Guest blog: Starting & Growing your business in India

22

May

There is no doubt about it; India is where the future lies for many international businesses. This was evidenced in January this year when Prime Minister David Cameron led a delegation of 16 leading UK tech start-ups to Bangalore on a mission to find out how India could benefit UK firms.

The economic allure of India is now well publicised. Currently the tenth-largest in the world by GDP, it is predicted to become the third largest in the next thirty years. Economic expansion has been driven by exports and latterly by imports, as India develops a staggeringly large middle class, keen to enjoy the trappings of wealth.

The lure of India includes low start up costs, a wealth of top-class graduates leaving India’s high-quality University system each year, and access to a huge domestic market place, that is already home to the world’s tenth highest concentration of billionaires.

Starting a business

Starting a business in India is actually fairly straightforward, although as with any international venture, understanding the laws of the land and legislative provisions pertaining to start-up businesses is the key to success.

The legal process for setting up a company in India is broadly speaking the same wherever you are, however there are state and city variations which mean that the only true way to know that what you are doing is correct is to enlist the help of a commercial lawyer with the necessary experience in your chosen destination.

The primary focus for any start up is the business concept that should be rigorously explored to ensure that there is a genuine market and that a robust business plan projects a future for your idea.

Once you have a concept that you think may work on the sub-continent, you will need to decide on the legal structure for your business. Like the UK, India offer a variety of legal business structures, including sole proprietorship, partnership, limited liability partnership, and private and public limited companies.

The legal requirements and obligations vary with each company type, so it will pay to have specialist legal advice from a commercial lawyer when you make this important decision.

The legal process

The majority of international investors starting up in India will choose a private limited company to provide legal security and to protect personal assets. As a foreign investor you may be entitled to own up to 100% of your company, however in some areas equity caps apply for certain industries so this is worth checking up on well in advance. Some international investors choose to partner with a local entity to assist in formation and to harness local expertise.

The steps to incorporating your start up are broadly similar as they are elsewhere in the world, and include choosing a name and checking it is available with the Registrar of Companies (this can be done online). You will also need to register your business at the Ministry of Corporate Affairs (also online) and apply for a Director Identification Number and digital signature.

Once you are registered as a director and your name approved, you can apply for approval of your company by the Registrar of Companies. This approval process requires you to disclose authorised capital, objectives, location of the venture and submit logos and trademark applications. Once approved you have 60 days to register the company.

Company registration, as in the UK, requires Memorandum and Articles of Association. These must be subscribed by two persons and is countersigned, usually by a commercial lawyer. You will also need to register for Service tax under the Finance Act 1994 and register for VAT. If you collect tax, either from employee wages or from VAT on products sold then you will need a TAN (Tax Deduction and Collection Account Number).

Alternatives

India offers foreign investors some interesting alternatives to starting an Indian company. If you have a company formed in the UK, one idea worth exploring is that of a Project Office, that can be started with permission from the Reserve Bank of India. This allows you to set up a temporary site office in India to complete a specific task. This might be more suitable for your business proposal.

Nick Brand of Contact Law wrote this article on starting a business in India for Transformational Business Network. Nick received his LLB from the University of the West of England in 2004 before going on to work as a director of 2 property businesses.

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