‘Start-up’ which has a dictionary meaning of ‘setting-up’, in the corporate world, means the ‘initial stage of the company’ or ‘the newly established business’. The number of start-ups especially in the developing countries like India is increasing like never before. Startups are the things that has nothing negative, the risk of failing, perpetual stress, frustration caused even by thinking about the startups eventually ends up adding elegance to the personality of the founder. There are two main motives behind the increasing rates of startups in India. The first one is the social development caused by startups. Startups have the potential to create jobs which is surely consuming the unemployment all over the world. Governments know this very well and this is the reason why they are now motivating the youth to start their own business. And the second reason which is equally significant to the first one- is the personal growth of the founders. Creativity, Self-Motivation, Punctuality, Stress-Management, Risk Taking Factor, Leadership, are a few of the many qualities that are developed naturally by the founders.
An Idea is enough to ignite a person to start something new, but if he wishes to take that idea into the corporate world, there are some legal processes he must follow. Trepidation may hit some people as soon as he reads the word ‘legal’. And that is pretty normal because of the complications it involves.
The first and the most important thing is to identify exactly what type of company you are planning to start. There are some important factors that are to be considered before registering the company. The following are different types of registrations that can be done according to the plans for the future. Here are the most popular registrations that are suitable at the inception.
As a Proprietorship Firm
If you intend to do all the business yourself with no co-founders, registering your firm as a Proprietorship firm is the best option. It cost around 5000 INR to 10000 INR to register a sole Proprietorship firm. You need two documents to be submitted for the registration. If you are starting a service based business like website developing, consultancy, digital marketing, etc. you need to submit Service Tax Certification and Chartered Accountant Certification regarding the nature of business. And if your business is product manufacturing or sales business, you need to provide Shop Act License and VAT/Sales TAX/TIN Registration. In addition to the above documents, basic documents like ID proof and address proof are required.
As a Partnership Firm
In Partnership firm, minimum 2 and maximum 20 partners can be involved. The share of each partner is written on an agreement paper which is signed by all the partners. Along with the documents to be submitted for the proprietorship firm, additional documents like a Certified True Copy of the Partnership deed, pan card for the firm and a Current Account in the name of the firm is required. The cost is nearby 7000 INR to 8000 INR, which is very affordable for small scale business.
Limited Liability Partnership (LLP)
A limited liability partnership (LLP) is a partnership in which some or all partners have limited liabilities, exhibiting elements of partnerships and corporations. It costs about 9000 INR to 10000 INR and no minimum capital is required. It provides more credibility than a partnership firm. In simple words it is the next level of a partnership firm. This is most preferable registration for the startups because of the less budget and less legal procedure involved.
As a Company
Registering as a company is more complicated and requires about 15000 INR which is more than any other procedure. But company is most preferable by the investors, thus expansion of the business is very easy if it is registered as a company. Now there are two most popular types of companies. The private limited company and the other is a public limited company.
In a Private Limited Company the shareholders cannot transfer their shares. 2 members to 50 members can be the part of a private limited company. Capital of minimum 1 lakh or more must be paid up which may be prescribed from time to time.
Whereas, a Public Limited Company allows the shareholders to transfer their shares. It can have minimum 7 members and no limit for the maximum members. Hence, the general public can subscribe to its shares. Also, a capital of minimum Rs5 lakhs must be paid up.
It is very difficult to decide which type of registration is best for the business. The factors like budget and future goals may help to simplify the complexity. If the initial budget is low, you can start as a partnership firm and as the business grow you can switch it to Limited Liability Partnership or Private Limited Company. If you initially started as a Proprietorship firm and you alone want to take your business to higher level, you can also register your business as One Man Company. One Man Company is a company which needs only one person for all the formality. Considering the views co-founders and consulting business lawyers may help you to take the best decisions.
The Law-Mantra To Initiate A Startup
