The First Steps to doing Business in India

Summary

This 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

00:00

🏢 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.

05:00

📑 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.

Keywords

💡Proprietorship

A proprietorship is a business entity that is owned and run by one individual. It is one of the simplest forms of business entities to register and maintain in India. In the video, it is mentioned as a suitable choice for startups with a single owner on a small scale. The script explains that there is no formal registration required to start a proprietorship, only a PAN (Permanent Account Number) for the proprietor and a bank account in the name of the proprietorship.

💡Partnership

A partnership firm is a business entity formed by two or more individuals who come together to pool their capital, skills, and efforts. The video script highlights that at least two members are required to start a partnership business. To register such a business, a partnership deed, which is duly notarized, is necessary. This concept is integral to the video's theme of explaining different business structures in India.

💡Limited Liability Partnership (LLP)

An LLP is a partnership firm that has its own legal standing, with the liability of the partners being limited to their investments. This makes it a popular choice for businesses seeking to limit the personal financial risk of the partners. The video script mentions that LLPs are governed by the provisions of the LLP Act 2008 and are registered through the Registrar of Companies (ROC). The process involves obtaining a Designated Partner Identification Number before applying for registration.

💡Private Limited Company

A private limited company is a separate legal entity from its directors and owners, making it a more complex structure suitable for businesses that have grown significantly or involve substantial capital and efforts. The video script explains that private limited companies are governed by the Companies Act 2013. Directors need to register and obtain a Director Identification Number (DIN) before applying for company registration online at the ROC website.

💡One Person Company (OPC)

An OPC is a type of company where one person can be both the shareholder and the director. Introduced by the Companies Act 2013, it is a new concept in India, useful for small companies with an annual turnover of less than 50 lakh rupees. The video script positions the OPC as a viable option for entrepreneurs who wish to operate as a single-member company, highlighting its relevance in the Indian business landscape.

💡Registered Society

A registered society is a non-profit organization managed by a governing body. The decisions made by this body are communicated to the members and the Registrar of Societies. The video script mentions that it is registered under the Societies Registration Act 1867. This concept is relevant to the video's theme as it provides an alternative business structure for non-profit activities.

💡Trust

A trust is a legal arrangement where the ownership is transferred from one person (the settlor) to another (the trustee) for the benefit of a third party (the beneficiary). The video script explains that trusts are governed by a Board of Trustees and are registered under the Indian Trusts Act 1882. This concept is important in the video as it outlines another form of business entity that can be established in India.

💡Hindu Undivided Family (HUF)

An HUF consists of persons lineally descended from a common ancestor and is governed by the provisions of Hindu law. The video script mentions that a business entity can be registered as an HUF, which is a unique concept in Indian business structures. This keyword is significant as it reflects the cultural and legal diversity in the types of business entities available in India.

💡Excise Duty

Excise duty is a tax levied on the production of goods in India. The video script explains that manufacturers, once their turnover crosses a certain threshold, must pay excise duty before their goods can leave the factory gate. To facilitate this, a Central Excise Registration Certificate is required. This concept is crucial for understanding the financial obligations of manufacturing businesses in India.

💡Value Added Tax (VAT)

VAT is a tax on the sale of goods and services collected and governed by the state government in India. The video script states that VAT registration is mandatory for businesses with a turnover above a certain amount, which varies by state. This keyword is important as it highlights a key tax consideration for businesses operating in India.

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