Doing business in India is becoming a focal point for many international companies. With a significant contribution to global trade and economics, the rise in the Make in India initiative, India is moving faster than ever in becoming the manufacturing as well as a business hub for the world. There has been a paradigm shift after the Covid-19 pandemic and it opened new doors for Business Incorporation in India. This is further supported by the Startup India scheme where the government provides support to qualified startups through various incentives thus making market entry in India easier.
The following points will help you guide through some of the important aspects of Indian markets:
Following four legal structures are most prevalent in Indian markets for doing business:
1) Proprietorship
[Governed by: NA]
It is the simplest form not requiring any mandatory legal registration. It is not considered a separate legal entity from its proprietor and the proprietor is personally responsible for all the liabilities.
Legal Compliances for Incorporating Proprietorship firm:
Apart from compliances with specific laws applicable, no other legal compliances are mandated. Such laws may include Income Tax Act, 1961, Goods and Services Tax Act, 2017, etc. Proofs such as Shop and Establishment act as business proof for such entities.
2) Partnership
[Governed by: Partnership Act, 1932 | Registrar of Firms]
A partnership is the association of two or more persons with common intent to run a business and share profits in a pre-determined ratio. It involves more compliances than sole proprietorship but lesser than companies.
Legal Compliances for Incorporating Partnership firm:
Partnership firm involves registering the firm with Registrar of Firms. Although it’s optional to register the firm, doing so is recommended otherwise it will attract the following disqualifications:
Apart from registration with the registrar of firms, other specific laws like Income Tax Act, 1961, GST act, etc. may attract compliances.
Opening a partnership firm requires a notarized partnership deed. As an identity proof of its legal existence, a PAN card needs to be applied for.
3) Limited Liability Partnership (LLP)
[Governed by: Limited Liability Partnership Act, 2008 | MCA]
As the partners of the partnership firm have unlimited liability, to reduce the financial risk upon them, the LLP concept was introduced. It ensures that the liability of a partner is limited only up to the amount of capital contributed by him.
Legal Compliances for Incorporating LLP company in India:
Following are the steps to incorporate LLP:
4) Private Limited Companies
[Governed by: Companies Act, 2013 | ROC, and MCA]
This is one of the most formal and regulated business structures. This structure is the most preferred option for those looking to expand and enter the Indian business market with its own legal existence.
Legal Compliances for Company Formation in India: Following are the steps to incorporate a private limited company
Taxation is an important aspect of Business Incorporation in India. Basic taxation applicable in India is as follows:
Parameters |
Proprietorship |
Partnership |
LLP |
Company |
Tax Rate* |
Slab Rate |
30% |
30% |
30% [25% if turnover or gross receipts does not exceed Rs. 400 crores in the PY 2018-19] |
Other Tax Aspects |
Various provisions are incorporated to further reduce the tax rates. For eg: Section 115 BAA/ 115BAB etc. |
* These are subject to levy of surcharge, cess, interest, penalties, etc.
Startup India is the initiative launched by the Government of India for building a strong ecosystem to support startups and entrepreneurs. If any entity satisfies the criteria of being a startup, then it becomes eligible to avail of the benefits of this scheme.
Your entity must satisfy the following criteria:
Startup India Scheme provides the following incentives:
Startups in India are a great tool for economic development. This decade is of startups and businesses with proactive government support. If you are planning for Company Formation in India or planning to launch a startup, feel free to contact the professional for assistance and support.
Also read: Guide to Company incorporation in Singapore
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