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How to start a business in India? Explained in 3 simple steps.

edited February 2012 in Everything Else
India is among the emerging markets with huge potential for new businesses, few choose to venture out on their own right after their Graduation and few dream to start after bagging sound experience. In any case this discussion is for those who decided to start or started thinking about starting a business.

Step by step guide

Stage 1: Ask yourself?

The first and important thing is have clarity on why you want to start a business, think about what made you felt that 'I have to start a business'? Have you seen an opportunity, or were you just passionate after hearing about successful Entrepreneur stories? You wanted to start just because you were fired or asked to quit your current job? What category do you fall in?

This is probably the crucial point, as per my analysis goes majority of Entrepreneurs start businesses after identifying a business opportunity. Starting a business is about solving a purpose or fulfilling a need of potentially large group. For example take Redbus.in (bus ticket booking online), the idea came in when few Individuals felt it hard to run after private travels to book a bus ticket. They have realized that if we make this process online many people will be benefited and explored the idea.

So do you see an opportunity, think. If you realize there is no Restaurant within 5 KM in your area, if you see this as an opportunity go ahead and start a Restaurant. You should also analyze the market conditions, if I start how many people are likely to visit me instead of going to ABC Restaurant which is X KMS far? The cost factor, how much will it cost to start a Restaurant? How will I finance, from where do I get resources or employees to work in your Restaurant? Your understanding matters here. (This is only an example)

Stage II: (After crossing Stage I and if you are fully satisfied that there is a business idea you want to execute)

Depending on the type of your business decide the type of entity you want to keep. a) Sole proprietorship b) LLP (Limited Liability Partnership c) Private Limited. Each of the above structures have their own advantages and disadvantages. We will try to explain in the simplest way possible.

a) Sole proprietorship: The easiest one of all the three mentioned above, a single owner company. Not many book rules, the ease of incorporating is easy. The main problem is unlimited limited, your personal assets are also at stake. Not recommended for business ideas which have a potential of making good revenue in the future. Not a good idea if you want to raise funds through venture capitalists.

The good part is it is extremely easy to start as proprietorship firm, you can easily transfer the ownership of your firm to others and it is easy to windup. Not a legal entity in the eyes of law.

If your attitude is to look at the process of winding up a business then you are better off to go for a job, chances are that you cannot move ahead without persistence.

b) LLP: An idea taken from west (LLC), LLP is a hybrid form of business structure which is much like sole proprietorship but have few advantages taken from Private Limited structure. The liability is limited, if you have two owners you are not responsible for the liability or misconduct of others. More on LLP can be had from here.

c) Private Limited: A legal entity in the eyes of law, limited liability firm. A minimum of two Directors are required to incorporate the firm, while registering a firm you need to have a minimum of Rs 100,000 as authorized share capital. Opening of a current account is required, you are better off to consult a Chartered Accountant and get your form incorporated.

Private Limited is the preferred business structure, if you wish to secure VC funding Private Limited business structure can be very handy. The cost of incorporating under Private Limited Structure may range anywhere between Rs 20,000 to Rs 30,000. (Rs 100,000 is required as Share Capital)

Decide the type of the business structure, please note that the above are provided for information sake and presented in the simplest way possible. You are required to discuss the same with an Attorney, Company Secretary or a Chartered Accountant to choose the type of your business structure.

Step 3: Choose a name for your Company & initiate company registration process
  1. You should have a unique name for your business (keep minimum 5 names of which one name will be provided), good way is to start searching on MCA portal. (Link)
  2. Go through these guidelines on MCA Portal (Link)
  3. Consult a CA, CS or a legal attorney and get your firm registered
  4. Depending on the type of your business structure it may take anywhere between 10 to 30 days

You are done!

Anyone with more inputs can always contribute; others who have questions can post a comment.

Comments

  • edited November 2013
    Hi Srikanth,

    The information was very useful. I'm planning to start a separate venture and I wish to use the land property which is owned by my father who's already running a company. Is there any rule to compulsorily pay some rent for this property even though it belongs to my father? And should I need to enter into any rental agreement with them which would be required for company's registration and all? 
    FYI: My father will become one of the directors for my new venture..

    Kindly clarify on this. Thanks in advance...
  • There is no such rule to pay any rent, it all depends on how you wish to. If you wish to show rent as an expense you can show that by renting the property from your father. For company registration you don't need this.
  • Thank u so much for your reply Sir...
  • @Srikanth Krishna: How useful is having an MBA degree before starting a company?
  • @Kavitha It doesn't matter at all, provided that you have the maturity to understand and act on some sensitive things..Soon after graduation if you want to kick off, go ahead.
  • sir,
    Please suggest me short time courses in marketing ,
     research methods and supply chain networks
    ,I am running a small supply chain network in health care products....
  • @qualitylabs there are one year PGDM courses offered in Institutes like Symbiosis you can take advantage on those courses. Link below for Symbiosis Bangalore.


    You can also look at weekend MBAs. Do let me know, use this form below.

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