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Starting a Business in India from point of view of Registration procedure is little much complex but however if someone have to start business in India then he must follows the rules and procedure, but choosing a right consultant and some research work before starting the business makes us easier to start a Business.

In India there is lot of competitions among various Businesses in almost every Industry. So in this arena if someone has properly registered business and having best price and services then he grab contracts and customers and achieve success, growth and market reputation.

So this blog help you in answer various questions which might comes in mind of every Entrepreneur or business owner before starting a business in India.

In India, there are 3 main types of business structures that can be formed:

1. Sole Proprietorship
2. Partnership
3. Company

1. Sole Proprietorship

Sole Proprietorship is the simplest form of starting business, where business is registered in name of One Person (Individual).All the losses, liability; Profit & Gains are attributable to Individual. The sole proprietorship firm name can be unique or in the name of individual, this depends upon his choice.

As the matter of its registration, individual not to need its registration but for opening of bank Account registration is necessary. Individual can register his Proprietorship Firm according to nature of his business. For example, if he is selling goods then he must register in State VAT (Sale Tax) or if he proving Services then he register in Service tax. Otherwise he may opt for Shop & Establishment registration.

2. Partnership Firm

If there are more than one person involved in the business then we must go for Partnership firm or Company.

Partnership firm can be created by three methods:

a. Normal Partnership Deed
b. Registered Partnership Firm under state law
c. Limited Liability Partnership

If we go for “option a” then all the partner just need to make a partnership deed on stamp paper by paying stamp duty as per state law and notarized the same and start business. On the basis of Partnership Deed, one can apply for PAN CARD for Partnership Firm. This creates a separate Legal Entity different from Partner.

If we go for “option b” then we must follow same procedure as mentioned in above “option a” but difference is that we must register this partnership deed under state registration. This option is quite much complex and involves huge time and money. It is not mandatory to register a partnership, but if registered, legal complications and delays can be avoided during disputes.

And if we go for “option c” then we have to register partnership firm according to LLP Act, 2008. In this option Partnership Firm is registered with Ministry of Corporate Affairs of India. Once the Firm is registered it can put LLP in the end of firm name. For eg. ABC LLP. If we open www.mca.gov.in then there is detail procedure related to registration. This is new concept in India but day by day LLP firms’ increases. There is main difference between this LLP and Traditional Partnership Firms is that, In LLP Partners liability are limited according to their Contribution and One partner is not responsible for act of other Partner but in Traditional Partnership Firms ALL partner is liability are unlimited.

 3. Company

There is another option which is forming a Company whether Private Limited or Limited. There is minimum requirement of two directors in case of private limited and 3 directors in public limited. In this Business Structure all founder willing to invest their money becomes share holder and Directors. Company is Separate Legal Entity, this means that Company can buy sell anything in his name. Here the Owners are called Share Holders and they hold shares in lieu of their contribution. Companies are registered under Companies Act, 2013 with Registrar of Companies. So in the future if their company incurs any debts or liabilities, the co-founders are not liable. Members in a private limited company can leave or join without any restrictions. Death, bankruptcy or withdrawal of any of the members does not stop the functioning of the company.

If they want investors (eg: angel/venture capital/private equity) on board, they can raise capital by selling their shares but this is possible in the case of Public Limited Companies.

Overall, private limited companies provide transparency at all levels for a starting a company and helps the clients or any other person in dealing with Company.

There is quite longer procedure for forming a company for more detail you can go for http://mca.gov.in/ Some key point in this procedure is as follows:-

Step 1: Apply A DIN(Director Identification Number)
Step 2: Approval of Name
Step 3: File MOA & AOA and other forms like form 1, 18,32
Step 4: Once approved a certificate of Incorporation will be issued.


Published by

CA Mohit Bansal
(Finance Professional)
Category Professional Resource   Report

2 Likes   68 Shares   22158 Views


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