Starting one’s own business is a dream for many. If we talk only about India, According to a Randstad Workmonitor survey, 83 per cent of Indian workforce would like to be an entrepreneur. This is higher than the global average of 53 per cent. 56 per cent said that they are considering leaving current Jobs to start their own business. This shows that Entrepreneurial ambition among the workforce is higher in India.

Essential requirement to start your business entity is knowledge of the business you want to establish. But the real barrier is not only Knowledge of the business but knowledge about which type of business entity to form and which Government Approvals are required to start a business.

Let’s discuss about first barrier which type of business entity to form?

Choosing a right form of business entity is very much essential to avoid higher tax rates and personal liabilities. Choosing a right form of business entity help accelerate one’s business entity. A business may be set up in India by way of a proprietorship, Partnership firm, Limited Liability Company, Private Limited Company and Public Limited Company. One has to choose a form of business wisely.

Second barrier: Which government approvals are required to start your business?

Every business required to take permission of regulatory authority prescribed by government which is different from business to business. But there are some Approvals and legal requirements which need to comply by every business entity.

Here I am listing down some of these requirements to start your business:

1. Permanent Account Number or PAN Card :

PAN Card is basic and foremost requirement to start your business.

Permanent Account Number, or PAN, is a 10-digit alpha-numeric unique identifier issued by the Income Tax Department to any person in the form of a laminated physical card. This is mandatory for filing one’s Income Tax Return and for all correspondence with any Income Tax authority.

At present, individuals and registered business entities, including export businesses, are required to have a PAN Card.

NSDL e-Governance Infrastructure limited and UTI Infrastructure Technology Services Limited handle the entire process of PAN allotment. You can apply for a PAN card by visiting their websites and applying online. Alternatively, you can also visit local PAN agents, obtain the form from them, and fill and submit it along with the necessary documents for a nominal fee.

2. Shop and establishment License for physical premises:

Shops and Establishments Act is another important regulation your business needs to take care of. Every state in India has enacted the Shops and Establishments Act.  This Act is executed in order to:

  • regulate the conditions of work,
  • provide for statutory obligations of the employers and
  • Administer the rights of employees in the unorganized sector and other establishments in their jurisdiction.

The rules under this act vary as per the states. You must consult the Shops and Establishments Act with the Administrative Office/Municipal Corporation in your city.

Moreover, you need to fully adhere to the legal requirements to ensure continuity as well as the smooth running of your business.

3. Goods and Service Tax Identification Number (i.e. GSTIN):

GST is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc.

Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.

GSTIN (Goods and Services Tax Identification Number). GST is basically a 15-digit number which has replaced the Tax Identification Number (TIN) that business entities were allotted while registering under a state’s Value Added Tax law. Such businesses also had to get several other identification numbers from various places. But now, after the GST implementation, all such numbers will be replaced by GSTIN.

4. TAN (Taxation Account Number) for withholding Tax:

TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. Under Section 203A of the Income Tax Act, 1961, it is mandatory to quote Tax Deduction Account Number (TAN) allotted by the Income Tax Department (ITD) on all TDS returns.

5. Professional Tax Registration:

Professional tax is the tax by the state governments in India. Anyone earning an income from salary or anyone practicing a profession such as chartered accountant, company secretary, lawyer, doctor etc. are required to pay professional tax in India.

6. ESIC Registration:

ESI stands for Employee State Insurance managed by the Employee State Insurance Corporation which is an autonomous body created by the law under the Ministry of Labour and Employment, Government of India.

This scheme is started for Indian workers. The workers are provided with a huge variety of medical, monetary and other benefits from the employer. Any Company having more than 10 employees (in some states it is 20 employees) who have a maximum salary of Rs. 15000/- has to mandatorily register itself with the ESIC.

7. EPFO:

Employees Provident Fund [EPF] is a scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is regulated under the purview of Employees’ Provident Fund Organisation (EPFO) which is one of the World’s largest Social Security Organizations in terms of clientele and the volume of financial transactions undertaken. Basically, EPF is normally like a benefit to an employee during the retirement provided by the organization.

EPF registration is mandatory for all establishments-

  • which is a factory engaged in any industry having 20 or more persons, and
  • to any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification specify on this behalf.

The employer must obtain the registration within 1 month of attaining the strength, failing which penalties will be applicable .A registered establishment continues to be under the purview of the Act even if the employee strength falls below the required minimum.

These are the 7 core requirements to start your business. Compliance requirements differs as per the industry.

If you have any query you can contact us on [email protected]

Author Bio

Qualification: CS
Company: Chintan Bhatt & Associates
Location: Ahmedabad, Gujarat, IN
Member Since: 01 Mar 2019 | Total Posts: 4
I am Practicing Company Secretary based in Ahmedabad, Gujarat, India. Dealing in matters relating to ROC/MCA, SEBI, Trademark, GST and other Company law related matters. View Full Profile

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April 2021