A step by step guide to starting your own Business

STEP 1: Come up with a unique selling proposition

USP is the quality of the product/service that you provide which makes you stand out from your competition. You need to make sure that your target audiences understand this USP. This can have a major impact of the sales of your products/services. Deep analysis is required to zero in on your company’s USP.

How to Start a Business

Analyze the ads and marketing strategies of your competitors to understand what they are trying to communicate with their customers. The USP of a company can be anything from competitive pricing to special characteristics of your product/service.

The tried and tested method of coming up with a USP is by putting yourself in your customer’s shoes. Understand the needs of the customer and also the buying behavior of your customers.

Even if you haven’t found a USP that would revolutionize the industry that you belong to, don’t be disheartened. All you need to do is make the customer reach for your product instead of your competitors.There are three key factors around which one can start your business and it is explained below

Unique Product – If you have a unique product/service, the product/service alone becomes your USP until someone else enters the Market. This is the best position to be as you can leverage the uniqueness to capture the market.

Hot Cake Theory – Keep an Eye on the trends that are happening around you and take advantage of the trend. Even if there is an existing player in the market you can take advantage of the trend to sell your products/services. The only catch is that your product/service will be in high demand as long as the trend continues.

Your USP here would be how your product identifies with the ongoing trend. The closer the product/service is to the trend the better it is.

Existing Product – You can also create a business around an existing product/Service. All you need to do is add value to it and highlight it to your potential customers by adding a feature to it or by packaging it differently.

STEP 2: Devise a Business plan

Once you have decided to take a plunge into business it’s time to sit down and come up with a Business Plan. Your Business Plan is your roadmap to success and a lot of thought needs to be poured into it. Your business plan should contain the following things:

Goals of the Organization: Goals of the organization should be well defined in your business plan. Both long term and short term plans need to be defined precisely.

Allocation of resources: Allocation of resources both tangible and non tangible should be defined.

Create a solid strategy to create value for your venture which would set you apart from your competition.

This document will also help you relay your goals to your employees and give you an understanding of the type of targets that needs to be set for them to achieve.

A business plan will help you keep track of your results and help guide you back on track if you are deviating from your plan.

STEP 3: Decide the type of company you want to start

Once you decide to start your own business, you also need to figure out the type of company that you want to start. This is particularly useful for tax purposes and will also help you plan your company’s future better. We have listed below the four types of company that you can start. It is also essential to consult a lawyer to understand the laws and to clarify any doubts that you may have.

Sole Proprietorship In this type of business, the business is completely yours. All the profits that you make are completely yours. No other employee can claim the profits as there are no stock options available to them. You can run your business they way you want to and you are not answerable to anybody else.

The negative aspect of Sole Proprietorship is that the Government considers you and your business as the same and you will be taxed accordingly. Also the business will exist as long as you continue to own it.

Partnerships

As the name suggest this type of business involves two or more partners. Like Sole proprietorship there is no distinction between personal and business finances. A partnership agreement is drafted, which addresses settlement of disagreements amongst partners and what needs to be done if one of the partners opts out or dies. There are three different types of Partnerships

General Partnership

General Partnership is the most Basic type of partnership where all the profits and liabilities are shared equally between the partners.

Limited Partnership

In Limited partnership the amount of investments determines the extent to which the partner is responsible. The decision making power also lies with the partner with the larger investment and he also carries the same liability.

Joint Venture

This is a time based agreement. Two or more individuals can enter a joint venture agreement which will be valid until the life time of the project and will be dissolved after the completion of the project.

Corporations

Being “incorporated” is highly advantageous for any business. Your business itself becomes an entity that can be taxed, enter into contract and is liable as an entity. The owner who is the shareholder of the company can sell the business when he wants to. The only drawback is that it takes time and it is also an expensive procedure.

The registrar of Companies (ROC) should issue a certificate of incorporation. The Memorandum of Association and Articles of Association needs to be submitted to the ROC for incorporation along with the necessary documents and the fee. ROC issues the certificate of incorporation after scrutiny.

Limited Liability Partnership

In Limited Liability Partnership, the company is considered as a separate entity but the partners can manage the company as in a Partnership firm. The partner’s rights and duty will be according to the agreement that they have signed amongst themselves. Limited Liability Company offers a lot of advantages like lower cost of formation, easy to dissolve and no need for minimum capital contributors.

