How to start a business in India in 2019?

Last Updated at: Feb 19, 2021
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How to start a business in India in 2019?

There are no limits and restrictions on who can become an entrepreneur. There’s no need for experience, a college degree, or even money for the initial investment. What one needs are a drive, a proper plan and a goal. For instance, when Mark Zuckerberg started Facebook during his college days, little did he know that his business’ market capitalization will be more than $500 billion and more than 2 billion monthly active users. Likewise, successful companies like Zomato, Flipkart, etc. started small and today needs no introduction.  

If you’re an entrepreneur aspiring to prove your mettle, chances are your business idea can turn into a million-dollar startup. Here, we guide you on starting a business in India in 2019. 

6 Steps To Writing An Impressive Business Plan

  1. Evaluate your idea

Once you have zeroed in on an idea, start analysing whether your business answers some basic questions like:

What problem is your product or service going to address?

Who will be the target audience?

Will it be a side project or a full-fledged business? 

Who will be the competitors?

What will be the means of running the business whether stores, online 

Is there an international scope for it?

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2. Identify your business structure

When you are clear of all the questions, your next step will be to assess the type of entity that best suits. In India, a startup can be registered as a Private Limited Company, Limited Liability Partnership, Partnership Firm, Sole Proprietorship and One Person Company. 

  • Private Limited Company: If you are planning to seek funding from investors and venture capitalists, to get bank loans and to have shareholders, this should be your choice. A private limited company is the one in which the shareholders and owners are only liable to their shares upon the instance of a financial crisis. In other words, they would not be at the risk of losing their personal assets.  To start a private limited company, you need a minimum of 2 people and a maximum of 200. The Companies Act holds provisions related to private limited companies in India and all such entities must be registered with the Registrar of Companies (RoC). It is also required to file mandatory annual compliance regularly which may lead to legal repercussions if ignored. 

 

  • Limited Liability Partnership (LLP): Professional and advisory firms that do not require equity funding can choose to register as an LLP. Unlike a private limited company, LLP offers the benefit of flexible partnerships wherein partners can choose their own internal structure, and it has fewer compliance requirements with low costs. In LLP, partners depending on the jurisdiction have only limited liabilities. An LLP can have any number of partners, however, a minimum of two partners are required during the registration. 

 

  • One Person Company: An OPC has only one director who is the sole shareholder. An OPC structure has high compliance requirements and cost and limited tax advantages. 

 

  • Partnership Firm: As the name suggests, if two or more persons look to establish a small company, then it can be registered as a partnership firm. This type of entity is controlled by the Indian Partnerships Act, 1932 and allows a maximum of 20 partners. The terms and conditions are bound by a partnership deed which must be signed by all the partners. Partners cannot transfer their interest in the firm to anybody without the consent of other partners. It is highly suitable for small businesses as debts can be recovered from the personal assets of the partners. 

 

  • Sole Proprietorship: In a sole proprietorship, a person who is the owner of the business and runs the business is solely, personally liable for business debts. This type of firm has no separate legal identity under the law. Sole proprietors cannot raise capital by selling an interest in the business. 

 

3. Make it official: When you have decided on the structure you will need to register the business. The registration process may differ based on the type of entity and below are the steps to register the most common type of entity Private Limited Company. 

  • Apply for Digital Signature Certificate
  • Apply for Director Identification Number
  • Check the company name availability
  • Apply for PAN (Permanent Account Number) and TAN (Tax deduction Account Number)
  • Get the Incorporation Certificate from RoC
  • Open a current bank account

 

4. Get government registrations and other licenses: All mandatory government registrations and licenses required to run a registered entity differ based on the place of business, sector or industry, entity type, number of employees, etc.  However, all incorporated business must apply for and obtain PAN and TAN. The former is mandatory for opening of bank accounts and filing income tax returns and TDS returns, while the latter is required by all companies engaged in deducting or collecting tax. 

  •   Shop & Establishment Act: This is a license requisite for shops, eateries,  restaurants, places of interest, theatres, etc. The Act regulates the working conditions of employees with respect to the number of working hours, holidays, payment of wages, health and safety measures, etc. 

 

  • Import Export Code: Often called IEC, this is a 10-digit code which is required by importers and exporters to clear customs and shipment and to transfer money to foreign banks. IEC can be secured with a minimum number of documents easily. 

 

  • GST Registration: GST is mandatory for all companies whose turnover is more than 40 lakhs and Rs 20 lakhs for States under the “Special Category”. In addition, GST registration is mandatory for businesses involved in the intrastate supply of goods irrespective of turnover. 

The above-mentioned registrations and licenses are just examples. 

5. Maintaining accounts and compliance: One of the most crucial things in a startup is to get an Accounting and compliance system in place. Maintaining your books and financial records help you study the cash flow, display the financial health to stakeholders, plan budgets, take key decisions, report profits and more.  

6. Create online presence: In this digital era, it is absolutely necessary for your business to create an online presence. Having an interactive website and social media pages help in showcasing your services and products while attracting potential customers. Before developing a website do remember that Terms of Service and Privacy Policy statements are the most important components, especially if you will be collecting customers’ data like email address and contact number. 

7. Form the team: If you are looking to hire employees, now it is the right time. Make sure to specify the designation, roles and responsibilities for each position clear enough after a thorough analysis. Many startups fail in hiring strategies due to inadequate team, not conducting market analysis, etc. which could be a costly affair. 

  • ESOPs: You can also leverage ESOPs (Employee Stock Option Plans) to attract and motivate the right pool of talent. ESOPs are an employee benefits scheme which offers them an ownership interest in the company. As an employer, it is up to you to issue ESOP as direct stock or as profit-sharing bonuses to employees of your choice. ESOPs, help in reduce incentive-related problems. 

The right to purchase may vest only after a stipulated period of time. ESOPs may serve as a lock-in mechanism as the employees would have to wait until they are vested with the right to purchase the shares of the company. However, founders may want to consider ESOPs carefully before employing them in their compensation packages as they will lead to a dilution of their own stakes eventually. ESOPs are, however, an attractive option for employees as their stake in the business increases as the performance and value of the business increases, which is a good way to retain top talent.

  • Employees’ Provident Fund: If the business employs 10 or more persons and is engaged in any of the industries notified by the government, the business is required to be registered under the Employees Provident Funds and Miscellaneous Provisions Act, 1952.

8. Protect the brand: Brand is one of the key assets of an enterprise, whether it is small, mid-sized or large. Your brand is how a customer perceives your business and identifies in the market. Protecting intellectual property which includes trademark, copyright, patent, industrial designs, software, inventions,  etc, is important. Due to lack of awareness regarding the scope and need for intellectual property (IP) protection, start-ups do not prioritise IP management in their early stages. But when you’re trying to woo investors or pitching to potential team members, it is important to protect both the business ideas and the brand

9. Raise funding: To source funds for your startup, some of the options available are crowdfunding, bootstrapping or self-funding, Angel investment, and venture capital, business incubators, bank loans, government schemes, etc. Getting a business plan with market analysis, organization management, financial projections, marketing and sales strategies help in impressing potential investors. 

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.