How to Start a Company in India

The first step of starting a company in India is having a proper business plan, which is primarily a formally written document that represents the vision of the entrepreneur, and describes the operations and strategies of the said entity. The business plan is referred to by different names, depending on the type of intended audience.

For example, if the proposal is given to a banker, it will be referred to as a loan proposal, whereas it will be called an investment prospectus or venture plan if provided to a venture capital fund.

Steps to be taken in order to start a company

Choosing the type of company

There are several factors that come into play when deciding the type of organization one wants to operate as like the nature of operations, the capital needed to set up and run the company, the scale of business, the amount of liabilities and risks the owners are ready to take for their business, the extent of control the owners want in their respective business, and relative tax liabilities.

In India services and businesses operating directly with the clients or customers such as tailors, doctors, restaurants, lawyers, and personal services are set up as proprietary establishments. The owners also need to decide whether they wish to operate in a limited local market or operate throughout the country and outside it as well.

Choosing the product

Choosing the product is an important part of opening a company in India as critical business planning can only be done after the choice has been made. Such decisions are normally taken on the basis of comparative analyses of various types of products and services the owner wants to specialize in.

These analyses normally call for examining the structure and size of the expected market for the said product or service and deciding on the demand they can expect in the future for the same. The life cycle of the product and its shelf life also needs to be ascertained before a step is taken.

Creating the infrastructure

There are several factors that come into play while deciding on creating a proper infrastructure for operating a business. Once the owner has decided to buy the land where the factory or business center will be set up, they need to determine whether it is close to important contact points like the airport, port, and rail road.

The owners also need to make sure that important raw materials such as power and water supply are readily available. They should also look to set up a proper telecom facility for effective communication. In addition, the owners can contact the respective state governments for the various concessions available in case of building and land taxes.

Naming and registration of a business

In India, a company needs to be incorporated in accordance with the rules set forth by the Companies Act 1956. The Government of India is responsible for the administration of this act with the help of the Ministry of Corporate Affairs and the Offices of Registrar of Companies, and the Official Liquidators. The Public Trustees, Directors of Inspection, and Company Law Board also assist the national government with the implementation of this Act.

With the help of the Companies Act, the Indian government can perform several important functions related to an organization’s operation such as formation, functioning, financing, and closing. This Act is applicable to every company that has been registered under it.

Choosing the industry location

Opting for the right location is extremely integral to the success of a company – not only in the short term but in the future as well. It is advisable that while opting for the company site, the owners keep in mind these factors – the area should be such that the company can expand in the future.

The location of a factory can impact the way the equipment and machinery of that company are organized and play a critical role in the overall production process as well. An optimum location helps a company in reducing its operational expenses and facilitating growth.

Product Pricing

While determining the price of their product a company should keep some factors in mind like determining the organization’s pricing objectives and the demand for their product. Other important factors in this regard are making an estimate of the profits and expenses involved, deciding on the product’s demand, and its competition.

The owners also need to consider the various governmental regulations and opt for a proper pricing policy or method like perceived value pricing, premium pricing, value pricing, ethical pricing, going rate pricing, and full line pricing.

The pricing objective normally differs with respect to various companies- a lower price draws more buyers but a higher price reflects the owners’ confidence in their products and the overall quality of the same.

Financing the company

Getting the start-up capital is the most important part of a company’s operations as all important decisions such as expansion, growth and continuation of operations are dependent on continued availability of finance. The first things the owners need to do is create a proper finance plan that lists the requirements and also mentions the prospective sources from where the money can be generated.

The owners also need to outline in the plan how they are going to apply for their financial requirements. Some other factors that have to be considered while framing a finance plan are the size and type of business, credit worthiness and image of the company, plans for expansion and growth, trends in the capital markets, and regulations specified by the governments.

Procuring raw materials, equipment, and machines

The most important choice in this category is choosing the technology that will be used to develop the products. The technology could be developed in India itself or imported. In case of the indigenously developed technologies the companies can approach CSIR and the Defence Research Labs.

They can also avail the services of intermediaries such as Asian and Pacific Centre for Transfer of Technology (APCTT) and Technology Bureau for Small Enterprises (TBSE) that can help with the procurement of relevant technology.

In case of imported technologies the companies should take recourse to foreign direct investment and foreign technology collaboration agreements that are backed by the Indian government. These processes can be done through the Reserve Bank of India.

The companies can select their raw materials from within India itself or import them. In India the imports are monitored by Foreign Trade (Development and Regulation) Act 1992.

Employing Human Resource

While recruiting the employees the company owners need to keep in mind important factors such as availability of labor with varying skill levels, expenses and productivity levels of labor, labor flexibility, behavior and attitude of laborers, and trade unionism.

The companies also need to prioritize factors such as job requirements, the number of employees required, possible sources of recruitment and steps needed to select employees who are correct for the business.

Last Updated on May 15, 2015