The world’s corporate giants were not born overnight. Somebody somewhere had a concept, developed a plan, collected funds and launched a small venture. Uniqueness, dedication and superior service nurtured it.
Quality and branding preserves it. A read into history of any major corporation consistently enforces this precept.
Make In India
‘Make In India’, a pioneering program in history of the world’s largest democracy was flagged off on September 25, 2014 by Prime Minister Narendra Modi.
The ‘Make In India’ initiative is three-pronged.
It encourages Indian manufacturers and service providers to upscale quality to meet and exceed global standards. ‘Make In India’ also encourages entrepreneurship among Indians through incentives and offerings for establishing micro, small and medium enterprises.
Once you have zeroed in on an idea, start analysing whether your business answers some basic questions like:
What problem is your product or service going to address?
Who will be the target audience?
Will it be a side project or a full-fledged business?
Who will be the competitors?
What will be the means of running the business whether stores, online
Is there an international scope for it?
If you are planning to seek funding from investors and venture capitalists, to get bank loans and to have shareholders, this should be your choice.
A private limited company is the one in which the shareholders and owners are only liable to their shares upon the instance of a financial crisis. In other words, they would not be at the risk of losing their personal assets. To start a private limited company, you need a minimum of 2 people and a maximum of 200. The Companies Act holds provisions related to private limited companies in India and all such entities must be registered with the Registrar of Companies (RoC).
It is also required to file mandatory annual compliance regularly which may lead to legal repercussions if ignored.
All mandatory government registrations and licenses required to run a registered entity differ based on the place of business, sector or industry, entity type, number of employees, etc. However, all incorporated business must apply for and obtain PAN and TAN.
The former is mandatory for opening of bank accounts and filing income tax returns and TDS returns, while the latter is required by all companies engaged in deducting or collecting tax.
To source funds for your startup, some of the options available are crowdfunding, bootstrapping or self-funding, Angel investment, and venture capital, business incubators, bank loans, government schemes, etc.
Getting a business plan with market analysis, organization management, financial projections, marketing and sales strategies help in impressing potential investors.
Brand is one of the key assets of an enterprise, whether it is small, mid-sized or large. Your brand is how a customer perceives your business and identifies in the market.
Protecting intellectual property which includes trademark, copyright, patent, industrial designs, software, inventions, etc, is important. Due to lack of awareness regarding the scope and need for intellectual property (IP) protection, start-ups do not prioritise IP management in their early stages.
But when you’re trying to woo investors or pitching to potential team members, it is important to protect both the business ideas and the brand
When you are clear of all the questions, your next step will be to assess the type of entity that best suits.
In India, a startup can be registered as a Private Limited Company, Limited Liability Partnership, Partnership Firm, Sole Proprietorship and One Person Company.
Professional and advisory firms that do not require equity funding can choose to register as an LLP.
Unlike a private limited company, LLP offers the benefit of flexible partnerships wherein partners can choose their own internal structure, and it has fewer compliance requirements with low costs. In LLP, partners depending on the jurisdiction have only limited liabilities.
An LLP can have any number of partners, however, a minimum of two partners are required during the registration.
As the name suggests, if two or more persons look to establish a small company, then it can be registered as a partnership firm. This type of entity is controlled by the Indian Partnerships Act, 1932 and allows a maximum of 20 partners. The terms and conditions are bound by a partnership deed which must be signed by all the partners.
Partners cannot transfer their interest in the firm to anybody without the consent of other partners. It is highly suitable for small businesses as debts can be recovered from the personal assets of the partners.
When you have decided on the structure you will need to register the business. The registration process may differ based on the type of entity and below are the steps to register the most common type of entity Private Limited Company.
- Apply for Digital Signature Certificate
- Apply for Director Identification Number
- Check the company name availability
- Apply for PAN (Permanent Account Number) and TAN (Tax deduction Account Number)
- Get the Incorporation Certificate from RoC
- Open a current bank account
This is a license requisite for shops, eateries, restaurants, places of interest, theatres, etc.
The Act regulates the working conditions of employees with respect to the number of working hours, holidays, payment of wages, health and safety measures, etc.
GST is mandatory for all companies whose turnover is more than 40 lakhs and Rs 20 lakhs for States under the “Special Category”.
In addition, GST registration is mandatory for businesses involved in the intrastate supply of goods irrespective of turnover.
In this digital era, it is absolutely necessary for your business to create an online presence. Having an interactive website and social media pages help in showcasing your services and products while attracting potential customers.
Before developing a website do remember that Terms of Service and Privacy Policy statements are the most important components, especially if you will be collecting customers’ data like email address and contact number.
You can also leverage ESOPs (Employee Stock Option Plans) to attract and motivate the right pool of talent. ESOPs are an employee benefits scheme which offers them an ownership interest in the company. As an employer, it is up to you to issue ESOP as direct stock or as profit-sharing bonuses to employees of your choice. ESOPs, help in reduce incentive-related problems.
The right to purchase may vest only after a stipulated period of time. ESOPs may serve as a lock-in mechanism as the employees would have to wait until they are vested with the right to purchase the shares of the company. However, founders may want to consider ESOPs carefully before employing them in their compensation packages as they will lead to a dilution of their own stakes eventually. ESOPs are, however, an attractive option for employees as their stake in the business increases as the performance and value of the business increases, which is a good way to retain top talent.