In India, the process of starting a business involves understanding various legal structures. Non-corporate entities, such as sole proprietorships, involve a single owner with unlimited liability, whereas corporate entities like partnerships, LLPs, and private limited companies offer distinct features. Sole proprietorships are simple with no separate legal entity, while partnerships require a partnership deed, and LLPs combine features of both partnerships and companies with limited liability. Private limited companies have shareholders and directors, offering limited liability. Phase 1 covers the different entity types and their governing regulations, tax structures, and liabilities. Phase 2 explains the step-by-step process of entity formation, including registering PAN, Aadhaar, and other documents. For instance, proprietorships require basic registrations and licenses, while forming a private limited company involves more paperwork, such as drafting MOA and AOA. Phase 3 highlights key post-setup tasks, including GST registration, intellectual property rights, and employee-related compliances. The entire setup process varies depending on the business structure, with duration ranging from 10 to 30 days.
Common Legal Structures for Starting a Business in India
Phase 1: Understanding Different Entity Structures in India and Their Key Differences
Phase 2: Step-by-Step Process for Forming Each Business Entity
Phase 3: Key Considerations After the Legal Setup of the Business
PHASE – 1
| Sr. | Questions | Incorporated as | |||
| Non-Corporate Entities | Corporate Entities | ||||
| Individual / Proprietorship | Partnership Firm | LLP | Private Limited Company | ||
| 1 | Nature or Definition ? | Single Person is a owner
running a business – Same PAN Card of Individual no new apply |
Two or More person comes together as Owner for running a business – Separate PAN card of Partnership Firm | Just like Partnership firm but given corporate Status like Company – hybrid combination of Partnership and Company features – Separate PAN card of LLP | Concept of Shareholders and Directors with Limited Liability – Separate PAN card of Company |
| 2 | Number of Owners | Sole Owner -1 | Minimum – 2 Maximum – 50 | Minimum – 2 Maximum – Unlimited | Minimum – 2 Maximum – 200 |
| 3 | Person who starts the entity would be called as? | Person would be called as “Proprietor” | Persons would be called as “Partners” | Persons would be called as “Partners” and specified person as “Designated Partner” | They became “sharehc:der” and those managing as “Director” |
| 4 | Liability is Limited or Unlimited? | Unlimited Liability | Unlimited Liability | Limited Liability of Partners | Limited Liability of Shareholders |
| 5 | Separate Legal Entity | NA | No | Yes | Yes |
| 6 | Any Document to be prepared? | No such | Partnership Deed | LLP Deed | 140A and A OA |
| 7 | Which Act governs this | No such specific Act | Indian Partnership Act, 1932 | Limited Lab iLit.–y Partnership Act. 2008 | Companies Act 2013 |
| 8 | Income Tax | As per Slab rate | 30% after Partners
remuneration and Interest |
30% a:ter Partners
remuneration and Interest |
25% |
Phase – 2: Step by Step Process of Each Entity Formation
(A) Proprietorship Firm
> Apply Pan Card & Adhar Card of Individual
> Decide The Firm Name
> Prepare A Registered Rent Agreement Mentioning Your Firm Name As “Tenant” With Police Verification
> Apply For Shop and Establishment Licence
> Apply For Professional Tax Licence of Firm
> Apply For Current Bank Account
> Apply For MSME Certificate
> Apply For Required Licence / Approval from Your Institute Like for Architect – Coa (Council of Architecture) To Practice
Duration – 10 To 15 Days
Phase – 2: Step by Step Process of Each Entity Formation
(B) Partnership Firm
> Apply Pan Card & Adhar Card of All Partners
> Decide The Firm Name
> Prepare A Partnership Deed and Notarised It
> Apply For Pan Card of Firm
> Apply For Tan Card of Firm
> Prepare A Registered Rent Agreement Mentioning Your Partnership Firm Name As “Tenant” With Police Verification
> Registered Your Partnership Firm with ROF (Registrar of Firm) – Recommendation
> Apply For Shop and Establishment Licence
> Apply For Professional Tax Licence of Firm
> Apply For Current Bank Account
> Apply For MSME Certificate
> Apply For Required Licence / Approval from Your Institute If Required Like for Architect – Coa (Council of Architecture) To Practice
Duration – 15 To 20 Days
Phase – 2: Step by Step Process of Each Entity Formation
(C) LLP (Limited Liability Partnership)
> Apply Pan Card & Adhar Card of All Partners
> Decide The LLP Name & Apply with MCA For Name Approval
> Incorporate LLP with MCA
> Prepare A Notarised LLP Deed and Filed With MCA
> Apply For Pan Card
> Apply For Tan Card
> Prepare A Registered Rent Agreement Mentioning Your LLP Name As “Tenant” With Police Verification
> Apply For Shop and Establishment Licence
> Apply For Professional Tax Licence of LLP
> Apply For Current Bank Account
> Apply For MSME Certificate
> Apply For Required Licence / Approval from Your Institute If Required Like for Architect – Coa (Council of Architecture) To Practice
Duration – 20 To 25 Days
Phase – 2: Step by Step Process of Each Entity Formation
(D) Private Limited Companies
> Apply Pan Card & Adhar Card of All Shareholders and Directors
> Apply For Digital Signature of All Shareholders and Directors
> Decide The Company Name & Apply with MCA For Name Approval
> Prepare Draft Moa and AOA
> Incorporate Company with MCA (Pan and Tan Card Comes Automatically with Incorporation)
> Pay The Stamp Duty on Share Certificate to Respective State Government
> Prepare A Registered Rent Agreement Mentioning Your Company Name As “Tenant” With Police
Verification
> Apply For Shop and Establishment Licence
> Apply For Professional Tax Licence of Company
> Apply For Current Bank Account
> Apply For MSME Certificate
> Some Institute Like for Architect to Practice – COA (Council of Architecture) Does Not Allow To Form A Company
Duration – 25 To 30 Days
Phase – 3: Common Points to Take Care After Legal Set Up
> Apply For GST Certificate – If Turnover Is More Than Rs.20 Lakhs for Services and Rs.40 Lakhs for Goods. You Can Even Apply Voluntary Also for Various Reasons
> Apply For Trademarks / Patents / Designs / Copyrights – IPR Https://Ipindia.Gov.In/ Https://Copyright.Gov.In
> Apply For Professional Tax Number of Employees – Even If One Employee
> Apply For ESIC & PF – If Crossed the Threshold for Number of Employees
> Apply For IEC (Import Export Code) – If Export Goods or Services
> Prepare NDA or Other Various Agreements with Clients, Employees, Vendors Etc.
> Apply For Startup Program If All Conditions Are Fulfilled
> Maintain Proper Books of Accounts and Keep Invoices of Each Payments And Receipts – Compulsory For Each Entity
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