Guide to Starting a Business In IndiaBy Companiesinn.com LLP V 2.1
Introduction – Indian EconomyThe Indian economy is the fourth largest economy of the world on the basis of Purchasing PowerParity (PPP). It is one of the most attractive destinations for business and investment opportuni-ties due to huge manpower base, diversified natural resources and strong macro-economic fun-damentals. Also, the process of economic reforms initiated since 1991 has been providing an in-vestor-friendly environment through a liberalised policy framework spanning the whole econ-omy.Foreign Direct Investment Policy &Law (FDI)The law governing Foreign Investment in Indiais Foreign Exchange Management Act, 1999 I ndian Economy is grow- ing over 8% for the last 10 years and it is expected to maintain this growth rate for(FEMA) managed by Reserve Bank of India next 20 years”(RBI) (India Central Bank). RBI notifies regula-tions under FEMA based on the government ofIndia guidelines and policies.As per the present policy, majority of sectorsare available for 100% foreign Investment with FDI - Negative Listfull repatriation benefits. It means investmentand profit can be taken back out of India. Retail Trading (except single brand product retailing)If the sector is opened for foreign investment, Atomic Energyno government approval etc requires if investor Lottery Business including Govern-comply with all rules and regulations. ment / private lottery, online lotter- ies, etc. Gambling and Betting including casi- nos, etc Business of chit fund I n India all most all sec- tors are open for foreign investment Nidhi company Agricultural or plantation activities, or Real estate business, or construction of farm houses, or Trading in Transferable Develop- ment Rights(TDRs)
Investment Vehicles (structures) available in India.The structures available for business in India are Company, Limited Liability Partnership (LLP),Partnership and sole proprietorship. However, foreign investment is only allowed in Companyand LLP. A foreign company can also open branch in IndiaCompanyCompany form of organization is most common incorporated business structure in India. Thepresent law governing company formation and administration is Companies Act, 1956. The mainfeatures of a company in India are; Limited Liability Organization Basically two types of companies available, Private Limited and Limited Minimum number of promoters for a private company is two and public company seven Number of directors for a private company is two and public company three. It is mandatory that all directors shall be individuals. The power of management is with Board of Directors subject to articles of the com- pany. Foreign Investment is allowed in this structure under automatic rout (without govern- ment approval) except some sectors.Limited Liability Partnership (LLP)LLP is a body corporate with all features of a company. This is a new business organization withall the features of US LLC and UK LLP. This is an ideal organization for business as compared toa company. The law governing LLP in India is Limited Liability Partnership Act, 2008. The mainfeatures and benefits of LLP are Limited Liability Organization A LLP can be formed by two people or corporate for doing business. Minimum two Designated Partners required for forming a LLP If all partners are corporates, their nominees can be designated partner Easy to manage subject to LLP agreement Firm taxation applicable Less compliance
Branch Office or Liaison OfficeCompanies registered outside India (Foreign Company) can establish their operations in Indiawithout registering a subsidiary company. The scope of operation of such offices is limited and ispreferred for representative office, sourcing, technical support, market support in India. Compa-nies from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China need previous approvalof Reserve Bank of India for opening a branch.Steps for Starting Business in India - CompanyA company can be incorporated by two person by subscribing memorandum of association andarticles of associations. After incorporation, a company can apply for tax numbers and open bankaccount to do business.If promoters or investors of a foreign company are foreign nationals or corporates incorporatedoutside India, apart from incorporation, the company need comply with foreign investment inIndia regulations. Below are the steps involve in incorporationPre-requisites for company formation Minimum two directors (only individuals) Minimum two promoters All directors need to take DIN( Directors Identification Number) using copy of passport and address proof (it is a number generated created by company registrar website after filing these documents) Apply and get Digital signature from Indian certifying authorities ( it is for online authentica- tion of documents filed) Registered Office Address in IndiaProcess of Incorporation Apply DIN numbers and file name for the company Prepare and execute Memorandum and Articles File these documents and get incorporatedLimited Liability PartnershipLLP is the most tax friendly business structure available foreign nationals. Since, it is taxed likea partnership firm, profit after tax in the hand of partners are tax free. The saving is around13%.Like company, LLP can be formed by two individuals or body corporate (entity) subscribingto incorporation document.Pre-requisites for company formation Approval of Central Government for investing in LLP Minimum two Partners and Designated Partners (DP) (only individuals as DP) All DP need to take DPIN( Designated Partner Identification Number) using copy of pass- port and address proof (it is a number generated created by company registrar website af- ter filing these documents) Apply and get Digital signature from Indian certifying authorities ( it is for online authenti- cation of documents filed) Registered Office Address in India
Process of Incorporation Apply DPIN numbers and file name for the LLP Prepare and execute and File Incorporation document File Incorporation document Prepare LLP Agreement and get it executed File LLP agreement and consent to act as a partnerRegular Compliance and other requirements of a Company or LLPA. Tax Compliance1. TDS (Tax deducted at source)As per tax law, many payments from the company including salary to staff need deduction of taxfrom the payments and pay to the government.Company’s or LLP’s Responsibility Deduction of TDS at appropriate rate Payment to government, every month File quarterly return and annual return2. Advance TaxEvery company need to project yearly income and expenses and pay tax every quarter based onestimate.3. Yearly Return filingEvery year before September 30th company need to file return with income tax authorities4. Service taxService tax if applicable, company need to collect same and pay to the government every month.Also, company is required to file return half yearly.B. Reserve Bank of India filingEvery company having foreign investment need to file return regarding investment and transferwith RBI before June 30th reporting position of foreign investment in the company.C. Company law & LLP Law complianceThe compliance requirements of a company incorporated under Companies Act, 1956 are asgiven below.1. Board Meeting and minutes – every quarter2. Annual General Meeting and minutes – once in every year3. Filing Annual Return and Balance Sheet with RegistrarApart from above, company need event based compliance. This may be for issue of new shares,appointment of directors etc.
