Starting a Small Software Company: What Licenses and Documents Do You Need?

I would like to have the documents and statutory details for setting up a small software company with around 10-15 software engineers. Could you please provide information on the licenses required and any other statutory requirements?

Thanks,
Ramananand

Acts Employers Should Begin With After Incorporation

From the date of incorporation of an establishment or workplace registration, the following Acts are important for employers to begin with:

1. Shops & Establishments Act and Rules applicable to your state, Tamil Nadu
2. SHWW (P, P & R) Act 2013
3. PF & Miscellaneous Provisions Act
4. Maternity Act, if a woman is employed
5. All other state-specific Acts such as the Safety & Fire Prevention Act and similar regulations

Kritarth Consulting Team
10.8.20

In addition, you should/can have the following registrations as well:

1. If yours is a Partnership firm, register the entity with the 'Registrar of Firms' by submitting the necessary Partnership Deed. If it is a Limited Company, you must register with the Registrar of Companies.

2. Obtain PAN & TAN.

3. Obtain GST registration, clearly specifying the services to be provided and assigning the appropriate codes.

4. Register for Professional Tax with the Commercial Taxes Department.

5. Consider MSME registration if your firm meets the stipulated criteria (Department of Industries & Commerce).

6. If your business involves exporting (software) and importing (software, components, equipment), secure IEC registration and code.

7. Identify and appoint an Auditor and Consultants to manage GST and IT compliances effectively.

8. Register for ESIC if your firm is eligible.

9. Maintain an Employees Register, Wage Register, Leave Register, and ensure compliance with other statutory requirements.

MSME and IEC Registration

Prof. Kumar amply touched upon the subject, covering even MSME and IEC registration.

MSME registration is not mandatory, but it is advised to obtain it. There is no hassle in getting it. The procedure is now very simple, free of cost, and paperless. There is no need for any agent to do it. It is now called Udyam Registration. This will help you avail certain loans and benefits from the government.

IEC registration is mandatory for export from India or import to India.

POSH Compliance

If there are more than 10 employees at the workplace, POSH compliance needs to be done. Violation will attract heavy penalties as well as cancellation of all your business licenses.

ESI Applicability

ESI is applicable except in Maharashtra. In Maharashtra, ESI is applicable to shops and commercial establishments with 20 or more coverable employees. If your software company is treated as a factory under the ESI Act, then ESI would be applicable.

Setting Up a Company

When you are looking to set up a company, you need to first decide on what kind of company you want to form, such as Proprietary, Partnership, LLP, Pvt. Limited, etc., and proceed further.

Thank you very much for your in-depth advice. One point I missed mentioning is that the owners of this project are in the US, and they want me to set it up in India. They have currently outsourced this work to a small company in India, but now they wish to bring this work in-house and have me manage it.

Impact of Change on Statutory Licenses

Will this change affect the statutory licenses required, as advised by you?

Preparations Before Recruiting

What preparations do I need to have in place before I start recruiting people, considering that I may not have much manpower support as we are just starting with 10-15 software engineers? Please advise me so that I can present the necessary information to them accordingly.

Thank you,

Ramananand

Dear Ramananand, half knowledge is always very dangerous. You need to hire an expert to take care of your issues. Specific queries regarding Labour Laws can be answered here.

Foreign Company Registration in India

To my (half) knowledge, any foreign company is required to be registered with the ROC as a Foreign Company to do business in India. Foreign citizens or companies making investments in India have to follow the FDI policy. Investments in shares or debentures should be made either through the automatic route or the government route. Certain sectors are classified as prohibited sectors.