STEP 4: Complete the registration of the company

The Entrepreneurship spirit in India is growing. Youngsters are willing to carve a niche for themselves by starting new companies. If you are also looking to start your own firm there are a few things that you need to know before you start your own company. This site will provide you with the comprehensive knowledge about starting a company and also how to run a successful business. Step by Step guide to starting a Company in India

Obtain a DIN (Director Identification number)

Download the Provisional DIN form from the website www.mca.gov.in. The Provisional DIN will be issued within 60 days. The form has to be filled and sent to Ministry of Corporate Affairs for approval along with the relevant Documents. The Documents required are –

Identity Proof – PAN Card, Driving License, Passport or Voter Id Card (Any one)

A photograph should be attached to the application form. The Identity Proof and the address should be attested by a Public Notary or Gazette Officer of the Government.

Residence Proof – Driving License, Passport, Voter Id Card, Telephone Bill, Ration Card, Electricity Bill or Bank Statement (Any one).After the verification is completed, the Ministry of Corporate Affairs will issue a Permanent DIN. Within 3-5 days a permanent DIN will be issued.

Obtain a Digital Signature Certificate

A Class-II Digital Signature Certificate is need for the new electronic filing system under MCA 21. There are six private agencies authorized by MCA 21 that can be used to obtain the digital signature certificate such as Tata Consultancy Services. The Company directors need to submit the application form along with the Identity Proof and address proof.

The fee structure depends on the agency and it ranges from INR 400 to INR 2650. The details of the certified agencies that are authorized to issue Digital Certificates can be found on the website of Ministry of Corporate Affairs (www.mca.gov.in).

Register the Company name with the Registrar of Companies (ROC)

Company name can be registered online. The applicant can check the availability of the desired name on the MCA 21 website. You can submit up to 6 names the ROC staff will check for similarities with other names in India. The approved names will be displayed on the website. Applicants need to refer the website to check whether the name that they have selected has been approved.

Pay Stamp Duties, file all the incorporation forms and obtain the certificate of Incorporation online

As of 1st January 2010 it has been made mandatory to pay for the stamp duties for incorporation documents online through the MCA’s website (www.mca.gov.in). The tradition method of payment of stamp duty has been replaced by e-payment of applicable stamp duty on Articles and Memorandum of association through MCA website.

Forms such as Form 1, Form 5 and Form 44 will also be stamped by the MCA website. All the information about which forms needs to be filed will be provided on the portal.

There are three forms that needs to be filed electronically in the MCA website, they are:

  • e-form 1
  • e-form 18
  • e-form 32

Additionally, scanned copies of consent by initial directors with their signature and memorandum & articles of Association needs to be attached to Form 1. The fee for registering the company can be paid online using a credit card or through cash payments at authorized banks.

The certificate of incorporation is automatically sent to the company’s registered office by speed post or registered post.The registration fees that needs to be paid to the Registrar depends on the company’s authorized capital:

The Base fee for registration is INR 4,000 provided the nominal share capital is not over INR 100,000.

  1. If the nominal share capital lies between INR 100,000 and INR 500,000 the registration fee will be INR 4,300.
  2. If the nominal share capital lies between INR 100,000 and INR 5,000,000 the registration fee will be INR 4,500.
  3. If the nominal share capital lies between INR 100,000 and INR 10,000,000 the registration fee will be INR 4,600.
  4. If the nominal share capital lies between INR 100,000 and INR 100,000,000 the registration fee will be INR 4,650.

Once the applicant makes the payment through Credit or Debit card the system will accept his documents immediately. Although in Mumbai ROC requests for pre-scrutiny of documents for corrections before the documents are uploaded. After the scrutiny is complete the documents will be approved without further delay.

Make a seal

It is not mandatory legal requirement for companies to make their own seal. This will be necessary to issue seals and other documents.

Acquiring a Permanent Account Number (PAN)

The PAN is a 10-digit alphanumeric number issued by an assessing officer of the Income Tax Department on a laminated card. National Securities Depository Services Limited (NSDL) and Unit Trust of India (UTI) has appointed authorized franchises and agents who will be able to provide you with a Permanent Account Number (PAN). NSDL has set up TIN Facilitation centers across India.

The Applicant can apply for PAN at these centers by filling up the Form 49A along with the certified copy of registration issued by the Registrar of Companies. The proof of Identity and Company address needs to be provided along with this. The processing fee will be INR 94 + Applicable taxes. The applicant will receive an acknowledgement slip after he submits the application form along with the appropriate documents.

The printed PAN card will be delivered to the applicant. According to the Income Tax Act of 1961 every individual must quote his/her Permanent Account Number (PAN). This will be used for Tax Purposes. Tax Deduction and Collection Account Number (TAN) is required for tax deduction purposes.

According to the instructions of Central Board of Direct Tax (CBDT) banks will not accept any form of tax payment without PAN or TAN.Online Application of PAN can also be made although the documents need to be dropped off at the appropriate physical locations. Further details are available in these websites – www.incometaxindia.gov.in , www.utiisl.co.in , www.tin-nsdl.com.

