Ever since India embarked on the path of liberalization, starting a business has only become easier. Government of India has also embarked upon the concept of a single window clearance, something considered to be the need of the hour. There are many options to start a business in India. One can incorporate a private limited company, set up a public limited company, form a partnership or limited liability partnership firm or simply go the sole proprietorship way. Foreigners also have the option of incorporating a joint venture company with an Indian partner or simply set up a branch or liaison office. All the above forms of incorporation are governed by a set of legislations; legislations that have to be adhered to whether you are an Indian citizen, foreign national or simply a non-resident person or entity. Let us understand the same in detail.
- Indian Companies Act, 2013: Indian Companies Act, 2013 is a master legislation that governs an incorporated entity such as a private limited company, public company whether listed or unlisted, joint venture company or simply a one man company. This, together with the articles and memorandum of association will govern the manner and mode of operating such an entity.
- Partnership Act, 1932: Indian Partnership Act, 2013 governs a partnership firm. A partnership firm is simply an understanding between two or more people known as partners who decide to start a business together. This, together with a partnership agreement signed by and between partners, will govern the manner in which a partnership firm as run and controlled.
- Limited Liability Partnership Act, 2008: a mix of an incorporated company and a partnership firm is a limited liability partnership firm. Such a firm, governed by the above mentioned legislation, is similar to a partnership firm except for limitation of liability of partners. This legislation along with a limited liability partnership agreement signed and executed by and between the partners, will govern the manner in which the firm is run, operated and controlled.
- Foreign Exchange Management Act, 1999 read with Reserve Bank of India (RBI) regulations: Reserve Bank of India from time to time notifies rules with respect to setting up of branch, liaison or project office in India. As mentioned above, foreign nationals are permitted to establish the above said offices in India with prior RBI approval. Starting a business in India by foreign nationals, will also mean compliance of financial regulations with respect to repatriation of money to and from their home nation.
Besides the above there are ancillary legislations such as the Income Tax Act, indirect tax laws to be put together in the form of Goods and Service Tax, besides various employment and labour laws that govern workmen and employees. Irrespective of whether someone in Indian or foreign national, the above legislations will govern an entrepreneur wanting to start a business in India. There are other legislations that govern companies listed on the stock exchange. However because they do not relate to Start Business in India, we have intentionally not discussed them in this post.