How To Start A Business In India

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Like every country in the world, India has rules and regulations you should abide by before registering your business. India is one of the fastest growing economies in the world, but starting a business in India has never been easy. In fact, India was ranked 142nd on the Ease of Doing Business Index. It was also ranked 158th on Ease of Starting a Business. It is fortunate there is a five-in-one form that has been introduced by the Ministry of Corporate Affairs (MCA) in May 2015. This form, the INC-29, is going to take the ranking of India to a new level.

The introduction of the INC-29 does not imply it has replaced the old procedure. DIN allotment, incorporation, PAN and TAN and ESIC registration are some formalities that still need to be observed, but this process is fairly smooth. In as much as it does not replace the previous procedure, it supports document submission to the MCA portal. This is the procedure you should follow.

Procedure 1

  • Get a Digital Signature Certificate from an MCA-authorized agency
  • It will take 2-5 days to complete
  • The cost of this whole process is INR 1,500

If you desire to start a business in India, you and any one of the directors must get a Class-II Digital Signature Certificate. This is obtained from an agency authorized by the MCA to use the MCA 21 electronic filing system. There are several authorized vendors like n-Code, Tata Consultancy Services, and e-Mudhra. Their rates differ, ranging from INR 400 to INR 2,650. These charges are inclusive of a certificate and a USB token. It takes 2-5 days to complete this procedure, depending on how long it takes for your documents to reach the vendor.

You have to submit the Class-II form, duly filled and completed and a self -attested copy of your PAN card. If you are a foreigner, you are required to submit a copy of your passport and a self-attested copy of:

  • Voter ID
  • Driver’s license
  • Ration Card
  • Utilities Bill or
  • AADHAR card

Procedure 2

  • Preparation of INC-29
  • Takes 1-3 days for completion

As soon as you receive your DSC, you are free to file for the INC-29. This, however, is not guaranteed. The INC is an 8-page document that requires different types of information and documentation. Some of these documents must have the Company Secretary’s signature and requires one-time submission. If you have made errors in your form, you can only resubmit once. If you intend to resubmit a second time, you should pay the filing fees again, and then apply for a refund of the paid government fees. Make a note of all the requirements and all attachments needed to apply for the INC-29.

Application for Director Information Number

The Director Information Number (DIN) can be applied to by up to 3 company directors through the INC-29. Any other directors can apply separately. The MCA uses this number to identify company directors. Getting a DIN requires scanned copies of:

  1. A passport photograph
  2. A PAN card or passport, if you are a foreigner, Voter Card/Driver’s License/utility bills that are self- attested. If you are a foreign national, get the documents notarized  by the Indian Embassy. If you come from a non-Commonwealth country, get your documents apostil led.

Name Approval

The old process accommodated the submission of six name options in your preferred order. The INC-29 allows you only a single name option. It is crucial you understand the MCA’s guidelines for naming. This ensures that your form gets approval upon first-time submission itself. You need to:

  1. Visit mca.gov.in and make sure your chosen name has not been taken by someone else.
  2. Go to ipindia.nic.com and make sure the name you have chosen has no registered trade mark. In the event there is one, get NOC from the owner as well as authorization to use it.
  3. Make sure the first half your name is a unique one. Steer away from making common references.
  4. The second half should reflect the field of work you are in.

Once the name is settled on, explain what it signifies in a sentence or two, because it will be mentioned on the form.

Memorandum and Articles of Association

The Memorandum and Articles of Association (MoA & AoA) should be attached to INC-29. They need to have the signature of a company secretary, who may or may not have drafted them. The MoA contains the main objective of your business. Your registration is prone to rejection if it has no relevance to your business.

You have to attach an affidavit from the subscribers that are available on mca.gon.in. The cost will depend on the Company Secretary that you choose to go with.

For more help on this, you can hire experts at freelancer.com who will help you come up with an appropriate memorandum and articles of association.

Registered Office Verification

Every company is required to have an office address that is registered, but not necessarily a commercial one. The home address of one of the directors is also acceptable. Attach this address with a copy of the Rental Agreement and NOC from the landlord, or a sales deed.

Appointment Letters and Declarations

Several self-attested attachments should accompany the application. A Company Secretary must issue a separate declaration, which verifies the declarations are genuine. These attachments include:

  • Letters of appointment for Directors, Managers, and the CEO
  • Form DIR-2 with the appointee director and managing director’s declaration

For Letters of Appointment of Directors, CEO, Managers

  1. Declaration by the first director in INC-9
  2. Declaration by appointee director and managing director in Form DIR-2

Procedure 3

  • Filing INC-29
  • 1 day to complete
  • Cost of Rs.2000, authorized capital fee, and stamp duty

If all your papers are in good order, you can file the INC-29. Fill in the form and attach the required documents. Double check you have not omitted anything or you will have to resubmit. If you make an error in your resubmission, your form will be rejected. Once submitted, payment needs to be submitted to a payment gateway. The fee varies, depending on the authorized capital fee. Stamp duty is dependent on the location. Most states quote the same price except for Punjab and Kerala.

Authorized capital fees are as follows:

  1.  INR 100,000: INR 5,000
  2.  For every INR 100,000 of authorized capital up to INR 500,000, INR 4,000
  3.  For every INR 100,000 of authorized capital up to INR 50,00,000, INR 3,000
  4.  For every INR 100,000 of authorized capital up to INR 100,00,000, INR 1,000
  5.  For every INR 100,000 of authorized capital over INR 100,000,000, INR 750.

Procedure 4

  • Issue of incorporation certificate
  • The time taken to complete is 2 days or more
  • The cost is nil

The government claims the Incorporation Certificate should be issued within two days. However, this awaits verification for its veracity. Filing for the INC-29 form will get you the incorporation certificate, which is a great leap forward.

In simple terms, we can say that once you have your PAN card number you can open a new account, then register for Limited Liability Partnership (LLP), and finally register your PVT Limited Company. Thereafter, register for service tax and VAT, and apply for TAN. For ease of accounting, the expense heads are something like:

  • Director Identification Number-100 INR
  • Digital Signature Certificate-1,500 INR
  • Company name online-500 INR
  • Stamping of Documents-1,300INR
  • Incorporation Certificate-14,000INR
  • PAN card-67 INR
  • TAN number-57 INR
  • Establishment Act registration-6,500 INR
  • VAT-5,100 INR
  • Profession Tax-Nil
  • Employees Provident Fund-Nil

It is crucial you follow all the procedures, otherwise your application will be rejected. All the steps are compulsory if you intend to get your business up and running. Carelessness during the filling of forms will get your application rejected, and you need to pay again for resubmission. To avoid inconvenience and unnecessary expense, take your time and go through the procedures before you submit.

Would you like to comment on the procedures on how to start a business in India? Leave your feedback in our comments section.

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Dikirim 11 Ogos, 2017

NickGolding
NickGolding Kakitangan

Entrepreneur & Creator

Nick is the Entrepreneur Correspondent for Freelancer.com. He is based in Sydney, NYC, & London. His life consists of frequent flyer points.

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