Register with the Office of Inspector

The employer’s name, Manager’s name and the name of the establishment, portal address and the category of the store needs to be sent to the local shop inspector with the fees that is applicable.Under the Section 7 of the Bombay Shops and Establishment Act, 1948 the procedure for registering a shop is given below:

The employer should register his establishment within the 30 days of commencement of work (Section 7(4)).
The employer should submit Form A to the local shop inspector with the prescribed fee to register his establishment (Section 7(1)).

Once the statement in Form A is validated the certificate for registration of establishment is issued in Form D (Section 7(2)).

The fee structure is given below

  • 0 employees: INR 100
  • 1 to 5 employees: NR 300
  • 6 to 10 employees: INR 600
  • 11 to 20 employees: INR 1000
  • 21 to 50 employees: INR 2000
  • 51 to 100 employees: INR 3500
  • 101 or more: – INR 4500

A trade refuse charge (TRC) which is an annual fee needs to be paid. This is three times the registration and renewal fee.

Register for VAT online

Value added Tax (Vat) is the tax that is added to the products or services sold. VAT registration form needs to be downloaded from the website of the subsequent state where the applicant has his establishment.

Register for profession tax

The section 5 of the Professional Tax Act states that every employer needs to pay professional tax and should obtain a certificate for the said company from the authority prescribed according to the state Government laws.

The documents that are needed for the same are address proof, details of the company registration number under Indian Companies Act (1956), details about the head office of the company if the company is a branch of a company registered outside the state, company deeds and the certificates under other acts.

All these documents need to be submitted along with the Form I to the registering authority of the state.

Register with the Employees’ Provident Fund Organization

Any establishment employing more than 20 persons or more and which comes under any of the 183 Industries or classes of business comes under the Employees Provident Funds & Miscellaneous Provisions Act of 1952. The applicant needs to fill in the application and submit it at the regional Provident Fund Organization (EPFO) where he will receive his social security number.

No need to apply for each employee separately. Although it is necessary for each employee to become members of the fund and individual account number needs to the allocated to them by the employer. If the workforce of the establishment is less than 20 there is no need to apply.

A code number will be allocated to the applicant within 3 days of submission if all the necessary documents are in order. In rare cases it is observed that applicants have received their code in mail after 12 to 15 days of submission of the form.

Registering for medical insurance (ESIC)

An employer needs to register himself and every employee working in his organization for medical insurance scheme. The individual records of each of the employee and the employer will be set up once the registration is done. Registration can be done by submitting Form 01 of the Employees’ State Insurance.

The Employer Code will be issued within a week. The code number will be sent to the employer by mail. Once the employer is registered he needs to submit the Declaration form for his employees. The employees need to provide their details to their employer.

Employee temporary cards (ESI) will be allotted to the employees. These temporary cards are valid only for a time period of 13 weeks. A permanent ESI card will be issued within 4 to 5 weeks. ESI benefits can be claimed by any organization employing more than 20 individuals. Comprehensive medical coverage, maternity benefits for women employees and compensation for fatal and other injuries will be provided for the employees.

STEP 5: Devise a Market Plan

Marketing plan is an important internal document that leads to the success of your firm. The plan should cover at the minimum a full year of operations. The three main areas that your business plan needs to emphasize on are your current state of business, the growth you want to achieve and how you are going to achieve the growth.

Your market plan needs to address the product/service that you offer, complete understanding of your potential customers, market and your competition.

Product/Service – The Product/Services section should provide a detailed analysis of your product/service, the features that make it better than its competition and the stage of development it is in.

Customers – This should provide you details of your potential customers. How you would appeal to your customer base and also provide a detailed market research you have done regarding the product.

Competition – Understanding your competition helps you understand how to leverage your products/services better. Understand how your competitor is establishing a connection with the audience and the marketing strategies, this will help you devise a plan that is better than theirs and help you capture the market.

STEP 6: Start your Business

The final stage is to define your company and start the business. This includes creating a logo and getting the letterheads, visiting cards and packaging designed. The logo and the identity need to reflect the company and the products/services that you are providing your clients.

A website is also an important part of the identity of the company. The financing for the first six months of operation needs to be arranged according to the business plan. The running cost of the organization along with the salaries of the employees has to be arranged. If it is a location based business, it is essential to find a location that helps you reach your potential customers.

Location can make or break your business hence special care needs to be taken in this regard. Recruiting is the last step of starting a successful business. You can look at hiring interns and also recruiting individuals on contract basis. This will ensure that you are not spending on employee benefit plan and will help you conserve money that can be spent on other crucial parts of your business.