Are you curious about to start your own business in India? You don’t want to work under anyone and want to become your own boss.
Then this definitive guide is for you. We have included everything you need from setting up your own business and entire legal formalities you require for a successful startup in India.
Do you know that according to the research of IBM And Oxford Study 94% Indian startup fails within the first five years. And they stated that the main reasons behind these failures is lack of pioneering innovation and not hiring the right team.
So for a successful business your passion, competition in the market and your business plan is crucial at the initial stage. Let’s dive deep to more learn about to start a company in India.
Start A Business In India
Starting a business is not the hardest part then keeping it running successfully. Indian government also encourages individuals to start their own business. Now the government also knows that small businesses are the backbone of Indian Economy.
You can apply for loan to start your own business in India at a lower rate of interest.
In this article you will learn,
- What do you need to Start Your Business In India?
- How to register your Business in India?
- What are the Tax Registrations you need in India?
Do these things before you start a business
1: Find Your Passion
Before starting any business make sure you have an interest in it. Passion is the fuel to keep you working all the time. Your Passion will keep you up even if you feel bored or hate it. You feel strong positive emotion towards your work.
Finding your passion is important if you want to live your dreams.
When you are working with your passion you have great enthusiasm, you don’t count the number of hours you work and you get lost into your work.
You don’t care about challenges, you are ready to take risks to become better at your work.
Business is the kind of thing in which you have to work day and night. You’re not on a 9 to 5 job.
Your employees have the freedom to work 8 hours only. But not to the business owner.
Business is all built upon the customer’s demand and happiness. If you don’t have your personal interest in your work then how can you be able to provide satisfaction to your customer.
So choose that field only, in which you are really ready to put your life and don’t feel lazy when you work.
2: Research and Study Competition To Start A Business
If you have found your passion, now you are ready to research and find competition in your field.
Understanding your competition in your field is a crucial aspect for any business activity.
Also Know this in advance, is it a demanding business in your area?
Does not matter what kind of business you are going to start, researching about the competition is always important.
You have to anticipate what your targeted customers are and competitive companies in your business field.
Find out in advance that there are enough people who can buy your product or service.
Research about the companies that already provide the same service as you are going to. Keeping eyes on your competitor is a great strategy to grow your business.
This does mean you are spying on your competitor, you just want to provide better services than them.
Search for the market gaps, find in which your competitors are lacking so you can provide better service. Also find what your customer wants and their unmet consumer needs.
If your business is on a large scale and you do not know much about your competition. Then you can search Google, check the latest trends in the market using Google Trends.
Check the social network of your opponent. If required, subscribe to their newsletter if they have any to get a better understanding of how they are running their business.
You can even directly ask your (future) customer or conduct a survey thay what they need and how you can solve their problem.
3: Make A Business Plan
This point is also the same as the research, but in this you research about your own business rather than your opponent.
Business Plan is serves as a road map that provides direction to the business. This is the document of your business’s future.
Business plan must be convincing for your lenders, investors and most importantly it convinces and satisfies you deeply. Because all your time, money and efforts are on the stake.
In this, you create a document of your business that describes your plan and strategies. Along with the information on how you are going to implement these plans to get desired results.
You put all the details on your business plan about your product or services you are going to provide. And how your product or services are helpful for your customer.
It provides concrete, factual evidence showing your idea for a business and sounds reasonable and has a high chance of success.
Its should includes:
- A brief description of your products and services
- Summary of objectives
- A view of growth potential
- An overview of funding requirements
These were the most important points that must be included in your Business Plan.
A clearly written business plan helps you to attract more investors and also helpful if you need a bank loan.
My Advice To start a Small Business
If you are going to start a small business in India. Then it’s better not to take loans from the bank or pull any investor toward your business.
Instead of these options you can ask for your family, friends who can invest into your idea.
Because If you suffer heavy losses in your business then it becomes hard to return the loan to banks.
After starting a business if you think you are in a good position and all your strategies are working, then you can think about the bank loans.
4: Calculate Your Business Cost
Having an idea about your business cost is beneficial for you. With this, you know how much capital needs to invest in your business.
One of the good reasons for Calculating Your Business Cost is that you get the estimate of how much capital you require to start a venture, so you never get out of resources
1: Calculate the cost of your assets- Assets are long term investment and you always need. For example, if you are starting a salon business that might include tables, chairs, mirrors, scissors, combs, hairdryer and other long term assets.
Other assets like you also need land to build a salon. So, calculate them in advance.
List spending on expenses- These expenses are not long term assets but are monthly or yearly based. Like the money you spend on building your website is a yearly expense and the salary of your employee is a monthly expense.
