How to open a small business in India

Learn the process step by step

Things are changing in India, with many small businesses starting up. One reason could be the current Indian government, which is promoting Startup India initiative and other schemes offering benefits to entrepreneurs. If you too are hoping to launch a startup in India, learn how to open a small business here.

Follow these steps to open a business

Now is the time to start the business you’ve only dreamt of. Learn the 7 steps on how to open a small business here.

  1. Have a business idea.
  2. Decide the business form.
  3. Work out funding.
  4. Register your business.
  5. Set the infrastructure.
  6. Hire staff (if needed).
  7. Publicize your startup.

Now let us examine each step in detail.

1. Have a business idea

How to Open a Small Business Man in Suit at Desk
First you must decide what type of business you wish to start.
Photo: Visualhunt.com

The first step in how to open a small business is to decide your business idea.

Your business must solve a problem, fulfill a need or have something the market wants.

You need to confirm your idea with real facts and figures. Try to find out about:

  • Those who are most likely to buy your product or service.
  • Your competition, meaning companies that are already offering this product/service.
  • What makes your product or service more desirable than theirs.

Once you have decided the idea, prepare a business plan that details the resources you would need to start this business.

2. Decide the business form

The next step is to decide the business form. This will determine your level of business risk as well as tax status.

Following are some of the business forms allowed in India:

Sole proprietorship

This is the most simple and basic business form. It means you are the owner of the company and responsible for its conduct, profits, losses and liabilities. You need not register with the government (unless you wish to open business bank account).

Partnership

This is a business form that includes you and one or more partners. Like a sole proprietorship, you and your partners are responsible for the conduct, profit-sharing, losses and liabilities of the company. This business form is also very popular and easy to start.

Private Limited Company

This form of business needs to be registered with the Ministry of Corporate Affairs and may comprise between two and 200 shareholders.

PLC is well-suited for most small, medium and large businesses.

 

It allows you to define profit-sharing as well as liabilities, responsibilities and roles of each partner or family member. For details on more business structures, you can read this post.

3. Work out funding

How to Open a Small Business Shopkeeper Counting Money
The MUDRA scheme lends up to 10 lakh to the small/micro enterprises through banks.

For most small businesses and startups initially, the budget is limited. Following are some funding options that can help finance your startup business in India:

Banks

Various banks in India today offer capital to startups. Also, under a scheme called Micro Units Development and Refinance Agency (MUDRA) Bank, the Indian government loans up to 10 lakh to the non-corporate, non-farm small/micro enterprises through banks.

Cooperative credit societies

There are many cooperative credit societies that lend small amounts to people who wish to start their own businesses in India. It is best to check the society’s reputation before working with one, as they are not regulated by the government.

Venture capital/angel investors

Indian and foreign venture capitalists or angel investors are ready to invest in startups, provided they show promise of profits and are legitimate.

Crowdfunding

Today, there are many good crowdfunding platforms based in India and abroad. You just have to join one and share your business idea. If they like it, they will collect money from members of the public in exchange for company stock.

Note: Those who choose the Private Limited form of business mentioned above can fund their businesses by issuing shares rather then relying solely on external funding.

Once you have funding, the next step is to legally register your business.

4. Register your business

How to Open a Small Business Leather Shop
All except sole proprietor businesses must register with Indian government.

Next step is to register your business at the Ministry of Corporate Affairs. What was once a confusing and lengthy job can now be done within one or two working days.

Once your company is registered, you can open a bank account in the name of your business.

You also need to register for:

  • Goods and Services Tax (GST) if you expect an annual turnover of Rs. 40 lakhs or more (Rs. 20 lakhs for the Northeastern states, J&K, Himachal Pradesh and Uttarakhand).
  • Permanent Account Number (PAN).
  • Taxpayer Identification Number (TIN) number.

If you like, you may register your trademark to keep others from using your business or product name.

5. Set the infrastructure

Depending on the business you are starting, you might need a physical shop or office. But you will also need a website to bring customers to your business.

Most people look for goods and services on the internet. A website helps them find you.

Thus, you need to launch your website which today, is relatively easy and inexpensive.

Don’t neglect to register a business domain name, preferably one that matches the name of your business.

Domain name is the online address of your business and is essential today for success.
For some businesses like service industry, you won’t even need a physical place to do business, as bookings can be done online. If you really need a space, then it should be cost-effective like your home, garage or shared office space.

6. Hire staff (if needed)

How to Open a Small Business Woman Working on Laptop
You can find skilled staff through local universities and institutes.
Photo: wocintechchat.com on Visual hunt / CC BY

You can start your business alone or could take the assistance of family members. But, if your business requires to hire some staff, then the best way to get them is from educational institutes or websites like Indeed India and Placement India.

There you can get low-wage and skilled staff. You can also register yourself with job websites of institutes, offering free hands-on training for fresh graduates on a stipend basis. Find more tips here.

7. Publicize your startup

Many startups cannot spend precious funds on advertising. But you can still promote your business on social media platforms like Twitter, Facebook, LinkedIn, YouTube and Instagram. You can share videos or articles about your company, products and its services on these social media platforms.

If you have the funds, you can also use traditional ways to promote your business like:

  • Advertise in the newspaper.
  • Local radio ads.
  • Distributing pamphlets etc.

But be careful in branding your business. If wrongly done, it can land you in business loss and failure.

Related: How to create a marketing strategy for your IT startup

How to open a small business summarised

There are many successful startups all over India, which shows that India is definitely a great place to start a business. Follow the above steps to know how to properly and efficiently do business here. Be confident — you can do this!

Vinita Gupta Malu
Vinita Gupta Malu has been writing on consumer and business technology for over 12 years. She is the former correspondent of InformationWeek and Express Computer magazines in India. She has written thousands of articles and has travelled around the world to report on technology events. Vinita is currently a content specialist and is developing content for Fortune 500 companies. You can find her on Twitter.