 (informing the ROC of the location of the registered office of the company) and e-form 32 (stating the appointment of proposed directors) have to be filed electronically
o Signed and stamped forms of the Memorandum and Articles of Association
o Initial consent of directors
o Original approval of name letter
o Stamped Power of Attorney documents
• Permanent Account Number (PAN) – A PAN card can be obtained by filing an application with the Income Tax department using Form 49A along with supporting documents. In recent years, the government has tried to simplify this process through service centres such as UTI Investor Services Ltd or TIN Facilitation Centers.
• Tax Account Number (TAN) – This is required for anyone responsible for deducting or collecting tax. Use Form 49B for this and submit it at any TIN Facilitation Centre authorized to receive e-TDS returns
• There is a mandatory registration process for Value-Added Tax (VAT) and other tax requirements such as professional tax and service tax
Labour Law Procedures
• Registration with the Office of Inspector, Shops, and Establishment Act: the steps involved in this may vary by state.
• Registration with the Employees’ Provident Fund Organization: This is required only if the number of employees is 20 or more.
• Registration with the Employees’ State Insurance Corporation – a social security scheme to provide protection to workers in the organized sector and their dependents in contingencies such as sickness, maternity, death, disablement or occupational disease
The steps and procedures described above may vary depending on the state and type of business. Tackle these in a proactive and systematic manner to ensure you don’t get caught in a legal tangle that will delay the launch of your business or hamper its operation.
For more information, refer to:
The Financial Year (FY) of a business is its 12-month accounting period which may or may not match the calendar year. At the end of the FY, books of accounts are closed, profit or loss computed and financial reports prepared for filing with appropriate authorities.