Thursday, October 4, 2007

Basics of starting a company in India

Since starting a business in India involves a number of formalities, it is best to be aware of the nature of requirements at the outset.

In an earlier post, we discussed the simple sole proprietorship, which can work under certain, limited circumstances. Most of you will want to set up a company.

Broadly, you need to the tick off the following big items on your list:

Apply for registration (with the Registrar of Companies in the location of the business) along with the important documents namely Memorandum and Articles of Association, particulars of directors etc., along with the registration fee.

A name search will be conducted on the company name options that you submit. People have experienced some difficulty in this area, with the ROC coming back with the objection that names are not sufficiently descriptive of the intended business activity. Also remember that names starting with “India/ India/ Hindustan” are the preserve of the public sector.

Remember that you need a minimum capital of a lakh of rupees.

You can expect the registration procedure to take 3 to 4 weeks.

A Permanent Account Number (PAN, from the Income Tax Department) and a Tax Account Number (TAN) will be needed.

Depending on the location, you may need registrations for Profession Tax.

Likewise, you will need a VAT or service tax registration depending on the nature of business activity. Different services are classified differently, so make sure you’ve got all of them covered, and have a registration for each of the locations where the service is being rendered/ invoiced.

Also check whether any license is required for your specific business.

In case you have more than 20 employees, you will need to register with the Employee Provident Fund office as well.

Given the number of agencies and procedures involved, you will do well to sign up an experienced chartered accounting firm.


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