“Life is too short to be working for someone else’s dream.”
– Hugh Hefner.
Whenever we start any discussion on start-ups, there come three words in our mind viz. freedom, courage, and passion. An entrepreneur can get his inspiration from many sources. Maybe you don’t want to work under the direction of someone, but rather you are passionate for being your boss. Here it seems necessary to understand the things from the very beginning as to how a person can start his own business.
Before you start with your idea to make sure that you are crystal clear with its aspects — it not a requirement that your idea must be unique and different from all others. Contrarily, you must proceed with the idea which interests you the most. A transaction is never complete without the exchange of the things. Just make sure that your start-up idea is so valuable that it can ensure you’re earnings out of it. It should be valuable for others. And after making a detailed plan for your business for at least a year, there arises a need to register your start-up.
The first, the oldest and the easiest way to register your business is ‘sole proprietorship’. This is a way in which you will be solely responsible for all the actions in your business, and you are the one who is going to bear all the responsibilities and avail all the profits from the start-up. This process of registering your start-up has lesser government formalities. What you have to do is to go to the municipality of your city or any local authority for registering it. It might take a couple of days and going to cost you around rs 1000/-. It can be done through an online mode, but not all the local authorities provide this forum. But if your business is not small and more than four people are working on your idea, then this way of registering your start-up may not be suitable for you.
One Person Company
There is another way in which you can register your company in which you won’t be personally liable if your business fails and that is ‘One Person Company’ (OPC). Around 5 to 10 days are required to register your start-up through this way, and approximate cost would be around rs 6000/-. And since this is a one-person-company, you have to be the director as well as the shareholder of the company.
Private Limited Company
Another way to register your company is by registering as a private limited company. Here, at least two shareholder and two directors are required. Maximum limit to have the number of the shareholder is 200. Otherwise, you will be required to register your company as a public limited company. This is a very reputable and credible way to register your company. Many start-ups try to register their idea through this mode. This costs around Rs 7000/- and takes 5 to 10 days to get registered. However, because it is a very trusted way to register your idea, government rules and regulations are more complexed. But if you are following a profession, say a doctor or a lawyer, and if you want to form a company of your own, then you can register it through the mode of Limited Liability Partnership (LLP).
It is always better to form a Pvt. Ltd. if you want to work with big corporates and companies and on the other side, it is better to go for sole proprietorship if you want to have a company of your own, and you don’t want to tangle yourself in procedural regulations.
After registration of your company, the need for the tax registration comes. If the turnover of your company is more than 20 lakhs in a year, then you have to do the GST registration. If you are into import and export, then you might need to do import-export code registration. Citizens of some states have to do Professional Tax Registration. If your company has 10 or more employees, then you have to get the Employee State Insurance Registration done and also Provident Fund Registration in case you have 20 or more employees in your company. There is an optional registration called MSME, i.e. Micro, Small, and Medium Enterprises Registration, after which you will be entitled to several benefits, e.g. it will be easier for you to get a loan from the bank and you will be entitled to several subsidies and exemption.
If you are running your company, there are a few things which you need to do on an annual basis. These are Yearly Mandatory Compliances. Every business has to file its income tax returns at the end of the year. Proper accounting is very necessary to run a company. Filing for GST Returns, Secretarial Compliances (for LLPs, OPCs, and Pvt. Ltd. companies), Social Audit (for OPCs and LLPs with more than 40 lakhs annual turnover) are further requirements if you are running a company.
(This article was submitted by Shivam Agrawal, a 2nd year student of law at Hidayatullah National Law University, as a part of B&B Associates LLP’s winter internship program.)