How to Start a Company in India: A Practical, Compliance-First Guide

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Starting a company in India has largely become an online process, but the right path depends on (a) your intended business model, (b) whether there is foreign investment, and (c) what registrations you need from day one (tax, labor, import-export, sector licenses).

Below is a brief step-by-step guide.

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1) Choose the right legal structure (and why it matters)

Most new ventures choose one of these:

• Private Limited Company (most common for startups + FDI)

Best when you want equity investment, scalability, ESOPs, and clearer governance under the Companies Act framework. Incorporation is done via MCA’s SPICe+ route (see Step 4).

• Limited Liability Partnership (LLP)

Often used for professional services and closely held ventures that want operational flexibility with limited liability. Incorporation is via MCA’s FiLLiP form (separate from SPICe+).

• One Person Company (OPC)

A variant of a company structure for single founders, with compliance characteristics similar to companies (useful in specific cases, but not always ideal for raising equity).

Decision tip: If you expect external investors or foreign shareholding, a Private Limited structure is typically the default. If you want partnership-style flexibility with limited liability and fewer corporate-style layers, consider an LLP.

2) Confirm foreign investment permissibility (if applicable)

If any non-resident will invest (equity, compulsorily convertible instruments, etc.), check:

• Sectoral caps, entry routes (automatic vs government approval), and conditions under India’s consolidated FDI policy framework.
  DPIIT maintains an official FDI policy page, updated periodically.

Common early tasks for FDI-backed setups:

• Confirm whether your sector is 100 percent automatic route or needs approval.
• Align the business model with any conditionalities (e.g., e-commerce, insurance, defense, telecom, etc.).
• Plan for downstream compliance (pricing guidelines, reporting, etc.) as applicable.

3) Get digital signatures (DSC) and identity documents ready

Most filings are electronic and require digital signatures for subscribers/directors/authorized signatories.

Prepare:

• Identity and address proofs for promoters (India/foreign nationals as applicable).
• For tax identity: you will need company tax identifiers post-incorporation; PAN basics are governed by the Income Tax Department.

4) Reserve the company name and incorporate via MCA

SPICe+ is the main incorporation workflow for companies. The MCA’s incorporation rules and the SPICe+ framework were enabled through amendments to the Companies (Incorporation) Rules (notably the 2020 changes).

Typical company incorporation flow:

1. Name reservation within SPICe+ (Part A)
2. Incorporation application (SPICe+ Part B)
3. Filing linked constitutional documents (e-MOA / e-AOA, as applicable)

If you are incorporating an LLP instead, use the FiLLiP (Form for incorporation of LLP).

5) Obtain PAN (and typically TAN) for the new entity

A company will need a Permanent Account Number (PAN) for tax identity and filings.

Why this matters early:

• PAN is required for most financial onboarding and tax registrations.
• TAN is required if you will deduct/collect taxes at source (common once you start payroll/vendor payments).

6) Register for GST (if you meet criteria or need it operationally)

GST registration is mandatory in many cases—most commonly once turnover crosses thresholds, and in specific scenarios regardless of turnover (e.g., inter-state supply in certain cases, e-commerce participation, etc.).

Practical tip: Even if you are below threshold, many B2B businesses register early to enable input tax credit (ITC) flows for customers—subject to commercial needs and compliance readiness.

You can register with GST as a Normal Taxpayer/ Composition/ Casual Taxable Person/ Input Service Distributor/ SEZ Developer/ SEZ Unit/ Tax Deductor at Source or Tax Collector at Source on gst.gov.in.

7) Register under labor laws as required

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If you will hire employees (or engage contract labor), labor registrations may apply. The Ministry of Labor’s ‘Shram Suvidha Portal’ provides online registration/licensing under multiple central labor laws (including EPF/ESI and others).

Operational takeaway: Don’t treat EPF/ESI as “later” if you’re onboarding staff quickly—misalignment here can create back-end compliance cleanups.

8) MSME (Udyam) registration (optional, but often beneficial)

If your entity qualifies as an MSME, you can register on the official ‘Udyam portal’ (Ministry of MSME). The portal specifies Aadhaar-related requirements for registration.

Why teams do this:

• Access to MSME-linked benefits (varies by scheme, sector, and state)
• Easier recognition with some counterparties and procurement ecosystems

9) Import-export: get an IEC (if you will trade across borders)

If you plan to import or export goods/services where IEC is required, apply via DGFT. DGFT’s site explains IEC as a mandatory business identification number for export/import.

10) Open a bank account and set up baseline governance/compliance

After incorporation and basic registrations:

• Open company bank account and finalize authorized signatories.
• Set up accounting systems and documentation discipline from day one.
• Track recurring obligations (depending on structure): board meetings, statutory registers, annual filings, tax returns, etc.

