If you are wondering what it takes to start a business in India, this article is for you. Like in any other country, starting a business in India requires a strong legal foundation and sustainable business model.
It is important to note that the ease of doing business in India has consistently improved over the past few years. Some factors influencing this positive change include favourable reforms by the Indian government in a few key areas.
Step-by-step Guide to Starting a Business in India
Here are a few things you need to know to start a business in India. We hope this article serves as a reliable blueprint and help founders turn their dream into reality.
1. Select a Business Entity
Once you have a business idea and have done the requisite market research, the next step is to choose the type of business entity that would help you scale and accelerate your business growth. This decision will also help you understand where and how you can save taxes.
You can choose from the different types of business entities listed below:
1. Sole proprietorship
2. One-person company
3. Partnership
4. Private limited company
5. Limited liability partnership (LLP)
6. Public limited company
2. Choose a Location
After completing the first step, you need to consider where you want to set up your business in India. The best way to do this is by choosing a state or a city with favorable policies for new and budding businesses. Most businesses in India are typically located in commercial or industrial zones defined by the government. It is a good idea to go through the real estate listings for commercial and industrial zones in the area where you are likely to start a business.
As per the Business Reform Action Plan (BRAP) 2020 report, the top six Indian states for ease of business include Gujarat, Telangana, Punjab, Haryana, Tamil Nadu, and Andhra Pradesh. The assessment was done on the basis of 301 reform points covering 15 business regulatory areas such as Access to Information, Labour, Environment, Land Administration & Transfer of Land and Property, Utility Permits and others. These should also be few of the things you should consider while selecting the location for your business.
On the other hand, one of the most important aspects when choosing location is availability of the ecosystem including prospect employees, partners, supply chain, etc. So, keep those factors in mind when choosing the location.
3. Open a Bank Account in the Name of the Business
It is critical to open a bank account in the name of your business once you set up your company. Business entities, including a one-person company, private limited company, and limited liability partnership (LLP), can open a bank account by submitting the PAN Card of the founding member and a Certificate of Incorporation.
As a business owner, you need to choose a bank that provides benefits to new businesses. For example, if a business requires a bank loan for initial working capital, it is recommended to open a bank account with a nationalized bank. What is the advantage? Nationalised banks are more inclined to offer loans to new businesses than private banks.
Some banks are startup friendly and offer banking services at that could invaluable to in the short-medium term. One such example is IDFC’s startup banking solution
4. Registration and Licences
It is essential to register your business with the concerned government authorities. Please note that the registration process may differ based on the company’s structure and entity type.
The main registration documents and licences required to start a business in India are:
1. Digital signature certificate (DSC)
2. Company name
3. Director identification number (DIN)
4. Tax deduction account number (TAN)
5. Permanent account number (PAN)
6. Certificate of incorporation
7. Goods and services tax (GST) registration
8. Import-export code (IEC)
9. Office of the inspector, shops, and establishment act certificate
It is important to note that the list mentioned above is not exhaustive, and there may be other types of registrations and licences you may require depending on the nature of your business. For instance, you would have to get an FSSAI licence if you are a food distributor, manufacturer, or distributor.
5. Arrange for Capital
Apart from bootstrapping, there are many ways to raise capital for your business. These options include angel investors, business incubators, bank loans, crowdfunding, government schemes, and venture capitalists. You can enter investors' good books by preparing an in-depth business plan, including financial projections, organization management, market analysis, sales, and marketing strategies. Apart from all these options, you can always go the normal route and self fund your business.
Final Thoughts
Starting a business in India can be tricky, and one can easily lose their way. Although the country has been criticized for its hostile and unfavorable policies in the past, things have changed. Today, India ranks 63rd out of 195 countries on the World Bank’s “Ease of Doing Business” index and it is a significant jump from its 134th rank in 2013.
We understand you may still require some help while starting a business in India. We at Scalix strive to help entrepreneurs and founders to overcome the initial barriers while starting a business. Contact us to build a scalable and sustainable business seamlessly.