And other expenses like the costs of fixing up your office or other tax registration.
Money You need for the first Year- This includes the money you need in your bank for the first year. Because your business might not be able to produce much sales in the first year. So to cover these expenses you need some insurance, like cash in your bank.
5: Find Perfect Location to start a business
Location is where you establish your business. A right or wrong chosen location can impact your cost and revenue.
Your startup must be in the right location, where you can easily get most of your customers. Your business must be located where the population of the city directly connects with your services or products.
Sometimes a competition is beneficial because you don’t need to drive customers by your own.
Why spend much money on advertisements when you have the option to steal other businesses customers, by providing more value to them.
When choosing location keep in mind that-
- Staff is easily available
- There must be Transportation facility
- Check the Price of the property
- Customer can easily connects your business
- Infrastructure – Like the quality of water, gas, electricity etc.
6: Manage Accounting System for you business
If you want to manage your accounting and business is not big enough then you can handle this part by yourself.
Usually an accounting person is who calculates the cost of every aspect in your business. His duty is to track every expense, how much you spent and the salary of the employees.
He monitors and analyzes accounting data and produces financial reports or statements.
It’s better to hire an Account manager for large businesses.
7: make a Business Team
A team is made of two to more people who work together to achieve a specific goal. Building a team means finding people with the same interest and mix of professional skills.
Always find a team who can devote everything to put your business ahead of the market.
Look for people who are efficient and happy to work with your business. Then a large list of people it’s better to choose only 3 to 4 first then talk to them.
- Talk about the atmosphere you want in your business
- Talk about your future plans
- Use ‘we’ instead of ‘I’ while explaining about your business
- Find if they have any experience already
- Do they can work in teams
- Are they positive enough
If they are curious enough to work and have great enthusiasm for your idea. Then you can think about working with them.
Note: 70% of venture capitalists believe that startups fail in india because they fail to hire the right kind of people.
So hire any people wisely, don’t take any risk and choose your team in haste.
Register Your Business In India
After doing all kinds of important work and after taking every decision. Like finding your passion, building a business plan and after choosing your team.
When you start a business in India, it’s also important to register your business.
If you need funding for your business then registration is important. Otherwise not any investor will invest in your business idea.
Registration is important so you don’t face any penalty for doing a business without informing the government of india.
So registration is important whether it’s a small business or on a large scale.
Choose a name for your Business
- Your Business name is your brand, so it must be short and easy to remember.
- You want anyone to think about ice cream if your business is about cars. (Hope you understand my point).
- Your business name must be unique, otherwise there will be a penalty over someone’s claim. You don’t want it to happen when you spend a lot of money on your business.
- Check the availability of the domain name of your business. If you also need a website on it.
Types Of Business Registrations In India
- Sole Proprietorship
- One person company (OPC)
- Pvt Ltd Company
- Limited Liability Partnership (LLP)
1: Sole Proprietorship
If you want control over your business, then this registration serves the deal. With this registration you are solely responsible for the profit and losses in your business.
You are the only proprietor of your business. The other good news about it is that it’s the easiest method to register your business legally.
Sole Proprietorship is helpful for small business owners such as salons, shops, and for other types of small businesses.
Advantages of Sole Proprietorship
- All profit is yours, of course loss also
- No government registration is needed
- No government regulatory paperwork
- You have to pay income tax only on your income (only if its higher)
- Registration fees might be 1 thousand rupees only and it takes 1 to 2 days for registration
How to Register For Sole Proprietorship?
For the registration of this, you need to go to your local authority with these documents-
- Aadhaar card
- PAN card
- Bank account
- Registered office proof (rental agreement or utility bills will require)
If you live in an urban area then you have to go to the municipality and for a small town area you have to go to the gram panchayat for registration and you are good to go.
2: One person company (OPC)
An OPC(One Person Company) allows a single person to incorporate and run a business. OPC was introduced by the Indian government in the Companies Act 2013, which allows everyone to start a business or company in India.
Before this act every company needs to register as an OPC, and needs two directors for a company. But with this act only one person can run a whole company.
Other advantages of OPC
- Lesser Documentation required then private limited
- Complete control of the company
- Makes it easier to get loans from banks
- Only director is required
- You are not personally liable for all the losses if they occur.
With OPC your company name will be like “yourcompanyname pvt.ltd (OPC)”.
How To Register For OPC?
- Obtain Digital Signature Certificate (DSC)- It is the electronic format of paper certificate like a driving License, passport etc.
