How to Start a Company in India - A Guide
A business enterprise is an economic institution engaged in the production and/or
distribution of goods and services in order to earn profits and acquire wealth.
The scope of a business is very wide. Find more information on Business Startups
in India at
Indian Government Website
Names and Other basics
Choosing a name for your company is a long-term decision. You will want your name
to encapsulate, in a few memorable letters or words, precisely what it is you offer.
It will take many years to build up your name in the consciousness of your customers.
So you want to make sure you get it right at the outset.
- Limited Company Names
If you are forming a limited company, you won't be able to register a name which
is considered the same as that of an existing company, or one which could be considered
offensive or illegal.
There is a range of rules you will need to bear in mind, and your solicitor can
help you. You can also get free advice on business names from the Companies House website.
A trademark identifies your product specifically in the eyes of the public. When
registered, it is protected by law, giving you the right to take action against
anyone else using it.
- Copyrights and patents
Similar rules apply to copyrights and patents. These protect the fruits of your
hard work against rival businesses and others using them without your permission.
Unlike patents, which must be applied for, copyrights happen automatically.
- Trading Laws
There are certain laws, such as the Trade Descriptions Act 1968 and the Sale of
Goods Act 1979, which are drafted specifically to protect the consumer. You must
be mindful of these laws and work within them.
Trading laws exist for your protection, too, so it is important that you have at
least a basic understanding of the law and how it affects your business. You can
find out about the trading laws from your solicitor and there are also various books
on the subject.
- Insurance - what's legally required?
There are some insurance products that the law demands you have, and others which
you should consider taking out as a matter of your own protection.
You must have employers' liability insurance, motor insurance (where appropriate),
insurance demanded by any contracts you may have, and insurance for certain types
of engineering equipment.
There are many sources of funds available to small businesses, however not all are
equally appropriate to all businesses at all times.
Different sources of finance carry different obligations, responsibilities and opportunities
for profitable business. The differences have to be understood to allow you to make
an informed choice.
Banks offer a range of financing options, including the most common - overdrafts
and term loans. They can provide any sum, small or large - you have to repay the
loan and pay interest on the outstanding balance. A bank may look to the owner to
provide security for the lending.
- Hire purchase and leasing
Hire purchase and leasing companies provide funds to buy fixed assets such as vehicles,
computers, office equipment, plant and machinery.
You may have to find a deposit of up to a quarter of the funding and pay the balance
off over a period of time. This period will depend on the expected life of the asset.
Your payments will include interest and capital. The security for the loan is the
asset itself and it remains the property of the finance company, at least until
it has been paid for.
- Invoice factors
Invoice factors provide finance to cover the period between delivering your products
to a customer and payment of the invoice. They can provide up to 90% of the value
of the invoice and can, if you wish, manage the whole process of collection of the
funds for you. The security taken is the full value of the invoices to your customers.
Venture capital firms, business angels (wealthy individuals who back businesses)
and corporate venturers (businesses whose primary aim is producing a product, but
who also back small businesses in related sectors) provide risk capital.
Business angels may invest as little as 5,000 British Pounds, but the other sources
of funding listed above will not usually look at anything less than 50,000 British
Pounds. In return for a share of your company they will put up cash to help fund
growth and development. They will expect to share the rewards, but usually ask for
Fund Rising Survival guide
Raising money is the hardest part of starting a startup. The hardest part is making
something people want: most startups that die, die because they didn't do that.
But the biggest cause of death is probably the difficulty of raising money. Fundraising
One reason it's so brutal is simply the brutality of markets. People who've spent
most of their lives in schools or big companies may not have been exposed to that.
Professors and bosses usually feel some sense of responsibility toward you; if you
make a valiant effort and fail, they'll cut you a break. Markets are less forgiving.
Customers don't care how hard you worked, only whether you solved their problems.
Investors evaluate startups the way customers evaluate products, not the way bosses
evaluate employees. If you're making a valiant effort and failing, maybe they'll
invest in your next startup, but not this one. But raising money from investors
is harder than selling to customers, because there are so few of them. There's nothing
like an efficient market. You're unlikely to have more than 10 who are interested;
it's difficult to talk to more. So the randomness of any one investor's behavior
can really affect you.
Investors are very random. All investors, including us, are by ordinary standards
incompetent. We constantly have to make decisions about things we don't understand,
and more often than not we're wrong. And yet a lot is at stake. The amounts invested
by different types of investors vary from five thousand dollars to fifty million,
but the amount usually seems large for whatever type of investor it is. Investment
decisions are big decisions.
That combination making big decisions about things they don't understand tends to
make investors very skittish. VCs are notorious for leading founders on. Some of
the more unscrupulous do it deliberately. But even the most well-intentioned investors
can behave in a way that would seem crazy in everyday life. One day they're full
of enthusiasm and seem ready to write you a check on the spot; the next they won't
return your phone calls. They're not playing games with you. They just can't make
up their minds.more...
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