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All you need to know about Company Formation

Nov 17, 2018

Most of us have the entrepreneur zeal in us with a tentative timeline. The corporate environment over the past few years have gone through a significant change and is now in favor of a start-up. With the encouraging signs all around, if you own a great innovative idea you must be trying to give it a legal structure to take it forward as a company or if you already have a legal structure, you still might be trying to make it more compliant from a legal standpoint.

Giving a legal structure to your idea or concept and thereby adhering to the compliances set by the law of the land, helps you to better perform your business as most of the legal compliances concerning company formation are aimed at the successful running of the business. However, giving a legal structure to your thought needs you to think like an entrepreneur, understand different aspects involved in detail, then choose the structure that is most suitable to you and complying with the given set of procedures. This is a continuous and a full-time activity that an organization cannot ignore.

Did you know that nine out of every ten start-ups fail as per Forbes research? The one company survived is because it has done everything right from ideation to company formation and complying with the law of the land efficiently on a continuous basis.

Being an Entrepreneur is a journey that needs a lot of time, effort, and hard work before you enjoy the fruits. This is where many start-ups fail, if you survive through the hard times, the rewards are also equally high. Let us understand some of the best practices to get started on your entrepreneur journey or to move to the next level.


This is the first step. You must have a solid idea or a concept which you believe has a demand in the market and it will add more value to the customer. Once you have an idea, you need to brainstorm it with a few set of people and test the waters with trusted audiences.

Business Plan:

After successful testing of your idea, Business Plan is the first document that you need to generate covering aspects like Finances, Resources, Revenue model and company operations. You should also decide whether you will be venturing alone or going with partners. Building a business plan needs expertise as many start-ups that survived their first year in business had their business plan written by experts.

Assess Your Finances:

This is a tricky step. Most of the time people underestimate the finances needed to run a business and many times an investment is required. You need to be aware of the best available financial options in your line of business. Study the competition. Take help of a CA or CPA to have these things streamlined for you.

Company Formation:

You must first decide the structure of the organization. It can be an individual operated or a partnership model. You have further many options, pros, and cons for every option available. You will need to gather all the information and then do a fitment analysis as to which model works for you. You also have got to select a name of the entity that is unique to your business.

In the US, we have the options of LLC & Incorporation. In India, we have options for Sole Proprietorship, Partnership, LLP, Private Limited, Public Limited, One Person Company and Section 8 Company (for Charity) like 501(c)(3). Based on the choice made there will be set of process and procedures defined by the law of the land to adhere to and get your incorporation certificate, Income Tax Registrations (PAN, TAN) etc.

Do not hesitate to hire expert advice in this step as this is the most crucial step that every organization has to go through successfully.


Post company creation, you need to cautiously meet all the compliance required related to different business aspects that you deal with.

You will need the following at the time of formation of the company depending on the type of services or products you sell:

• Income Tax Registration (PAN, TAN), Bank Account, Lease Deed
• SEZ, STPI, 100% EOU for Export Oriented Units
• Import and Export Code Number and Customs, Taxation Compliances
• Foreign Direct Investment (FDI and ODI), FEMA compliances with Reserve Bank of India compliances such as FC-GPR, FC-TRS and FIPB approvals
• Employee contracts
• Vendor Contracts, Customer agreements, MOU’s
• PF, ESI, Gratuity, Social Security like 401(k) etc.
• There will be some compliances that need to be followed on an ongoing basis:
• Companies Act Compliances, Secretarial services, Directors, Meetings, Minutes and Annual fillings
• Books of Accounts maintenance
• Payroll
• Vendor Management
• Finance
• Assurance
• Annual Reports, Tax filings
• SEZ, STPI, 100% EOU – Monthly, Quarterly, and Annual Returns
• Periodical Labour Law Compliances
• Contract Management and Registration of Agreements
• Patent, Copyright, and Trademarks
• Due Diligence services
• Subsidiary, Associates, sister concerns and related party consolidation

Select Your Technology:

Choose the right technology aids that will help your company run successfully like Financial packages, Human Resource Management solutions, CRM solutions and so on. Have a proper reporting structure in place for secure operations management across the organization.

Define Organization Structure:

Choose the right Organization Structure based on the service you provide and the Industry Vertical you serve. Have a correct intake process defined and create a flexible environment in your organization for better fruitful results. Hiring right talent takes your company to the next level.

Enable Growth Hacking Delivery:

Set up the right sales and delivery teams to kick-start your revenue cycles.

It takes time to be an entrepreneur and has a robust path ahead.

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