Starting your business venture is very complex thing in India. There are various hurdles to be crossed before you can get your venture going. I started out in my venture for development of my software firm which will be developing solution for mobiles and web. Our first product was IPhone game WhatZOdd.
We started out with our business plan; choose our product model and financing options.
Technical
- Business Plan
- Business Model
- Financing Options
Business plan highlighted our entrepreneurial vision, describing the strategy and operations of the venture. We thought about of our first product, and decided on our location of business. We also did an exhaustive research on our chosen product and the field to understand how are the product released in the market and revenue generated.
Business Model, we decided on venturing into the path of product making Social Networking products for Mobiles and Web. We decided not to go into service industry.
Financing options, we were self-financed. My partner had experience in Investment Banking and decided to take on the finances, marketing and revenue area. I, with my experience in Software industry took on the Technical Role.
We also decided to keep our company lean with only experts.
Recruitment, is a very tedious process in itself.
But with professional web sites like Naukri, Monster the process of advertisement is now made easy. You can either do the one-time with Rs. 2000/- each ad or subscribe. We went in for one-time Ad paying Rs. 2000/ each time.
Response of the Ad is usually very good with more than 1000 resumes but the quality is generally very bad.
That was easy part….
Now comes the difficult part of running a company … The regulation compliance.
Regulations
But along with technical aspects, we also need to draw up the comprehensive list of all the compulsory regulations which our business entity needs to follow. Ex- Registration of the Company, Taxation, Licensing requirements etc.
- Registering the Company,
- Aquiring DIN
- Shops and Establishments Act
- Board resolutions
- Opening Company Account
- Round and Director Stamps
- Tax Compliance, PAN, PTE, PTR
Registering the Company, first hurdle was incorporating our company, Siddbetter Pvt Limited registered. In India companies are governed by the Companies Act 1956. The Registrar of Companies (ROC) controls the task of incorporation of new companies and the administration of running companies. This process requires interacting with Ministry of Corporate Affairs (http://www.mca.gov.in/).
The laws are so complex that it is better to hire a CS (Company Secretary) for this purpose, as we did.
For purpose of record let me list of the procedure – of Registration
Our company was to be registered as Private Company, thus the Siddbetter Technology Pvt. Limited. It needs to have minimum of 2 members.
The following documents are required to be filed with the Registrar of Companies:
- Memorandum of Association (duly stamped) and a duplicate thereof.
- Articles of Association (duly stamped) and a duplicate thereof.
- The agreement, if any, which the company proposes to, enter into with any individual for appointment as its managing or whole time director or manager.
- A copy of the letter of the Registrar of Companies intimating the availability of the proper name.
- e-Form No. 1 (with prescribed stamps) for incorporation of a Company.
- e-Form No. 18, if desired for change of situation of registered office.
- e-Form No. 32 and e-Form 32 Addendum
Acquire Director Identification Number (DIN) for all the directors of the Company.
Shops and Establishments Act, business entity is compulsorily required to register itself under this Act within 30 days of commencement of work.
For getting the shop act, document needed,
1. PMC bill/ MSEB Bill of Rental place
2. Registered Leave and license agreement (not only Notarized agreement) between rented place Owner and Company having clause that Company will use place for office use.
3. OR No objection certificate from Owner of Rental place owner that he has no objection to use office for Company. This NOC should be notarized on Rs.100 stamp paper.
This was our single biggest hurdle in our case due to not owning the place in our location of Business.
We took a rental with Regus which provides offices for rent.
We entered into agreement with comment section which they said while agreement are just formalities like –
Kitchen amenities charges per employee – Rs. 2500/ per month. While there is no kitchen and they also do not allow the use the pantry for lunch. Because they are selling that space for business. Calling "Business café" , which we later came to know. Hopefully, they do not have “Business washroom” which is used only by their business for doing business.
After, our agreement was ending we were again sent the new bill,
Charges – Business Continuity @ Rs.5000 per month for 3 months, which they said you had agreed on during signing agreement. Again this was in comment section (giving no understanding). Why do you force business continuity when the client does not want it. Cheats!!
Next Charge- Exit Clean @ Rs. 1000 psm. Rs. 9000 for us. There is no end to their charges under every possible ridiculous heads.
My advice to any Entrepreneur, read through the agreement 100 times along with your legal advisory there is every possibilities of fancy looking words which goes without notice end up legal complications for you.
Every decision in a company like opening a Bank A/C , deciding on the office, loaning of assets etc. all require Board Resolutions with proper notice, proper attendance, and then formal resolution on the letter head of the company.
Get ready for board resolutions for each and every decision making.
Opening an Company A/C, opening a current Bank Account is mandatory. As soon as your company is registered. Entire world knows about it. You will start getting calls from Banks for opening the A/C.
Select a bank with proper care. Fill in the form yourself properly because if you do not they fill it Bank fill it themselves with any name, with any role which may later look very ridiculous. Like your name in Bank as developer etc.
Making of Round and Director Stamp, round stamp of company is mandatory requirement and goes in for all legal works. Director stamp which is rectangular is broken at side.
Regulation Compliance kicks in for any change in company
Plan and think about your company expense based on you company model. If you are going to make changes in your company like adding new Director, increasing share capital.
Everything costs money.
TAX Compliance,
Income Tax
Ex- increasing share capital from 1 lac to 4 lacs can cost you more than Rs. 10000 as fees.
Taxations, companies have to file their income tax returns. Companies apply for PAN and provided the PAN# just like us.
This PAN is used for filing income tax.
Payroll
Other than its own tax, company also has to deduct taxation of its employees Tax Deduction at Source (TDS). Submit the taxes in government treasury and provide the employees their Form-16 the end of fiscal year. Paying salary, deducting taxes making pay slip is all part of Payroll process.
Professional Tax
There is one more tax, call professional tax which is pay to the government.
Company also needs Professional Tax Enrollment (PTE) under which the Professional tax of its employees needs to be submitted. The Professional tax is deducted for each employee each month and deposited every month, but return needs to be filed each quarter.
For non-employees, Directors who are not being paid salary give one time Professional Tax of Rs. 2500/- each year before June. And there needs to be Professional Tax Registration (PTR) for each Director. For delay in payment, there is penalty of Rs. 2 per day.
This has been my learning till now... I will keep posting as I learn and experience more....
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