In the first part of our blog, we discussed some key steps entrepreneurs should keep in mind whenthey wish to establish a software firm which were mainly raising funds, developing a business planetc. Today, well talk in depth about the different formalities to be carried out in addition to fewmore crucial factors.
Obtain Direct Identification Number (DIN):
Before giving an application for incorporation, a software firm must decide on the number ofdirectors. They should not be less than 2 and exceed 8. Any one of the documents listed below canbe presented as an identity proof when you apply for a DIN:
- Driving licence
- PAN Card
- Voter ID
Resident verification may also be required. Apart from any one of the credentials just mentionedabove, individuals can also give electricity/telephone bill, ration card or bank statement as residentproof. The entire process will be conducted online through the Ministry of Corporate Affairs web-site. A certain amount of fess will have to be paid online via net banking/credit card. Once all thedocuments are submitted and verified, you will receive your unique DIN.
Register company name:
The software firm has to be listed with the Registrar of Companies (ROC). You have to fill up anapplication form online. Owners need to download Form 1A from the Indian governments officialwebsite and fill it up carefully. Think of 4-5 names so that if one particular name is not available, theothers can be considered.
Once you are done with securing a name for your firm, you have to apply for amalgamation forwhich you must create a Memorandum as well as Articles of Association. This is a chief documentthat contains the constitution of your corporation such as names of first directors and differentoperations. The incorporation form together with Form 1A should be submitted together on theofficial website of the related government authority.
After you get the consent for incorporation, it is recommended that you take 8-10 prints of thedocuments for further use. Another significant step is to obtain a tax account number by registeringwith the Income Tax Department. Your chartered accountant can aid you in this process. In addition,a bank account needs to be opened in the companys name for executing daily operations.
Enrol with Software Technology Parks India (STPI):
Once the incorporation task is over, software entrepreneurs should sign up with STPI and obtain alicense. This license is especially for new software firms having their operations in India.
Organizations which are registered with STPI enjoy certain benefits such as no taxes for 5 years inaddition to no import/export duty on software and hardware items. Make sure that you submit allthe necessary documents which include means of capital, business plan, financial statement withprojections of 5 years and overall project plan.
Decide on an office location:
It is not necessary to choose a spacious place to conduct your operations in the beginning. If youhave a tight budget, you can start business in a small place and then as your software firm grows,you can move to a bigger place. Certain factors such as number of employees you intend to hire, sizeof the firm, facilities available in the vicinity etc. should be considered before settling on a site.
Finances are not just required during the amalgamation phase. Entrepreneurs will need funds totake care of other expenditure post the firms establishment too. These costs include:
- Buying equipment like computers, chairs, certain programming applications, servers andother tools required for developing and marketing the software.
- Hiring competent, experienced people to ensure your software firm achieves tremendousgrowth.
- Paying rent for office space or loan interest.
- Other expenses such as service tax, fess of professional to manage books of accounts andtravelling to promote the software etc.
According to renowned research company Gartner, information technology spending in India isestimated to reach 73.3 billion USD in 2015 while the software sector might witness growth of 14%providing ample opportunities for young entrepreneurs beaming with new ideas for softwareproducts and services. Nonetheless, no software company can be successful if it does not follow theexact procedure for establishment. Make a note of all the steps listed and implement themefficiently so that you face no problems later. Good Luck!