How to Start Business in India

Are you searching “How to Start Business in India? Starting a business in India is a great opportunity in a fast-growing economy. Legal ADDA helps entrepreneurs and investors set up their businesses smoothly by handling all legal and registration processes. Whether you want to start as a sole proprietor, partnership, LLP, private limited company, or a foreign-owned business, we guide you every step of the way. Our goal is to make business setup easy and hassle-free so you can focus on growing your venture.

Are You Looking for Starting Business in India?

Start Business with Formation of Entity

There are multiple ways for starting a business in India. Mainly, are proprietorship and partnership firm business formation is popular as both options are cost-effective for formation. However, Company formation is popular for medium to large scale business idea. In addition, the Company form of business entity gives the advantage of government “STARTUP INDIA” and “MAKE IN INDIA” Scheme benefits.

Foreign Investor or Foreign Company who is willing to start a business in India can create Fully Owned Foreign Subsidiary Company, where foreign company/ foreigner will hold 100% Ownership of company. However, One Indian Resident Director required for the formation of a Fully Owned Foreign Subsidiary Company.

Let’s Understand the Stages for the Business formation and compliance management.

Choosing the Right Business Structure

Starting a business in India offers multiple options, each suited to different needs based on investment, scalability, and compliance requirements. The choice of entity plays a crucial role in legal structure, taxation, and operational flexibility.

Before starting a business, it’s essential to choose the right legal entity. Here are the main options:

A. Sole Proprietorship

Best for small-scale businesses with minimal compliance.
Owned and managed by a single individual.
Easy to set up with lower costs.
Personal assets are at risk since there is no separate legal entity.

B. Partnership Firm

Suitable for small and medium businesses.
Requires at least two partners under a partnership deed.
Registration is not mandatory but recommended.
Partners share profits, liabilities, and responsibilities.

C. Limited Liability Partnership (LLP)

Ideal for professionals and service-based businesses.
Combines benefits of partnership and company structure.
Limited liability protection for partners.
Requires registration with the Ministry of Corporate Affairs (MCA).

D. Private Limited Company (Pvt. Ltd.)

Best for startups and businesses seeking investment.
Separate legal identity with limited liability.
Eligible for government schemes like Startup India and Make in India.
Requires at least two directors and shareholders.
Needs compliance with MCA and annual filings.

E. One Person Company (OPC)

Suitable for solo entrepreneurs who want a corporate identity.
Limited liability benefits with a single owner.
Requires one director and a nominee director.

F. Public Limited Company

Ideal for large businesses planning to raise funds through public investment.
Requires a minimum of three directors and seven shareholders.
Subject to higher compliance requirements under SEBI and MCA.

G. Fully Owned Foreign Subsidiary

Best for foreign investors looking to enter the Indian market.
Allows 100% foreign ownership.
Requires at least one Indian resident director.
Complies with FDI (Foreign Direct Investment) regulations and Reserve Bank of India (RBI) guidelines.

Conclusion

India offers diverse business formation options, from small-scale proprietorships to large corporations. Choosing the right structure ensures smooth operations, financial benefits, and compliance with government regulations. Whether you are an Indian entrepreneur or a foreign investor, understanding the entity types and legal procedures is the first step toward a successful business venture in India.

Types Business Entity Formation in India

Individual Proprietorship

An Indian resident can start a proprietorship business using their personal PAN. It is simple and has the lowest formation cost.

Partnership Firm

Two or more persons can start a jointly owned business by forming a partnership firm. Foreign individuals are not allowed to be partners in a partnership firm.

LLP

Two or more persons can start a joint business by forming an LLP (Limited Liability Partnership). It is similar to a partnership firm but offers better legal recognition and limited liability protection.

OPC Company

One person can form a One Person Company (OPC) with a single director. The maximum capital is restricted to ₹50 lakhs. Foreign individuals are not allowed to be members.

Private Limited Company

A minimum of two shareholders and two directors is required. Foreign directors and shareholders are allowed to participate in the company.

Public Limited Company

A minimum of seven shareholders and three directors is required. Foreign directors and members are allowed in the company.

Producer Company

Suitable for producer activities such as agriculture and related sectors. FDI is restricted in a Producer Company. Only primary producer activities are allowed.

Section 8 (NGO)

A non-profit organization can start its activities by forming a Section 8 Company, which is specifically for non-profit purposes.

Foreign Subsidiary

A foreign company can start its business in India by forming a fully owned subsidiary, where ownership is held by a foreign company or an NRI.

Steps to Start a Business in India

Step 1

Formation of Entity

Incorporation of Company in India

According to requirement of business one can choose which type of entity you want to form. there are multiple options.
1. Proprietorship
2. Partnership or LLP
3. Company
4. Foreigned Owned Company. etc

Step 2

Registration & License

Obtain Applicable Registration and License

Secondly, Entity required to obtain all the registration and licenses which is applicable for activity of business.

License and Registration List for Startup Business

PAN Card: Income Tax Permanent Account Number is Compulsory for starting Business In India. However Individual Proprietor Not Need to Apply Separate Business PAN. for all other types of Business Establishment PAN separately available from Income Tax Department.

Professional Tax Registration/ Shop Act License: Before Starting Business activity, Establishment Need to Get Registration Certificate from Local Municipal Corporation. Such Registration are as per Local Municipal Area Guidelines. Types of Registration are Professional Tax Registration, Shop and Establishment License, Gumasta Dhara License etc.

Goods and Services Tax Registration (GST): Supplier of Goods or Services are Required to Get Registration under GST Act. Minimum Turnover without GST is upto Rs. 40 Lacs. However for Interstate Sales and For Export Sales GSTIN (GST Number) is Compulsory. Goods and Services Tax is Combine Tax Structure of Service Tax and Sales VAT Tax.

Tax Account Number (TAN): Person or Establishment Responsible for Tax Deduction at source are required to get TAN. Its Mandatory for the entity who is required to get tax audit of their Books of Account.

Provident Fund Registration (PF): If employees are morehan 20.

ESIC Registration: If Employee Morethan 10.

Special Registration According to Business Activity:
Labour License: in case Manpower industries.
DoT (TRAI) License: in case call center and BPO, KPO activity
Foods License (FSSAI): Hotel, Restaurant Units
Drug License: Medical Store
Import Export Code (IEC) : Exporter

Step 3

Bank Account

Opening of Business Entity Bank Account

After All License and Registration, Business bank account need to be open with bank for payment and receipt of proceeds of activity.

Step 4

Compliance

Maintaining Records & Compliance Filings

All the accounting records of business sales, purchase, expense should be maintained time to time. All the Application return must be filed within due time.

Legal ADDA