Establishing and running a business is not an easy task. Starting a business requires not only money but also an understanding of business environment. It is important to note that a wrong business decision can affect overall functioning of the business and can also have adverse effects on the profitability of the company.
Some of the important aspects of running a business include dealing with competition in the marketplace, complying with government rules and regulations, protecting interest of investors and so on. It is important to give due consideration to all these aspects while forming a business.
Important Steps In Forming A Business
Decide The Nature Of Business
It is important for an individual to decide the nature of business to be carried on. Some individuals may prefer to start a product manufacturing company while other individuals may decide to provide services. Some individuals may also start a trading company. Further, it is important to decide the type of product (s)/service (s) to be manufactured/provided before starting the registration process.
Identify Place For Office
Office address is required for company registration. In case an individual is planning to start business from his/her residence, he/she may have to provide documents such as property ownership document, water and electricity bill for registration purposes.
In some cases, a no objection certificate (authorizing registration of company at residential address) may also have to be obtained (from the property owner) in case property is registered in the name of some other family member. For instance, an individual may decide to open a company at his/her place of residence.
However, property is registered in the name of his/her mother. Individual will have to obtain a no objection certificate from his/her mother to get the company registered at the residential address. In case office space is taken on rent, an individual is required to submit rent/lease deed and no objection certificate from the property owner (lessor) to get the company registered.
Select Business Form
Once office space has been identified, next step is to take decision on business form. Common business forms include sole proprietorship, partnership, limited liability partnership or a private limited company. Depending on the form of business, the requirements for registration may vary. It is important to note that except sole proprietorship, atleast two members are required to form any other type of business.
Decision on the form of business can also be taken after discussing benefits and risks such as taxation benefits, audit requirements and so on (of different business forms) with a business consultant or lawyer to be hired for registration purposes. It is interesting to note that many individuals prefer to start a sole proprietorship or partnership firm initially.
Select A Consultant/Lawyer
A business consultant or a corporate lawyer can be hired to prepare and file the documents required for company registration (with the relevant authority). For instance, a partnership deed is prepared in case of a partnership firm. In case of a company, memorandum and articles of association are required to be prepared.
Business consultant or lawyer can also help an individual in understanding important aspects of the registration process. It is important to maintain constant communication with the consultant or lawyer throughout the registration process. Follow up may also be required to ensure timely completion of different registration activities.
Obtain Certificate Of Incorporation
A registration certificate is issued once the application for registration has been approved by the registration authority. This certificate is called “Certificate of Incorporation”. The date of incorporation of the company is mentioned on this certificate. This certificate can be used for obtaining various statutory licenses required for running the business.
Depending on the expertise of business consultant or lawyer (hired for registration purposes), it may take 20 – 25 days for registration of a private limited company. On the other hand, a sole proprietorship or partnership firm can be opened within 3 – 4 days. Further, the cost associated with forming a private limited company may be higher as compared to a sole proprietorship or a partnership firm.