Company law complianceThe compliance requirements of a company incorporated under Companies Act, 1956 are asgiven below.1. Board Meeting and minutes – every quarter2. Annual General Meeting and minutes – once in every year3. Filing Annual Return and Balance Sheet with RegistrarApart from above, company need event based compliance. This may be for issue of new shares,appointment of directors etc.LLP Law complianceLike company LLP also company with LLP law and other regulations . It is mandatory for a LLPto file annual return before 30th May and accounts before October. The benefit of LLP is, it is notrequired to hold board meetings unless LLP agreement provide for the same.Labour Law1. Provident Fund (PF)Applicable to companies employing 20 or more staff The First Step for Employer is to maintain a salary register for the purpose of PF compliance For PF monthly compliance, the Employer is to calculate PF Employee/Employer Cont. State- ment based below mentioned rate2. PayrollEvery company need to prepare payroll of all employees working in the company.3. Professional TaxThis is deduction from staff salary and payable to government. Responsibility is with company orLLP for deduction and payment.4. Shops and EstablishmentA business shop or office should be registered under the relevant laws of local state. If the com-pany has multiple offices, all the offices should be registered under this category.
Why choose Companiesinn.com to form yourCompany/LLP?CompaniesInn.com through its dedicated professionals have over 10 years of experience inbusiness setup services and incorporation consulting. We have advised over 5000 companiesand LLPs in the last 3 years in the setting up of their businesses. Our vast experience in the le-gal domain coupled with the effective use of information technology ensures the timely deliv-ery of service, with high professional standards and at an affordable price. This new method ofCompany/ LLP incorporation evolved by our research team helps an ordinary investor navi-gate easily through the various steps required by law.The following factors contribute to ourexcellent and highly acclaimed incorporation and compliance services.Experienced team:Our experienced team have the expertise to handle any assignment for setting up a Company/LLP in India. This includes incorporation of a new enterprise or converting an existing business(i.e. sole proprietorship, partnership etc) into a Company/ LLP.Low cost:CompaniesInn business setup services are priced attractively to meet the requirements of bothemerging and established entrepreneurs. Use of standardised processes and information tech-nology enables us to provide the service at competitive costs, often at 1/4th the rates charged byother CA/ Law firms. Moreover our prices are pre-defined with no hidden charges. The onlineprice calculator allows you to get itemised service charges including the standard Governmentfees.All services available under one roof:To comply with the various laws governing business establishments in India, a Company orLLP needs to apply for PAN and TAN Numbers (Income Tax Dept), Shops/ Establishment Reg-istration (Dept of Labour), Service Tax (Central Excise Dept), VAT (State Commercial Tax Dept)etc depending on the nature of its activity. We can help you file for all these certificates so thatyou can focus your time and energies on operating the business which otherwise might be illspent in follow‐ ups with various Government departments.Continued support:Our associate firm CN Partners Consultants LLP has experience in corporate law complianceand will ensure timely compliance of your Company/ LLP’s legal requirements at an affordableprice.Tax compliance and accounting services:Our sister concern CN Business Solutions LLP, is a book keeping and tax law compliance firm.This firm can help you maintain your Company/ LLP’s accounts and file the various returns asrequired under law at an affordable charge.HelpDeskRunning a business as company or LLP need professional held and advise, to cater this wehave our helpdesk for all our clients. After incorporation, you can call any time during businesshours for any help or assistance.