Starting a Software Company in India: What Legal Steps Should My Friend Take?

Hi all!

I just wanted to know what one needs to do in order to start a software company in India. There is a friend of mine who has some projects to work on, and he is thinking of starting a company with a few of his friends. He asked me for help regarding the legal formalities involved. I had no clue, so I was wondering if any one of you could help me out here.

Thank you.

First thing is to get in touch with the labor commissioner of that city. Second thing is to get a leased telephone line. Please register the company with all the details about your project. These are surface-level details.

Regards, scare_crow

SETTING UP A COMPANY

Register the Company

The first thing you need to do to set up a software project or call center, or in fact any business, in India is to form a company. The Companies Act 1956, sets down rules for establishing public and private companies. The most common corporate form is the limited one, and not the unlimited company. It is formed only after registering the Memorandum and Articles of Association with the ROC (Registrar of Companies) of the state in which your company's main office will be located. These are the most important documents that you will submit to the ROC.

The Memorandum sets out the constitution of the company (name of the company, the nature of liability of its members), and includes its objects (the purpose for the formation of the company, the parameters within which it has to carry out its activities). The company cannot do any act that is outside the object of the company even if all the shareholders approve it unanimously. The Articles of Association are the rules and regulations for managing the company's internal affairs and for achieving its specified objects and purposes.

Getting the Company Name approved

You then send your company's name to be approved by the ROC in the state/Union Territory in which you will maintain its registered office. The approval is subject to certain conditions no existing company should have the same name, and the name must incorporate the words Private Ltd at the end, if a private company, and Limited if public.

Pay a registration fee

Next you pay a registration fee, scaled according to the company's share capital, which is stated in its Memorandum. Once you obtain all the documents described in Step 1 and the registration fee, the ROC grants the certificate of incorporation to you (the applicant).

INDIAN COMPANY / INDIVIDUAL

An Indian citizen can set up IT software and services operations in India through the following.

• As an Individual / Proprietor

• As a Partnership / Firm / Trust

• As a Company registered under the Companies Act, 1956

No prior permission of the Government of India is required to set up IT / software units in India

The above are just broad guidelines

However I would suggest that your friend approach a practising Company Secretary or Chartered Accountant who has prior experience in this area and they will do it for you as a turnkey project. They may charge something in the range of INR 5000- 10000

Hi,

Any business can be started with ownership as follows:

1. Proprietorship: Entire capital is owned by a single individual.
2. Partnership: When two or more individuals share the capital, it becomes a partnership. You need to enter into a partnership agreement and register the same.
3. Company: Form a private limited or a public limited company. Refer to the earlier post for details.

Consult with any practicing Chartered Accountant; they will assist you.

Siva

Hi,

I agree with Mr. Sivasankaran. However, in the case of a Pvt. Ltd. company, I think there is a stipulated number of directors that you might need to identify while forming a new company. If the company being started is an IT company, then you might also need to register yourself with STPI.

Thanks and Regards,
Siva