In India, starting a business can be an exciting venture, however, it requires a complete understanding of the legal framework to ensure smooth and seamless operations. In this blog, let’s go through some of the top mistakes entrepreneurs make and how to avoid these mistakes while registering your company in India.
1. Insufficient Information
Submitting documents with incorrect or insufficient information can delay the registration process for your business or, in the worst cases, result in rejection. Since the registration process requires submitting supporting documents, it is mandatory to upload these documents after proper attestation using the owners’ Digital Signature Certificate (DSC). Moreover, it is always recommended to double-check all documentation for any errors, ensure they are valid, and verify that all required information is included before submitting.
Some of the important supporting documents required are
proof of identity
PAN card
address of the directors
registered address of the company
rental agreement
No Objection Certificate (NOC) for rented office spaces (if applicable)
2. Choosing the wrong business structure
In India, there are some important business structures that you can choose while registering your business:
Private limited company
Public limited company
One person company (OPC)
This choice can be made based on various factors like the cash flow, size, and future development and growth prospects of your business or company. Private limited companies offer flexibility to smaller businesses by mandating a minimum of two shareholders and directors. Public limited corporations, on the other hand, are suitable for larger businesses and require a larger number of directors and shareholders. OPC’s are appropriate for individual business owners who want to manage and take over all the responsibilities of the company.
Click here to know about the Pvt. Ltd. and Public company business structures in detail.
3. Keep track of Indian Regulations
Businesses ought to be aware of Indian regulations, while registering their businesses. Any failure to violate and comply with these regulations might result in serious legal consequences, including penalties. Furthermore, it’s always good to keep track of the updates and changes in the regulations. This can prevent any unnecessary problems that could possibly delay the company’s registration process.
4. Not Seeking Professional Advice
One of the biggest mistakes that many aspiring entrepreneurs make while establishing a business is not seeking expert guidance. Expert assistance simplifies the complicated process of company registration, preventing errors while gaining valuable and comprehensive knowledge of the entire registration process. Consulting with experts such as lawyer’s, corporate agents, and chartered accountants may assure legal compliance and assist you in navigating the complications associated with business registration.
5. Choosing Appropriate Company Name
Not checking for possible trademark issues or name availability is a common mistake. It is imperative to conduct a thorough name search for businesses using the trademark databases and MCA portal to ensure your chosen name is:
MCA – Compliant: Steer clear of phrases or words that are prohibited or that would require prior approval from Ministry of Corporate Affairs (MCA) authorities.
Unique: not almost identical to or precisely the same as an already-existing business name.
Trademark – Free: Doesn’t violate any registered trademarks that might eventually give rise to legal concerns.
6. Overlooking Licences
Your company’s registration process may come to an unforeseen halt or rejection if the required sector-specific licences, certifications, and permits are not obtained prior to submitting the documents. The ideal solution is to determine which industry-specific licences your company needs. Some of the specific licences that you may require according to your business needs may be:
Drug Licence: For companies involved in pharmaceuticals
FSSAI Licence: For companies that deal with food
Import-Export Code (IEC): For any business involved in import/export of products
To avoid any legal issues, make sure you apply for and receive these licences before starting your business.
7. Not understanding your market
Prior to registering your business or company, it is essential to understand your market. Skipping this phase can result in erroneous strategies and even your business being a failure even after starting it. Some of the common mistakes involved in market research are:
Assumption of Market Demand: For example, if you launch a new product or service without first ensuring that there is substantial demand in the market, it can cause a loss for your business.
Neglecting Competitor Analysis: In this case, entrepreneurs must perform thorough research about their competitors and understand the demand and their target audience. Failing to follow this step can also cause business losses.
8. Ignoring Environmental Regulations
You might have to strictly adhere to particular environmental standards, depending on your business type. Globally, environmental laws are becoming more and more strict. Businesses may guarantee they abide by current laws and regulations and steer clear of possible legal problems and fines by adopting sustainable practices. This makes it easier to get through the registration process easily and quickly.
9. Neglecting or skipping taxes
Another essential step while registering your business or even after registering your business is to not forget or neglect to pay the necessary taxes to run your business. Entrepreneurs have to register for the relevant local, state, and governmental taxes accordingly.
Check out our website to file your taxes for your business with our tax filing professionals
10. Not maintaining a business bank account
Opening a new bank account is vital for managing your business effectively. By opening a separate bank account for your business, you can streamline and manage your personal and business finances separately. One of the biggest mistakes while registering your company or business is not opening a separate bank account for business purposes. Using the same bank account for both personal and business activities can cause confusion and complicate tax filings.
Final Thoughts
Registering a company in India requires careful research, attention to detail, and compliance with standard legal requirements. By avoiding these common mistakes, you can speed up the registration process and lay a strong foundation for your business. Alternatively, you can seek advice with a professional expert to save your effort, valuable time, and any legal issues in the long run. We recommend you talk with an experienced lawyer or tax professional who can guide you by providing helpful advice according to your business needs.
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