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Shalini Singh

Shalini Singh | Updated: Aug 14, 2019 | Category: Legal

Legal Steps for Starting a Business in India

With the passage of years, we see that new start-ups are blooming across the country, ranging in every field from the software industry, food processing industries to the pharmaceutical industries. But most of them do not have the idea of the legal aspects involved in the business. Legal steps for starting a business in India is quiet tiresome and hectic. Company filings and Regulations are not the easy part of any startup or a new business venture. In addition, it digs a great hole in the personal finances of the company.

Here is a quick sketch of the Legal steps for starting a Business in India Government’s Role in starting the Business

Government’s Role in starting the Business

The Ministry Of Corporate Affairs has made it easy for new startups by introducing online registration. The Ministry of Corporate Affairs in India introduced a five in one form called INC- 29 (Integrated Incorporation Form) to make the process of registration easier. With the introduction of this new form, it has reduced the interaction with the authorities at various levels. Now, one can register for a new company by just sitting at the comfort of the home.

A business Entity Incorporation

Before starting the business, one must decide the format of an entity for conducting the business. Selecting the right type of business entity will support the business plan and accelerate business growth. It reduces the tax rate and prevents personal liabilities in case of loss.

Legalise the Contract

The owner of the company, in partnership with its close friend or any other relative, has the trust issue. But in today’s elusive world, uncertainty can take place with anyone. Therefore it is necessary that everything should be discussed, prepared, and signed in an agreement regarding the investment and the distribution of profits.

The issue that needs to be discussed are

  • Dealing with shares of a founder and decision making system of a business.
  • Everything should be recorded in the written format. On the basis of this discussion, a legal agreement should be drawn up in simple terms

Obtaining the required registration and License

A business entity must be registered with various government authorities depending upon its nature and activities. It also requires to file statements with the government on a timely basis.

Following are the various registration and licenses required to operate a business in India

  • IEC (Import Export Code) is required if the business involves import or export.
  • Employee’s PF must be organized in advance.
  • License for the office premises.
  • VAT (Value added Tax) in case if the business involves the sale of goods.
  • PAN (Permanent Account Number) for Income Tax
  • STN (Service Tax Number) if the company is service-based.
  • Professional Tax Registration
  • ESIC (Employee’s Insurance)
  • FSSAI (Food Safety and Standards Authority Of India) license if the industry is food manufacturers, storage, transporters, distributors, etc.

The brands must be trademarked

Protection of the trade name, logo, tagline, and key phrases is the foremost thing while the business is growing. These things must be trademarked so as to avoid misuse. Through a trademark, one can brand and advertise its business. Till the time the business entity is not trademarked, one can start the business using the term “TM” next to its name.

Accounting and Taxation Systems

The accounting system keeps track of the various transactions conducted by the business. It helps in scaling up the operations and finance the growth. A well designed and strong accounting team helps to gain the advantage of foresight in the business.

Business Policies

Well, structured policies provide the best principles of corporate governance at the venture.

Operation Policies

Marketing policy such as advertising guidelines and client satisfaction parameters.

Terms and Condition of Websites

HR (Human Resource) Policy such as retirement, termination, notice, etc.

IT policies such as Level of access, backups

Company’s official assets policy, such as the use of the company’s laptops, mobiles, vehicles, etc.

Rewards policies such as appraisals, increments, benefits etc.

Code of Conduct such as corporate Culture, sexual harassment etc.

Website policies

Privacy Policy, Terms of Use policy and Disclaimer Of liability

Business Systems

Audit Committee, Compensation Committee, and Recruitment process

Selecting a Business Structure.

Sole Proprietorship Firm

It requires one person for the registration in the name of the owner or any other family member if the owner is doing a job somewhere else and usually takes 6 to 7 days or more. The main advantage is that it is easy to start and requires less costing and compliance. If someone is starting a service-based company, then one can start with this and convert it into a product based company when the company grows in the future.

One Person Company

OPC is introduced under the Companies Act, 2013. It has only one shareholder who must be the citizen of India and reside in India. The shareholder has to nominate another person in case of the death of the original shareholder.

Partnership

A partnership is a kind of business venture who agrees to share the profit of the business. In the agreement, the partners complete flexibility and decide on matters like accounting and auditing.

LLP (Limited Liability Partnership)

LLP is a legal entity in which operations are managed as per the provisions of the LLP agreement.

In this, a partner can not be held personally liable for independent or unauthorized acts.

Private Limited Company

A private limited company is a form of a business entity having its own legal existence separate from that of its owners. The ownership can be easily transferred. The shareholders do not actively participate in the management of the business.

Public Limited Company

A public limited company is a form of business entity in which there is a transfer of shares by the shareholders.

Conclusion

Legal steps for starting business in our country requires a lot of effort and is a tedious task. Since, the government’s role in starting the business, has been simplified these days, it is better to put things in the right manner in advance so as to avoid pitfalls in the future, and this can scale up the business successfully.

For anything related to how to start a Business Venture, reach us at LawyerINC

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Shalini Singh

Shalini Singh

Shalini is working as a legal research and content writer from the past 2 years with experience in covering Legal Act and Amendment related topics.


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