How to Start a Business in India – Rules, Regulations & Step-by-Step Guide

How to Start a Business in India – Rules, Regulations & Step-by-Step Guide

Introduction

Starting a business is exciting—but it’s important to get the legal and regulatory aspects right from the beginning. As a Chartered Accountant, I often see entrepreneurs struggle because they miss out on critical compliances. This guide will help you understand:

• What rules and registrations apply when starting a business in India
• How to choose the right business structure
• Tax and regulatory registrations required
• Other legal compliances to keep in mind

1. Choose the Right Business Structure

The first step is deciding the type of entity. Each has its pros and cons:

Proprietorship

• Easiest to start, minimal compliance
• No separate legal identity
• Income taxed as personal income

Partnership Firm

• Two or more people
• Registered or unregistered (but registration advisable)
• Governed by Partnership Act, 1932

Limited Liability Partnership (LLP)

• Hybrid of partnership and company
• Separate legal identity
• Limited liability for partners

Private Limited Company

• Separate legal entity
• Limited liability
• More compliance and cost, but good for scalability

One Person Company (OPC)

• Single owner
• Separate legal entity
• Limited liability

1. Register Your Business

Depending on the business structure:

Proprietorship: GST registration, Shops & Establishment License, Udyam registration (optional but recommended)

Partnership: Register partnership deed, PAN for firm, GST registration

LLP: Incorporate through MCA portal, obtain LLP agreement, PAN, GST

Private Limited/OPC:

• Name approval via RUN/Spice+
• Incorporation via Spice+ form (MCA)
• PAN & TAN allotment
• GST registration if applicable

1. Obtain Tax Registrations

• PAN & TAN – For business tax compliance
• GST Registration – Mandatory if turnover crosses threshold (currently ₹20/40 lakh, depending on business type and state)
• Professional Tax – Applicable in some states
• ESI & EPF – If employing staff beyond specified limits

1. Other Licenses & Approvals

• Shops & Establishment License – Required by state laws for most businesses
• Trade License – Especially for local municipal limits
• Import Export Code (IEC) – For businesses dealing in imports/exports
• FSSAI License – For food businesses
• Pollution Control License – For manufacturing units
• Industry-specific approvals as applicable

1. Open a Business Bank Account

Always separate personal and business transactions for better accounting and compliance.

6. Maintain Proper Books of Accounts

Even if your business is small, keep proper records:

• Sales, purchases
• Expenses
• Inventory
• Tax payments

Good books help in:

• Filing correct tax returns
• Securing bank loans
• Business valuation

1. Understand Ongoing Compliance

• GST returns filing (monthly/quarterly/annual)
• Income Tax returns
• TDS payments and returns
• ROC filings for companies and LLPs
• Renewal of licenses

1. Seek Professional Advice

Starting a business involves legal and financial implications. Always consult a CA, CS, or legal professional for the right advice specific to your business.

Conclusion

Starting a business is a big step, but knowing the rules and following proper registration and compliance processes will save you from legal hassles later. If you’re planning to start your venture, feel free to reach out to me for personalized guidance.