How to start small business in India
Indian Economy's true backbone is small businesses. According to the MSME data, there are more than 36 million small businesses in India currently, giving jobs to more than 80 million people. Over 8% of the GDP, 40% of the Indian export and 45% account for the total production output come from Small businesses. The Govt. of India acknowledges the incredible contribution of these small businesses and supports them through various subsidy plans. In this article, we have outlined the tips and tricks on how to start a small business in India.
Opportunities for Small Businesses in India
When the economy is shaking and you do not have a job for yourself, then it is the best time to open a small business. As I said before, you can begin a small business yourself. Opportunities for starting a small business here in India are amazing.
Small Business Ideas
A small business could be a manufacturing unit or a service provider. According to Ministry of Micro, Small & Medium Businesses, any service related business with an investment of Rs.2 crores and less is categorized as a small business, whereas any manufacturing unit with an investment of not more than Rs.5 crores is categorized as a small business. Considering the aforementioned classification, there are several businesses that one can start a small business.
While selecting a small business plan you want to implement, the Entrepreneur should consider the following vital aspects:
- Marketing Prospects
- Experience of Entrepreneurship
- Investment Requisites
- Business Goals
- Requirement for Raw Material
- Staffing Needs
- Business Entity
- Licenses for Business
- Taxes
- Financial projection
- Breakeven
Business Entity
The majority of independent small businesses in India are often opened as a proprietorship firm or partnership firm because of the simplicity of compliance. Nevertheless, to bear the cost of limited liability security and building a registered business entity, the Govt. of India launched Limited Liability Partnerships in India in the year 2008 through the Limited Partnership Act. As a result, small businesses with a yearly revenue of over Rs.10 lacs can create an LLP to get extra advantages such as Limited Liability protection, bank finance easy access, uncomplicated business transferability and so on.
Moreover, Limited Liability Partnerships do not need a review if their yearly sales turnover is below Rs.40 lacs and the investment is not more than Rs.25 lacs, making it a perfect entity for a small business with simpler compliance needs. On the other hand, small businesses with a large investment in machinery or equipment that surpasses Rs.25 lacs or has yearly sales revenue that exceeds Rs.40 lacs will have to register them as a private limited company.
Tax Registration
After you have done the business registration, the small business owner may need to register for various taxes as his business crosses particular milestones. The main tax registrations needed for any small business and the milestone when the registration has to be obtained are mentioned below:
PAN Card
In India, PAN is amongst the first few registrations that any small business requires right after they get registration for their company since it is compulsory to open a bank account and to perform various monetary transactions. For a Proprietorship Firm, the Proprietor can use his own PAN card. In case of Partnership Firm, Pvt. Limited Company, Limited Liability Partnership, One Individual Company, etc, they issue a different
PAN card.
TAN Registration
TAN is necessary for businesses that have to deduct tax at the source which is also recognized as TDS. So, if a small business has to deduct tax by the law while making any payment, TAN needs to be registered.
Service Tax Registration
Any business providing over Rs.9 lacs of taxable services annually has to obtain Service tax registration. The business should collect and pay service tax from the clients once the yearly taxable services revenue surpasses Rs.10 lacs.
VAT Registration
Any business selling products and goods requires obtaining VAT Registration. The State Governments controls Value Added Tax or VAT. Therefore, the necessity and process for VAT enlistment differ from state to state. However, the majority of states ask for VAT registration for businesses selling products and goods worth over Rs.5 lacs in a financial year.
Business Registration
Besides the tax registrations, a small business owner(s) needs to obtain one or more of the following business registrations as and when the requirement comes up.
Udyog Aadhaar
Udyog Aadhaar was launched by the Govt. in place of MSME registration in order to make the procedure for small business registration simple. Small businesses can get Udyog Aadhaar registration to benefit from a variety of schemes and activities endorsed by the Govt. intended for small businesses.
Trademark Registration
This type of registration enables a small business to secure its uniqueness and investment in the ad. Small businesses would now be able to effectively compete against bigger businesses because of the reduced advertisement expenditure through popular channels like the internet, social media, etc. Hence, it is imperative for all the small businesses to get their trademark registration and guard the brand name against their competitors or any future litigation.
Import Export Code
Businesses that are involved in the export or import of goods from India are required to get IE Code or Import Export Code. However, it is a not obligatory registration.
ESIC Registration
Any small business with over 20 employees needs to obtain ESIC Registration. Having this registration may assist a small business to hire efficiently and offer better advantages to its employees.