Starting a business in India

So you have decided to take the first steps as an entrepreneur – starting a new business in India – but are overwhelmed because of the sheer number and complexity of legal requirements between you and success?
Don’t worry – you are not the only one who feels this way!

Starting a new business venture in India can be both – exciting & overwhelming.

That is why you need us in your corner to simplify the process and freeing you to focus on the most important thing – how to make your business successful!

Every business is different and needs a best-suited structure for success. Discuss with our experts and find the best type of business structure for you based on your specific requirements. You can select from the most popular business structures listed below or let our experts guide you so that you can start your new business confidently!

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Start your New Business with the business structure best suited to your requirements

Private Limited Company

Private Limited Company is the most preferred corporate structure for starting a new business in India. It has limited liability for owners and offers many options for funding – ideal for start-ups and entrepreneurs.

One Person Company

One Person Company(OPC) is a type of Private Limited Company which is owned by a single person. However, unlike a solo proprietorship firm, an OPC has a corporate structure similar to a Private Limited Company.

Limited Liability Partnership

A Limited Liability Partnership(LLP) is the hybrid of a Private Limited Company and a Partnership Firm. Many small and medium scale businesses as well as professional service businesses such as consulting use LLPs.

Partnership Firm

When two (or more) people create a for profit business – it is called a partnership. Small and medium scale businesses prefer Partnerships because it offers the benefit of lower compliances.

Sole Proprietorship

Solo Proprietorship is the most favored structure to start business in India especially preferred by solo entrepreneurs. It is the least complicated to start but has a more unorganized structure.

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Frequently Asked Questions about Starting a New Business in India

Yes, it is mandatory to register a business entity to establish it and get legally recognition in India. In case of proprietorship firms, it is not mandatory to get a business registration. However it is advisable because you need it for certain activities – such as opening a business account with a bank.

Before registering a new business in India,

Finalize what types of activities your business will do.
Whether you are a solo entrepreneur or starting a business with partners.
The amount of capital will you be investing.

The appropriate structure is selected based on these factors to start the registration process of your business.

The major steps to register a company in India are

Step 1: Get Digital Signature Certificate(DSC) – The Information Technology Act, 2000 requires digital signatures on the documents submitted in electronic form. This is to ensure the security and authenticity of the documents filed electronically.
Step 2: Get Director Identification Number(DIN) – Director Identification Number (DIN) is a 8-digit unique Identification number allotted to individuals who intend to become/already are directors in a company by the authorities.
Step 3: Create an account on MCA portal.
Step 4: Incorporate or Apply for the company to be registered

To choose the correct business structure for you, some of the criteria to consider are as follows:

Are you a sole owner or do you have business partners – For the former Sole Proprietorship and One Person Company are ideal whereas for the latter, other structures can be considered.
Capital requirement. For businesses with more capital requirement, corporate structures are beneficial.

There are some legal requirements and compliances after registration.

Make sure to complete other registrations(for ex – GST registration).
Business specific licenses/registrations – Shop & establishment registration, FSSAI registration, Import-Export Code,  etc. must also be obtained.

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Comparison Between Various Business Structures

Act

Companies Act, 2013

Companies Act, 2013

Limited Liability Partnership Act, 2008

Indian Partnership Act, 1932

No specified Act

Registration Requirement

Registration under Companies Act is mandatory

Registration under Companies Act is mandatory

Registration under LLP Act is mandatory

Unregistered partnerships are legal, but registered entity enjoys certain advantages

There is no registration criteria prescribed. But, registration is recommended

Number of members

Minimum 2 and not more than 200 shareholders

Only an individual,and an Indian resident can be the shareholder

No bar on maximum number of partners, but minimum 2 Designated Partners are required

It is formed with minimum 2 partners, but not exceeding 50

Proprietor is the only owner of the firm

Separate Legal Entity

Yes. It is a separate entity and can own assets in its name.

Yes. It is a separate entity and can own assets in its name.

Yes. It is a separate entity and can own assets in its name.

No. It does not have any separate identity from its partners 

No.  Proprietor and business are considered the same

Liability Protection

Limited up to the total value of shares subscribed

Limited up to the total value of shares subscribed

Limited up to the capital amount agreed to introduce

Partners are jointly and severally liable to pay the debts of the Partnership Firm

Proprietor’s liability is to pay-off all the debts and obligation of the firm

Statutory Audit

Auditor must be appointed within the 30 days of incorporation

Auditor must be appointed within the 30 days of incorporation

Applicable when turnover exceeds INR 40 Lakh or contribution exceeds INR 25 Lakh

Statutory audit not applicable. Tax audit may be applicable based on turnover

Statutory audit not applicable. Tax audit may be applicable based on turnover

Ownership Transferability

Shares can be transferred with the consent of other Shareholders

Shares are not easily  transferable 

Ownership can be changed with consent of other partners

Ownership is not transferable easily, clause of partnership deed should be referred

Firm is no different from proprietor and so ownership is not transferable

Uninterrupted Existence

Yes. Perpetual existence as the management and owners are different. Ownership is easily transferable

Yes. The nominee will take place of member.

Change in Partners or Designated Partners does not affect the existence of LLP

Change in partner leads to dissolution or formation of another partnership firm

Death or insolvency of proprietor directly affects the firm

Foreign Participation

Foreign national are allowed to invest under the Automatic Route

Member, nominee and director must be an Indian resident

Foreign nationals are allowed, subject to FDI Guidelines

Foreign nationals are not allowed to be a partner

Foreign Nationals cannot commence proprietorship business

Tax Rates

Moderate. Tax rate applicable for small companies is reduced to 22%, dividend distribution tax applicable

Moderate. Tax rate applicable for small companies is reduced to 22%, dividend distribution tax applicable

High. With tax rate of 30% on business profit, no tax on income distribution to partners

High. With tax rate of 30% on business profit, no tax on income distribution to partners

Low. Tax rates of individual applied to Proprietorship Firm

Statutory Compliances

High. Companies have to meet high compliance requirements 

High. Companies have to meet high compliance requirements 

Moderate. Lesser compliance requirements compared to companies

Low. Separate ITR of partnership is filed, else there is no filing requirement

Low. No compliances and no requirement to file a separate ITR