Legal Procedures and Compliances for Starting a Business

. 6 min read
Legal Procedures and Compliances for Starting a Business

The various rules and regulations to start a business in India can be an enigma to the uninitiated. The various peculiarities of the Indian system of Business Management Structure Regulations are multilevel and complex. You would always need someone to guide you through the rules of starting a business.

This article will explain all the salient aspects of the legalities to make you understand how to start a business better.

Know about the types of Business Structures

There are various types of Business Structures from which to choose for your company. You must always ensure that your business is registered with the appropriate authorities, as this can have a significant impact on how you conduct your business in the future as well as the direction it will take.

  • Limited liability partnership (LLP): An updated version of LLC that must be registered with the registrar of LLP's
  • Private limited company: This type of company must be registered with the MCA and the Registrar of Companies.
  • One-person company: Similar to a private limited company, but only one shareholder or person is required to register.
  • Sole proprietorship: This is the most basic business structure, with no set registration process and the ability to be started by a single person.

After determining which business structure is best for your needs, you must choose a business name that mirrors the ideology of your venture and ensure that it is not already in use by another entity. Your entity name should protect your business at the state level, a trademark that protects your business at the national level, and a domain name that gives your business an online presence.

stack of documents laid on laptop with pen

Secure these Required Documents

The following list of documents and applications have to be secured to be able to register your business in India :

  • ID's and Proof of Address for all directors and shareholders; they may be any one of these - PAN Card, Aadhar Card, Passport, Driving License, or Voting ID.
  • A Director Identification number for all directors.
  • A Digital Signature Certificate for all Shareholders and directors.
  • Bank Account Statements and any other attached documents.
  • Details of any investments.
  • Address Proof for Place of Business, Rental agreement, property registration certification.
  • NOC from the owner of the place of business is rented.
  • Passport size photograph of Directors as well as the shareholders.

A Founder's Agreement is a legal document that contains important information about the venture/founding business's members. As a result, the document serves as a legal agreement that establishes the founders' and the company's rights, ownership, responsibilities, dispute resolution, and other terms. As a result, having a well-drafted Founders Agreement with all necessary details provides a firm foundation for the journey of a business. In the event of a disagreement, it can also be used as a point of reference.

Starting a business presents a slew of difficulties; financial accounting and management are two of the most prominent. Efficient financial management is a must-have for any business. OkCredit is a financial accounting service that can help you manage your inventory as well as your finances.

india's no.1 staff management app

Ensure you fulfil these eligibility criteria

There are certain criteria that you must fulfil before even starting the formalities of registering your company.

  • You must ensure that there are at least two shareholders and directors. Shareholders and directors can be the same individuals.
  • One of the directors must be a permanent resident of India. That means the person must have spent at least 182 days in India in the previous year.
  • You must have a registered office address where you can conduct official business.
  • To file applications, the directors will need to have a Digital Signature Certificate as well as a Director Identification Number.
  • The company's owners will have to create all of the necessary documents on their own. It will include a shareholder agreement, a letter of agreement, and a memorandum of understanding.

Procedure of Registration

Following is a list of steps that you must follow to get your company registered :

  1. To begin, the entrepreneurial team should be aware of the various eligibility criteria that must be met before even the consideration of registering your business. The best option would be to consult a legal expert who can ensure that you understand the legal steps to start a business.
  2. Once you are certain that you have met all of the criteria, you can proceed to obtain the necessary documents for your registration to begin the legal process of starting an online business.
  3. Initially, directors, shareholders, and founding members will be required to apply for and obtain Digital Signature Certificates and Director Identification Numbers via MCA's official portal.
  4. Furthermore, entrepreneurs must now apply to reserve a company name. They can submit up to six preferences through an application form. Before allocating a suitable name based on its availability, the MCA will conduct an online name search.
  5. Following that, the company's owners must retain the services of a lawyer to draught the company's legal documents, which will include a Memorandum of Association and Articles of Association.
  6. The entrepreneurs are now prepared to file for RoC incorporation by submitting the following forms: INC-7, INC-22, and DIR-12.
  7. Following the submission of an application, the entrepreneurs must pay the required stamp duty and processing fee to the RoC. The regional RoC office will then review and verify all of the details and, if satisfied, issue the business with a certificate of incorporation.

The Registrar of Companies will require five to six days to verify all documents and issue the required certificate. Companies that have received their incorporation certificate are eligible to apply for a PAN card and TAN for tax purposes. Other registrations may be required depending on the nature of the proposed business, but the majority of businesses must register for GST.

man pressing the register key on keyboard

Benefits of Registering Your Business

  • Have your legal existence and identity.
  • Take advantage of perpetual succession, which ensures that external events do not disrupt the company's operations.
  • Furthermore, the shareholders and directors benefit from limited liability, which helps them protect their assets.
  • Gives businesses the option of purchasing or leasing their property.
  • Allows for the free transfer of ownership from one person to another in a business.
  • Enjoy superior connectivity to the entire nation due to your status as a legitimate business.
  • If you're a primarily online business, you will have access to better technological facilities.
  • If your business operates stores, whether online or brick-and-mortar, you'll have access to the best supply chains.
  • You'll have access to a more diverse crowd of customers.
  • You'll also have access to various government departments that you may need to liaison with.


Although it may feel cumbersome, registering your business can lead to better opportunities, positive relationships with the authorities, a sense of security that helps you take risks, and eventually greater profits. You can follow this article to fast-track your business registration.

Also Read:

1) Why You Should Have A Joint or Independent Account With Your Business Partner?
2) Things Business Owners Should Do If They Can’t Pay Credit Card Bills
3) How To Charge for Your Services if You Are an Event Planner?
4) How to Answer the Phone Professionally at your Business?

Stay updated with new business ideas & business tips with OkCredit blogs in English, Hindi, Malayalam, Marathi & more!
Download OkCredit now & get rid of your bookkeeping hassles.
OkCredit is 100% Made in India.


Q. What are the documents required to start a Sole Proprietorship?

Ans - Here are the documents you'll require to secure a Sole Proprietorship

  • Address Proof of Owner and Place of Business
  • Founders Agreement
  • Bank Account Statements
  • Tax returns

Q. What are the advantages of Sole Proprietorship?

Ans - The advantages of Sole Proprietorship are :

  • Lesser Paperwork
  • Lower Business Taxes
  • Straightforward Banking and Loans
  • Simplified ownership

Q. What's a good business to start in 2021?

Ans - Here are some new business ideas for 2021 :

  • Online Coaching
  • Feeling Creative? Start a podcast or youtube channel
  • Dabble in Web Development and Graphic Design
  • Ecommerce