How to start a Software Company in India?

Last Updated at: Dec 23, 2020
How to start a Software Company in India?

India has seen an upsurge in the coming of software companies. With the tech-movement throughout the globe, we see more and more software companies in the market. Starting a software company may be quite interesting and at the same time challenging, given the legal complexities and procedures. You may be in an anxiety-driven rush to build an amazing software product, to onboard customers, to design new ideas for creating that “cool” workstations, etc.  

One must know that the regulating statute for all software companies is the New Companies Act, 2013. In this article we will brief you about the following topics: 

  • What are the basic processes to register a software company in India? 
    • What are the legal procedures used to start a software company in India?
    • Basic things to know before setting up your company

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What are the basic processes to register a software company in India? 

The first and foremost step to proceed with the registration of your software company is to find a unique and descriptive name and get it registered with the Registrar of Companies. Once the name has been registered, move to the next step of obtaining a Company Identification Number or CIN as it is generally known. Now for the next step, before the Registrar of Companies (RoC) make a submission of all documents and required legal forms. Please remember to be as descriptive in the submissions as possible. Include the name of all shareholders, total amount of share capital, funds and all the other relevant information. On the verification and approval of the submission, you legally own the said software company and the next step will be to apply for a certificate of registration.

What are the legal procedures used to start a software company in India?

The legal formalities related to starting a software company in India is two way- one is the pre-registration process and the other is the post-registration process. So, the pre-registration process includes the following formalities:

1. Obtaining Directors Identification Number or DIN: Identification of directors is the first and foremost step towards starting a new software company in India. Ideally, the number of directors should be between two and eight, neither more nor less. All the directors must have a separate DIN. Directors can obtain DIN by submitting their identity proof like Passport, Voter’s ID and PAN card, and residence proof like Ration card, EB bill, etc. 

2. Reservation and registration of a Company Name with the Registrar of Companies: In order to register the intended name for your new software company, you need to run through a Company name search to check if your preferred name is available or not. If it is not available, you may have to come up with alternative names keeping in mind the MCA guidelines for naming.

3. Application for Certificate of Incorporation: The next step is to apply for obtaining the Certificate of Incorporation. At this stage, you need to draft a Memorandum of Association including the company’s first directions and operations thereof. While applying one has to submit this application along with the form 1A at the official website of the concerned department. 

4. Get Digital Signature Certificate (DSC): As per the provisions of the Information Technology Act, 2000 a company is required to have a valid Digital Signature on the documents submitted electronically. This also ensures the authenticity or security of documents filed electronically. 

Basic things to know before setting up a software company

Here are some tips for you to know before you start building a successful and powerful startup. 

Choose an appropriate entity: With different types of entities like sole proprietorship, private limited company, limited liability partnership company, etc, selecting the entity that fits your particular business needs and goals is of utmost importance. Try to get professional business guidance from Lawyers, Chartered Accountants and Company Secretaries who can help you with assessing the options. 

Form the right team: To get your product off the ground you need the right mix of traits, skills and expertise. A strong team will be willing to support you and offer their piece of mind rightly in whatever key decisions you make for the growth of your business. Also, ensure to get the important legal documentation like Founder’s Agreement or Partnership Agreement, Employer agreement, etc to prevent any disputes in the future. 

Focus on customer’s pain points: At times entrepreneurs once they begin developing an idea they may get deviated from their main focus and end up developing something else which may or may not be useful. But it is important to create products that people want to buy and are actually in need of. As a thumb rule, every decision you make must answer this question, “Will this solve my customer’s problem?”

Test, analyze and iterate: Getting the product perfect the first time is highly impossible for a startup. Testing your software helps in determining and rectifying the bugs and ensures quality, thereby increasing customer satisfaction. There may be a lot of mistakes and failures but each iteration brings you a step closer to achieving your vision. Also, you can continue the testing, analyzing and iterating process even after your product is launched. 

Here are some benefits of company incorporation/registration:

Company incorporation

Company incorporation

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