START A BUSINESS
Startups require a great deal of research, hard work and dedication to take off and become a success. The most important thing that one needs to focus on while starting a startup is the ‘finances- giving your business a legal existence’.
Starting a business in India has become considerably easier over the last two years. It now takes 35 days to register a company in Mumbai, compared with 71 days a year ago and 89 days in January 2004. The improvements are a result of computerizing the process for obtaining tax registration numbers—both Personal Account Numbers (PANs) and Tax Account Numbers (TANs). Additionally, the stamp duty can now be paid through authorized dealers (banks) as well as through the stamp office.
Decide on a Business Structure
When you have determined the viability of your business concept and you’re ready to set up your business, one of the first steps is to register your name. But before doing so, you must decide if you’re going to be a sole proprietorship, a partnership, a corporation, or a society. Each has important implications for liability, taxation, and succession planning.
There are a few things to consider when setting up your business structure. The most common business structures in India include:
- Sole proprietorship. If you plan to operate the business on your own, either under a business name or your own name
- Partnership. If you plan to operate the business with one or more partners
- Private Limited company. A type of company that offers limited liability, or legal protection for its shareholders but that places certain restrictions on its ownership. These restrictions are defined in the company's bylaws or regulations and are meant to prevent any hostile takeover attempt.
- LLC. A corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities.
- Joint venture. A commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities.
A major difference between a corporation and a sole proprietorship or partnership is that in a corporation, no individual person is responsible or liable for debts (unless specifically outlined in a contract or legal document for your business). Also if any members of your business leave or are replaced, it won’t affect the business as a whole and operations can continue, uninterrupted.
It may surprise you, but doing almost any business in India, or even running any kind of office or establishment, requires several licenses. Some licenses are simple tax registrations. Some businesses just need a trade license or Shops and Establishment Registration. For some specific activities like manufacturing and export-import, you may need a bunch of licenses. For employing more than 10 employees, you may need various labour and employment related registrations. Not having these things in order when you are growing fast can be fatal and slow down investments, as investors will ask you to first sort of license issues before they put in money. These things are seriously looked into during any legal due diligence before investments are made.
Also, not following licensing norms leads to fines, costly legal suits and even business shut-down. If you are a business owner in any sector, you better have a sense of what licenses are essential. You should also know what are the important license conditions and ensure that these conditions are not being violated in course of your business.