The First Steps to doing Business in India
Summary
TLDRThis video script outlines the process of setting up a business entity in India, detailing various types of entities such as proprietorship, partnership, LLP, private limited company, one-person company, registered society, trust, and Hindu Undivided Family. It emphasizes the importance of choosing the right entity based on business size and requirements. The script further explains the need for registrations like excise, service tax, and VAT, depending on the nature of the business and turnover, and provides guidance on where to find more information.
Takeaways
- 🏢 To start a business in India, one must first choose the type of business entity based on the scale and requirements.
- 👤 Proprietorship is a simple business entity suitable for small-scale startups with a single owner and requires only a PAN number and a bank account.
- 🤝 A partnership firm requires at least two members and involves creating a notarized partnership deed.
- 🔗 Limited Liability Partnership (LLP) is a partnership with legal standing where partners' liability is limited to their investments, governed by the LLP Act 2008.
- 🏢 Private Limited Company is a more complex entity suitable for businesses with significant capital and efforts, governed by the Companies Act 2013.
- 👤 One Person Company allows a single individual to act as both shareholder and director, introduced by the Companies Act 2013.
- 🏛️ A registered Society is managed by a governing body and is registered under the Societies Registration Act 1867.
- 💼 Trusts involve transferring ownership for the benefit of another person and are governed by a Board of Trustees, registered under the Indian Trusts Act 1882.
- 👨👩👧👦 Hindu Undivided Family (HUF) is a business entity governed by Hindu law, consisting of linear descendants from a common ancestor.
- 💼 After choosing the business entity, one must identify the nature of the business, such as manufacturing, merchant, or service provider, each with specific registration requirements.
Q & A
What are the different types of business entities that can be established in India?
-In India, various types of business entities can be established including Proprietorship, Partnership, Limited Liability Partnership (LLP), Private Limited Company, One Person Company, Registered Society, Trust, and Hindu Undivided Family (HUF).
What is the minimum number of members required to start a Partnership business in India?
-At least 2 members are required to start a Partnership business in India.
What is the legal framework governing Limited Liability Partnerships (LLP) in India?
-LLPs in India are governed by the provisions of the LLP Act 2008.
What is the significance of a Private Limited Company in terms of legal status?
-A Private Limited Company is a separate legal entity from its directors and owners, and it is governed by the provisions of the Companies Act 2013.
What is the main difference between a One Person Company and a Private Limited Company?
-A One Person Company requires only one person who can be both the shareholder and the director, whereas a Private Limited Company requires at least two directors and two shareholders.
What is the role of a Registered Society in India?
-A Registered Society in India is managed by a governing body and is registered under the Societies Registration Act 1867. It is unsuitable for commercial purposes and is informed by the Registrar of Societies.
How does a Trust function in the context of business entities in India?
-A Trust enables the transfer of ownership from one person to another for the benefit of a third person. It is governed by a Board of Trustees and private trusts are registered under the Indian Trusts Act 1882.
What is the role of a Hindu Undivided Family (HUF) in business?
-A Hindu Undivided Family (HUF) consists of persons linearly descended from a common ancestor and is governed by the provisions of Hindu law. A business entity can be registered as an HUF.
What are the different types of businesses that can be conducted by a registered entity in India?
-The types of businesses that can be conducted include manufacturing, merchant activities, and service provision.
What is the necessity of VAT registration for businesses in India?
-VAT registration is mandatory for businesses trading or manufacturing goods in India if their turnover exceeds a certain threshold, which varies by state.
What additional registrations might be required for a manufacturing business in India?
-For manufacturing businesses, additional registrations such as Central Excise, VAT, industrial license, Pollution Control, and fire safety might be applicable depending on the nature and type of manufacturing activities.
