What Are the Major Formalities for Setting up a Start-up in India? Setting up a new business sounds very simple. However, you must remember that you would need to go through a certain process to setup a startup business in India. Here are some of the major formalities and steps you must know to set up a startup in India: The first thing that you must think of the moment you decide to set up a startup in India is the legal status. You need to finalize on whether you want it to be a proprietary firm, partnership firm, LLP, or a private/public limited company. Please note that your decision on the legal status will depend on various factors.
Proprietary startup If have think you are ready with the initial capital required for the startup and are not comfortable sharing ownership or stake given the small size of your business, you can have a proprietary firm. In case of proprietary firm, you just need to name your business and use your PAN account as business owner (apply for PAN in case you don't have one) to open a bank account in the firm's name with you as the proprietor. Next, you need to obtain all other kinds of permissions and licenses such as service tax registration, VAT, sales tax registration, and TAN, as required, in the name of the business and commence operations as a startup.
LLPs or Partnership firm startups In case there are more than two or three people who want to set up a startup in India together while having limited liability for each partner, LLP is the best way forward. However, if it is a family business and the partners are not worried about unlimited liability for each to share, you can start a traditional partnership firm. The legal requirements for LLP or partnership firms remain the same as mentioned above for sole-proprietorship concern in terms of bank account, service tax registration, and other formalities.
Company startups However, if you want to raise capital from people who may necessarily not be your business partners or might not run the business with you, then you must form a limited company registered under the Indian Companies Act. It can be a private or public limited company. In case of public limited company, it can be a closely held company or a listed company. The criteria to decide the type of company depends on the amount of capital you need for your startup or depending on the size of your business. If you have decided to form a private limited company, the first step is to decide the company's name and register the name with the Registrar of Companies (ROC) providing them with 4-5 choices. Once the ROC communicates the availability of name within 3-5 working days, you must prepare a Memorandum of Association (MOA) and Articles of Association (AOA). MOA will lay down the objectives behind forming the company, which will include prime objectives and other objectives that the company may pursue later.AOA will define the way you run your business. Most of the provisions of AOA are listed in the Indian Companies Act, 2013.Once ready; you need to file the MOA and AOA with the ROC along with certain forms pertaining to the directors and the registered office. The directors