How to set up new business?

To set up new business one has to register under various Acts. For our easy understanding, we can divide setting up process into two broad categories, namely

• Entity registration
• Business registration

In this article, we will discuss about Entity registration. Entity registration means setting up a structure or type of venture you can chose from. Only after entity registration, one can start the process of business registration. After obtaining entity and business registrations, business can be started.  The various options of entity registrations available in India are as under –

Any one person planning to start a business can look at the following options

Proprietary Concern ( Read More Is setting up proprietary concern a bad idea? )

• Proprietary concern can be started by only one person
• This is the easiest and most cost effective way of starting a business
• For setting proprietary concern, there is NO Entity registration is required.  OR

One Person Company (OPC) ( Read More Corporate Status to proprietary concern – a new initiative in India )

• This is as an alternative to proprietary concern. As on date, only the Indian residents are allowed to set up OPC
• It is a new type of entity introduced by the Companies Act, 2013.
• For starting an OPC, one has to file relevant documents and get it registered under Registrar of Companies (ROC).

Two or more people jointly planning to start a business can look at the following options-

Partnership Firm ( Read More Setting up a partnership firm )

• If two or more people join together to start a business, they can look at setting up Partnership Firm.
• This is also an easy and reasonably cheaper option of starting a business.
• For setting partnership Firm, one has to prepare a Partnership Deed and get it registered under Registrar of Firms (ROF). The registration process will take around 20 working days. OR

Private Limited Company (PVT LTD) ( Read More How to start a private limited company )

• This is an alternative to partnership firm.
• The procedure and the cost of setting up are higher than setting up partnership firms.
• For starting a private limited company, one has to prepare Memorandum of Association and Articles of Association (along with other documents) and get it registered under Registrar of Companies (ROC). The registration process will take around 30 working days. OR

Limited Liability Partnership (LLP)

• This is an alternative to partnership firm and private limited company
• The procedure and the cost of setting up is higher than setting up firm, but lower than setting up Private limited company.
• For starting a LLP, one has to prepare a Partnership Deed (along with other documents) and get it registered under Registrar of Companies (ROC). The registration process will take around 25 working days.

Limited Company (LTD)

• If seven or more people decide to start a company, they can look at any of the above option or setting up a limited company.
• The procedure for setting up LTD company is almost similar to setting up PVT LTD company, register at Registrar of Companies (ROC)
• The cost of setting up LTD is higher than setting up PVT LTD

Want to set up a charitable organization, NGO or educational Institution can look at the following options-

Section 8 Company : (Read More How to start a trust – Section 8 Company under Company Act 2013)

• If two or more people decide to start a school or charitable organization can look at setting up Section 8 Company.
• To start Section 8 company, one has to prepare Memorandum and Articles of Association (along with other documents) and get it registered under Registrar of Companies (ROC)

Trust

• If three or more people decide to start a charitable organization, they can create a either a Section 8 company or a trust.
• To start a Trust one has to prepare a Trust Deed and get it registered at Sub-Registrar’s Office

Society

• If seven or more people decide to start a charitable organization, they can set up either Section 8 Company or a trust or a society.
• To start a society one has to prepare Bye Laws of the society and get it registered at Registrar of Societies.

I will write about Business registration in my next post and also I will write a detailed process of setting up each of the above entities in separate articles.

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