Outlines
🏢 Types of Business Entities in India
This paragraph outlines the various types of business entities that can be established in India. It begins by emphasizing the importance of choosing the right type of business entity based on the requirements and circumstances. The paragraph then details several common types: Proprietorship, which is the simplest form requiring only a PAN and bank account; Partnership, needing a partnership deed and at least two members; Limited Liability Partnership (LLP), which offers legal standing and limited liability, governed by the LLP Act 2008; Private Limited Company, suitable for larger businesses with significant capital, governed by the Companies Act 2013; One Person Company, introduced by the Companies Act 2013, suitable for smaller businesses; Registered Society, managed by a governing body and registered under the Societies Registration Act 1860; Trust, governed by a Board of Trustees and registered under the Indian Trusts Act 1882; Hindu Undivided Family (HUF), governed by Hindu law, and can also be registered as a business entity.
📑 Business Registration and Compliance in India
The second paragraph discusses the steps to register a business entity in India and the compliance requirements based on the nature of the business. It starts with identifying the business nature, such as manufacturing, merchant, or service provider, and the implications for foreign trade. For manufacturers, it mentions the need for a central excise registration certificate and the payment of excise duty. Merchants are discussed in terms of buying and selling goods, both domestically and internationally. Service providers are highlighted for offering intangibles like consultancy and IT services, with a requirement to register with the service tax department. The paragraph also covers the necessity of VAT registration for businesses trading or manufacturing goods, which is mandatory if the turnover exceeds a certain amount set by the state government. The summary concludes with guidance on where to find more information, suggesting the websites of the Ministry of Corporate Affairs and the Central Board of Excise and Customs for further details.
Mindmap
Keywords
💡Proprietorship
💡Partnership
💡Limited Liability Partnership (LLP)
💡Private Limited Company
💡One Person Company (OPC)
💡Registered Society
💡Trust
💡Hindu Undivided Family (HUF)
💡Excise Duty
💡Value Added Tax (VAT)
Highlights
Deciding on the type of business entity is crucial as it affects registration procedures and legal requirements.
Proprietorship is a simple form of business entity suitable for startups with a single owner.
No formal registration is needed for a proprietorship; only a PAN number and a bank account are required.
Partnership firms require at least two members and a notarized partnership deed for registration.
LLP is a partnership with legal standing where partners' liability is limited to their investments.
LLPs are governed by the LLP Act 2008 and registered through the Registrar of Companies (ROC).
Private limited companies are separate legal entities suitable for businesses with significant growth or capital.
Private limited companies are governed by the Companies Act 2013 and require a DIN for directors.
One Person Company is a new concept in India, allowing one person to be both shareholder and director.
Registered Society is managed by a governing body and registered under the Societies Registration Act 1867.
Trusts involve the transfer of ownership for the benefit of a third party and are governed by a Board of Trustees.
HUF is a business entity governed by Hindu law, consisting of linear descendants from a common ancestor.
Businesses can be registered as manufacturers, merchants, service providers, or other types based on their activities.
Manufacturers must obtain a central excise registration certificate if their turnover crosses a certain threshold.
Merchants buy and sell goods without a manufacturing setup and may engage in export-import businesses.
Service providers offer intangibles like consultancy and IT services and must register with the service tax department.
VAT registration is mandatory for businesses trading or manufacturing goods, depending on the state's turnover threshold.
Additional registrations like excise, service tax, and VAT may be required depending on the business type and turnover.
For detailed registration information, refer to the Ministry of Corporate Affairs and Central Board of Excise and Customs websites.