(Exact requirements vary by entity type and activity—company vs LLP, turnover, employee count, sector licensing, and foreign investment status.)

A founder-ready checklist (use this to scope your timeline)

1. Before filing

• Decide structure (Private Limited / LLP / OPC)
• Confirm FDI permissibility (if any foreign investment)
• Get DSCs + KYC documents

2. Incorporation

• Name reservation + incorporation filing (SPICe+ for companies)

OR

• FiLLiP for LLP

3. Immediate post-incorporation

• PAN (and likely TAN)
• GST registration (if required/strategic)
• Labor registrations as applicable (Shram Suvidha)
• Udyam (optional, if eligible)
• IEC (if import/export)

Common pitfalls (and how to avoid them)

• Rushing the entity choice: Investors and banks care about structure; changing later can be costly.
• Ignoring FDI conditions early: A sector may be “open” but still conditional—plan the model and documentation accordingly.
• GST identity/document misuse risks: Use strong internal controls around PAN/Aadhaar/GST credentials and authorized signatory access—fraud and misuse cases do occur (reported in Indian media).
• Treating labor compliance as optional: If you’re hiring quickly, line up registrations and onboarding processes early.

Incorporation, filing, and compliance: India government touchpoints

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Starting a company in India involves multiple central and state government touchpoints, from incorporation with the Ministry of Corporate Affairs to tax registrations, labor compliances, municipal approvals, and sector-specific clearances. Understanding which authority governs which aspect of the business helps founders sequence their setup efficiently and avoid regulatory bottlenecks.

Central government touchpoints (Pan-India)

These apply regardless of which state you set up in.

Ministry of Corporate Affairs (MCA)

Role: Company / LLP incorporation and corporate compliance
When: Day 1
What you do:

• Name reservation
• Incorporation (SPICe+ / FiLLiP)
• Filing MoA, AoA
• Director details
• Annual filings

Applies to: Companies, LLPs, OPCs

Income Tax Department (CBDT)

Role: Tax identity and income tax compliance
When: Immediately after incorporation
What you do:

• PAN application
• TAN (if TDS applies)
• Income tax returns
• Transfer pricing / withholding compliance

Applies to: All entities

GST Authorities (CBIC)

Role: Indirect tax registration and compliance
When: Before commercial operations (if applicable)
What you do:

• GST registration
• GST returns
• E-invoicing (if applicable)

Applies to: Most trading, manufacturing, service businesses

Ministry of Labor / EPFO / ESIC

Role: Employment-related registrations
When: Before or immediately after hiring
What you do:

• EPF registration
• ESI registration
• Labour law registrations via Shram Suvidha

Applies to: Businesses with employees

DPIIT / FDI-related authorities (if foreign investment)

Role: Foreign investment policy oversight
When: Structuring stage
What you do:

• Check sector caps
• Government approval (if required)
• FDI reporting (via RBI routes later)

Applies to: Foreign-funded entities

DGFT (Import-Export)

Role: Trade authorization
When: Before import/export
What you do:

• IEC registration

Applies to: Trading / manufacturing exporters & importers

State government touchpoints (Location-specific)

These depend on where your office/factory is located.

Local municipal corporation / Urban local body

Role: Business premises approvals
When: Before operations
What you do:

• Trade license
• Shop & Establishment registration
• Signage permissions

Applies to: Offices, shops, warehouses

State Labor Department

Role: Local labor law compliance
When: When hiring
What you do:

• Shops & Establishment Act registration
• Contract Labor registration (if applicable)

State Pollution Control Board (SPCB)

Role: Environmental approvals
When: Before manufacturing / certain services
What you do:

• Consent to Establish
• Consent to Operate

Applies to: Manufacturing, logistics, food, chemicals, etc.

State Industrial Development Corporation

Role: Land, infrastructure, incentives
When: Site selection / expansion
What you do:

• Land allotment
• Industrial park approvals
• Incentive applications

Examples:
MIDC (Maharashtra), TSIIC (Telangana), UPSIDA (UP), KIADB (Karnataka), etc.

State Investment Promotion Agencies

Role: Investor facilitation
When: Pre-entry / expansion
What you do:

• Single-window approvals
• Incentive guidance
• Sector clearances

Examples:
Invest India (national), Invest Karnataka, Invest MP, Invest Telangana, etc.

Risk management for founders & investors: Why knowing which authorities control approvals matters

Different authorities control different risk areas:

• MCA → Legal existence
• Tax → Financial compliance
• Labor → Workforce management risk
• SPCB → Environmental risk
• Municipal → Operational legality
• DPIIT/RBI → Foreign investment compliance

Missing even one can delay:

• Bank accounts
• Payroll
• Invoicing
• Fundraising
• Factory commissioning

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