- Obtain Director Identification Number (DIN)- It is a 8 digit number allotted by the Central Government to the person who wants to become a director of the company. DIN has never ending- lifetime validity.
- Apply for Name Approval- Approve your company name with the “(OPC) Private Limited” mark, like “ABC (OPC) Private Limited”.
Documents required For OPC:
- Memorandum of Association (MoA)
- Articles of Association (AoA)
- Proof of registered office
- Affidavit and consent of director
- A declaration that all compliances have been made File all forms with the Ministry of.
- Corporate Affairs (MCA)
- Collect your certificate of Incorporation
Registration process is the same as the Sole Proprietorship. Application fees for OPC is nearly 5500 and it takes 5-10 days for approval.
3: Pvt Ltd Company
To start a Private Limited Company, you need two at least directors and two shareholders to form a company in india.
To form a private limited company, at least 2 members are required and maximum 50 members are allowed.
It’s a Private Limited Company so it doesn’t have the right to collect the funding from the public. If they can’t raise the funding from the public then it also cannot publicly issue the shares.
Benefits of a Private Limited Company
- The shares of the company are easily transferable to the other person.
- There are more tax benefits in LTDs
How to register a Private Limited Company?
- Digital Signature Certificate– Passport size photograph, Self-attested Address proof, Self-attested PAN card of the applicant.
- Obtain Directors Identification Number(DIN).
- A name registration application needs to be filed.
- You need to draft MOA and AOA. MOA states the objects of the company while AOA specifies the rules and regulations of the company.
- Now file the application through SPICE-E form on MCA’s website and obtain PAN and TAN applications.
When all your papers are ready, you are done with the procedure of your application. Application fees for Private Limited Company is nearly 6500 and it takes 5-10 days for approval.
4: Limited Liability Partnership (LLP)
LLP businesses have more than one owner of the business. This kind of business is mainly run by two or more individuals.
Limited Liability Partnership is required when you are poriessional in your field. Like if you are a doctor, lawyer or engineer then you need to register through the LLP registration process.
With LLP you are not allowed to issue shares for your company. With LLC all the partners have limited liabilities which means each partner is not responsible for another partner’s negligence.
Benefits of LLP
- Easy to start
- Can be two or more owners of business
- Minimum money is required to start
- Low Registration Cost
Documents Required for LLP Registration in India
- Documents of Partners– Address and residence proof, photograph.
- Passport– In case of NRI.
- Proof of Registered Office Address
- Digital Signature Certificate – All the documents digitally signed by the authorised signatory.
Tax Registration For Business In India
Tax Registration is mandatory when you start a business in India. Not only for businesses but also for every person with higher income.
There are the four types of mandatory tax registrations for every type of business in India.
However, for small businesses only GST and MSME is required.
1: GST Registration
GST was launched on 1 July 2017 by the President of India. Businesses whose turnover is more than 40 lakhs per year, they need to register with GST. This process of registration is called GST registration. If you do business without the registration of GST then it’s illegal and results in high penalties.
Document For GST Registration
- PAN card
- Proof of Business Registration identity
- Photographs and address proof of persons in charge
- Business Address Proof
- Bank Account Statements.
GST Registration only takes 2 to 6 days to process your application.
2: ESI Registration
Employee State Insurance Registration is required if your business has more than 10 employees working.
ESI applies to all types of industry whether it’s a small shop, establishment or factories.
It’s kind of insurance run by the Government which is more than medical insurance.
Benefits Of ESI Registration
It covers you with-
- Free medical treatments
So you can focus on your work or business without worrying about your medical insurance.
3: PF (Provident Funds)
This registration is required when your business has more than 20 employees working.
4: MSME Registration
Medium Small and Micro Enterprises is beneficial for your business. Every small business when it gets short of resources then they can apply for MSE loans. It is helpful for getting loans at cheaper interest, easy and hassle free with quick approval .
Benefits Of MSME
- Easy to get loans
- Tax Subsidies
- Assumption Schemes
- Upto 50% off on tenders
- Protection for delayed payments
This is optional, but when you start a business in India, these are the schemes are lot more effective for your business.
So this was the guide on How To Start A Business In India. I try to explain everything from top to bottom you need in stating a business.
As India is growing rapidly, starting your own startup in India is more beneficial. Also you get more help from the government as indian government also encourages young people to start their own business.
Now Small Businesses are the backbone of every nation.
All the explained points are required of you before starting your own company in India. Does not matter if this big company or a small business, you can follow each and every step. I have tried to explain everything, but still if you face any difficulty you can comment below to search for the point on Google for deep knowledge into any topic.