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The Legal Procedures involved in starting a Business in India
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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Founding an enterprise calls upon a good measure of anticipations and apprehensions. While the expanse and diversity of the Indian market is ideal for the budding entrepreneur, cultivating a commercial trade demands active and alert engagement with the process. From conception to installation, the course is a long and laborious one, and hence, as an aspirant, it is important for you to acquaint yourself with the sequence in which you can realize each phase.
One of the more definitive tasks to accomplish while setting up a trade is making way through the legal tangle of registering a commercial undertaking. You might find enrolling your business into a lawful certification to be a rather elaborate process, as it entails seeking authorization from numerous arms in administration. This generally involves a series of procedures that run parallel to the logistics of establishing an enterprise, such as sourcing capital or mapping out inventory needs. Each stage is separately processed, documented and approved over varying lengths of time. To ensure each procedure is concluded smoothly, it is best to familiarize yourself with the stages and resources required.
The good news for upcoming entrepreneurs is that while company registrations in India were previously deemed slow, obstructive and ill-organized (considering the month-long applications and attestations), new improved procedures have now been established by the state. The Ministry of Corporate Affairs (MCA) recently introduced an E-form under the SPICe (Simplified Proforma for Incorporating Company Electronically), thus simplifying the incorporation of a company through an online application form and optimizing the process. The government has also established a Central Registration Center (CRC) to offer “speedy incorporation services in line with global practices”. These include reducing the number of procedures from 12 to 6, and processing a number of requirements simultaneously to cut registration time to a brief 6 days — a welcome change for every aspirant!
To make it simple for you, we have listed down the steps involved, which make up the entirety of the process:
1. First, you must obtain a Digital Signature Certificate (DSC) form a source approved by Ministry of Corporate Affairs. This certification validates the SPICe form that will be used for registration details and declarations.
2. You must then obtain the Director Information Number (DIN), reserve the company name with the Registrar of Companies (ROC) and obtain the Certificate of Incorporation with the submission and verification of the SPICe form. These steps, earlier processed independently, have now been integrated into the same approval stage, thus streamlining the first stage.
3. Next, you must obtain a Permanent Account Number (PAN) issued by the Income Tax Department. This step has now been merged with the one used to obtain the Tax Deduction and Collection Account Number (TAN), and together they settle the tax-related authorizations.
4. Further, you must register with Employees' Provident Fund Organization (EPFO) and for medical insurance (ESIC) which is state funded.
5. Then register for VAT online and Profession Tax. You may need to register for other taxes subject to trade and location.
6. It is now essential to open a bank account to induct the company into the financial system.
7. Finally, register with the Shops and Establishments Act, which is chiefly useful to the unorganized sector of the economy.
8. Additionally, do check for state specific and industry-specific guidelines that may require further registrations or documentation. Compliance with these at the start would minimize operational hassles when the business gets up and running.
This thus concludes assembling the legal parameters of establishing your own trade. Once registered, operations can commence as you make your way in the world of free trade.
Read Also: How to run retail or hospitality business
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