Transcripts
setting up a business entity in India
depending on the requirements and
circumstances various types of business
entities can be established in India we
will explain the process step by step
step 1
the first step is to decide on the type
of business entity the registration
procedure and associated legal
requirements depends on the type of
business we will explain various types
of common businesses now types of
business entities one proprietorship is
one of the simplest forms of business
entity to register and maintain in India
a startup with a single owner on a small
scale might choose this type of business
there is no formal proprietorship
registration to start a proprietorship
only pan number for the proprietor is
required along with a bank account in
the name of the proprietorship to
partnership the objective of a
partnership firm is to pull together
people so that more capital skills and
efforts can be brought together at least
2 members are required to start a
partnership business to register such
business
one needs a partnership deed which is
duly notarized through a notary 3
limited liability partnership LLP is a
partnership firm that has its own legal
standing the liability of the partners
in an LLP is limited to the investments
and therefore it is called a limited
liability partnership LLP is governed by
the provisions of the LLP Act 2008
the registration of LLP is done through
Registrar of Companies that is roc first
the partners need to register at ROC and
get designated partner identification
number and thereafter they can apply for
registration of LLP online for a private
limited company is similar to LLP and is
a separate legal entity from its
directors and owners being more complex
a private limited company is established
only when the business grows
significantly or if a business involves
significant capital and efforts limited
companies are governed by the provisions
of the Companies Act 2013 the directors
of the company need to register and
obtain directors identification number
that is di N and then the application
for registration of company may be
applied online at ROC website v one
person company is similar to a limited
company only one person is required who
can be a shareholder as well as the
director of the company new concept in
India which has been introduced by the
Companies Act 2013 and is useful for
small companies with less than 50 lakh
rupees annual turnover six a registered
Society is managed by a governing body
unsuitable to each other the donors and
the Registrar of societies are informed
on decisions made by the governing body
it is registered under societies
Registration Act 1867 Trust enables the
transfer of ownership from the first
person to a second person for the
benefit of a third person
it is governed by a Board of Trustees
private trusts are registered under the
Indian trusts Act 1882 Hindu Undivided
family @uf consists of persons linearly
descendant from a common ancestor HUF is
governed by the provisions of hindu law
a business entity can be registered as
an HUF as well now that we know the
different types of businesses in India
we may choose the one that suits us the
most and move to the next step step two
one needs to identify what nature of the
business the firm registered in step one
would conduct from export-import
perspective one can choose any one of
the options manufacturer a manufacturer
has a unit which takes in raw materials
and processes them to create finished
goods as per the foreign trade policy
manufacture includes processes such as
refrigeration repacking polishing
labeling reconditioning repair remaking
refurbishing testing calibration
re-engineering for manufacturers the
moment your turnover crosses a certain
threshold one has to pay excise duty
before the goods can leave the factory
gate for the sake of paying excise duty
a central excise registration
certificate has to be obtained in
addition other registrations such as VAT
industrial license Pollution Control
fire safety and such might be applicable
depending on the nature and type of
manufacturing activities merchant
Merchants do not have their own
manufacturing setup merchants buy goods
from a manufacturer or another merchant
and then sell the goods to customers or
other merchants or manufacturers in
India or abroad both merchants and
manufacturers are allowed to carry on
export import businesses in India
merchants to need to register with
applicable agencies like State
Commercial tax department merchant
guilds etc service provider services
provider provides intangibles like
consultancy services IT services BPO
services etc all service providers need
to register with service tax department
and pay service tax as applicable once
the turnover crosses a certain threshold
in addition they may also register with
various service sector associations such
as NASSCOM etc step 3 value added tax
VAT registration is a tax registration
required for businesses trading or
manufacturing goods in India that is
collected and governed by the state
government VAT registration is mandatory
if turnover is about five or ten lakh
rupees depending on the state summary to
recap this video one needs to first
decide on the type of business entity
depending on the size scale and
requirements as explained in step one
then one needs to register the business
entity as detailed in step one and
step two thereafter depending on the
type of business and turnover one has to
check whether they are required to get
their excise service tax and VAT
registration done one may refer to the
websites of Ministry of Corporate
Affairs triple w dot mca dot govt dot i
n for more details on registrations at
step one one may refer website of
Central Board of excise and customs
triple w dot CBEC
dot govt dot i n as well as state
commercial tax department for more
details on step two and step three
registrations in case of any doubt your
Neary at bun two is available for help
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