Registration is the first step to company formation, frequently prone to unwitting mistakes. MPVD & Associates guides entrepreneurs towards greater conscience.
Business owners tend to make common mistakes during the company registration phase, which can impact their growth process significantly. As a leading CA firm in Kolkata, it is our responsibility at MPVD & Associates to guide you in the right direction when you take the big step to incorporate. Get some valuable insight from this blog that will help you make the best choices, consciously.
Mistake #1: Not Having a Pre-Registration Checklist in Place
Incorporation. What does it mean to you? It’s the first step to establishing your business, isn’t it? Well, here is some fact check—it is not the first step.
Registering a company might seem simple, considering the online portal opened by the MCA. However, the decision is not as straightforward. Following a pre-registration checklist is vital to covering all these priorities and costs cohesively and ensuring that your incorporation process goes smoothly.
- Design a Business Model: Understand the right business structure for your business model. The first step should be about planning the right ways and the right time to take each step. This is the roadmap for how you complete the circle of production, supply and capture value.
- Fund Analysis: registering a company involves several fees, and that doesn’t only include company registration and incorporation services in India. There will be additional costs for things like stamp duty, notary charges, company name approvals, etc. Have a realistic fund analysis and cost plan for registration fees based on the business structure, types of licences and both national and regional legal compliance.
- Documents: Organise all necessary documents needed for a seamless incorporation process, based on the business structure. Entrepreneurs often mix up vital information in erratic documentation, such as Adhaar cards not linked with the mobile number, erratic founders/shareholder’s agreement information, property documentation of the office space, or rental agreements, which are all vulnerable to errors or sudden “undocumented” changes and must be sorted thoroughly before company registration.
- Regulations & Licences: Understand the “current” Indian regulatory norms for new businesses. There could be special industry-specific licences, such as those for food businesses, that would need FSSAI registration. There could be regional licences; for example, Maharashtra-based businesses would need the Gumastha licence under the Shop and Establishment Act. Navigating post-incorporation compliances for the near and long-term future.
Tax Planning: Research taxes not only for liabilities but also to leverage benefits, both short-term and long-term. For example, if your company qualifies for the Startup India scheme, then you claim a 100% tax exemption on annual profit for any 3 years within a time block of 7 years.
Mistake #2: Conflating Small and Startup Businesses as the Same
What do you think a startup is? A large number of aspiring entrepreneurs in India have this notion that every new company is a startup and that registering the startup company is typically the first step to incorporation. But that is not entirely true.
While the process of incorporation under the Companies Act of 2013 is the same for startups and general companies, they are different from a general small business in terms of products, services and business model. Consider the following scenario as an example.
- General Business: If you are starting an import-export business of jute bags in the traditional form, it will not qualify you as a startup but as a general business.
- Startup: If you are an artist, launching specially designed artisan jute bags, and creating a niche, voila! The entity gains the potential to qualify as a startup.
The most prominent trait of a startup in India is to introduce new products, services, disruptive innovations or approaches to the market and create a new outlook for the socio-economic paradigm. This is the feature that qualifies them for the Startup India Scheme benefits provided by the Government of India.
The small business, on the other hand, intends no disruptions and instead focuses on following the industry norms for its traditional routes, which bears fewer risks and greater stability. So have a realistic plan for your business model, tread the right path, and tap into relevant opportunities and conscious milestones.
Fact Check— Not all businesses are startups. Not all startups need company registration as the first step of incorporation. Not all startups necessarily need to register as a formal company immediately when they are starting out. Many startups begin as sole proprietorships or partnerships initially, especially if they are testing their idea, gaining initial traction, or operating on a small scale. These forms of business can start working without registration being the first step, although they may have other legal and tax implications to consider, such as getting a GST registration to get you started as an artist selling your crafts.
Mistake #3: Not Taking Intellectual Property Rights Seriously
Art, literature, technology, scientific discoveries or inventions—these are all intellectual properties. If you are looking to economise on properties that are nothing but your brainchild, then consider protecting them.
Business ideas may not directly get intellectual property status, but that doesn’t mean they can’t be protected. Any idea that brings out a unique product, approach, technology or methodology qualifies to be patented. You could have protections like a trademark or a copyright based on the type of product.
A company that has its intellectual property rights (IPRs) registered can also use its trademarks and designs to advertise its products and services abroad. This right enables companies to export their patented goods or enter into franchising arrangements with overseas businesses.
Mistake #4: Taking Professional Help Only for Company Registration and Not for Preliminary Business Consulting
The points mentioned above are not the only mistakes that entrepreneurs make during company registration in India. It is a new journey, and incorporation is only the starting point.
Different businesses need different types of roadmaps. Sometimes entrepreneurs plunge in before consciously navigating their plan ahead. For serious achievers, however, the best way forward is through knowledge and learning. This is why taking professional business consulting or startup consulting makes a lot of sense.
The expert guidance protects you from making common mistakes when registering your company. It gives you more unbiased and downright guidance about India’s GST system, company formation methods, business models, income tax return laws and several others.
If you are looking for expert guidance to register your company, then get in touch with us at MPVD & Associates. Write to us at mpvdassociates@gmail.com or send us an enquiry.