5 Easy steps to become an Entrepreneur in India.
Updated: Jan 8
So you have decided to take the plunge of starting your own business in India. You need to ensure that this decision is not taken in haste and is well-thought out and well structured. Here is an easy guide for you to assist you in taking this decision.
STEP 1: ENTREPRENEURSHIP IS NOT JUST A FANCY WORD.
You should understand that there is a difference between being an entrepreneur and being a freelancer. If you have read the book Cash Flow Quadrant by the famous business author Robert Kiyosaki, then you will know what I am talking about. If not, then here’s the major difference between the two, Freelancers exchange time for money (albeit much more money than a traditional job). Entrepreneurs rely on systems, automation and employees that work without their direct involvement and interference. So, before you start your entrepreneurial journey, know and understand that you need to tread this path very carefully with adequate systems and processes in place from day 1 of doing business. For having these processes in place, you cannot just start with a laptop and a printer at your home office, you will be needing a considerable amount of investment of time and money for researching.
STEP 2: BUSINESS PLAN. DETAILED NOT SUPERFICIAL.
After you have decided to finally become an entrepreneur, it’s time for you to put your business idea on paper. This will help you determine whether your business idea is likely to succeed and be sustainable. You’ll need to research the market and prepare budgets for your business. Various templates of business plans are available online. Download one, it will give you a basic idea about the manner of planning things. You need to delve deeper and research as much as possible, so that you understand the risks involved and you are not caught by surprise. Most of the entrepreneurs get excited with their business idea that they fail to analyse and forecast the risks that could arise. The habit of forecasting risks can help you mitigate the same, in a systematic manner. It is better to spend considerable amount of time in chalking out your business plan, so that in future it is easy for you to present the same to investors and other potential stake holders of your business.
STEP 3: DECIDE ON THE LEGAL STRUCTURE.
There are several types of legal structures you can choose from when setting up a business, they are detailed as follows, with basic details about them:
1. Sole Proprietor
A sole-proprietorship is a business-type where a single person owns and runs the entire business. It is the most simple business structure you could go for. It is very suitable for any one-person businesses; this includes independent accountants, web developers and content writers among others. Being a sole trader means the individual is entitled to all/any profits of the business but is also liable for any debt/damages incurred.
2. Limited company
A limited company is a structure wherein the business is a separate entity from the individuals who own it. This means the owners are only liable for any business debts to the extent of the amount of money they have put into the business, thus limiting the exposure for business owners beyond their total investment. There are two types of limited companies you can incorporate in India.
Private limited company -
In a private limited company, the owners privately hold shares. This is the most common and preferred incorporation structure for most small businesses in India. Private limited companies gain more traction from foreign investors in India.
Public limited company -
In a public limited company, shares are available to the public at large for purchase and ownership.
Public limited company is commonly used as a structure for major companies after they make an initial public offering(selling a large portion of their shares in the capital markets).
3. Limited liability partnership (LLP)
An LLP is a partnership structure used by many businesses including law firms, architectural firms or accountancy firms. An LLP is made up of at least one designated partner and one general partner (there can also be more than one of each), and these partners have different responsibilities and exposure regarding the business.
STEP 4: THE FAC OF DOING BUISNESS. FAC-FINANCES, ACCOUNTING AND TAXES.
Once you have set up the legal structure of your business, there are several important financial and tax responsibilities you need to figure out.
Before you can start generating any revenue or making purchases, you are going to need to open a business bank account to send, receive and securely store your businesses capital (money). As a shareholder, owner or director you will likely be responsible for filing some form of accounts, filing paperwork and paying various taxes on an annual or more regular basis. Understanding your basic accounting, tax and financial responsibilities from the start is essential to running your business properly, being legally compliant and avoiding hefty fines from the Government. When it comes to starting any small business, it is advisable to have an accountant.
STEP 5: PROTECT YOUR IDEA.
Intellectual property (IP) is intangible property that is the result of your creative calibre and unique and innovative thought process. Protecting your IP as a business can be critical to protecting your business, brand and products from damages that come from people using your intellectual property without your permission. A trademark is nothing but a symbol, word or words that is legally registered which represents a business that legally owns it, protecting the business from anyone else using this name or symbol. For new ventures, you will want to trademark your company name and brand, this makes sure you legally own your brand and company name, and prevents anyone from misusing it.
A patent is an exclusive right granted to the inventor for a product, invention or process that is novel and unique that provides a new way of doing something or provides a new technical solution to a problem. Applying for a patent is only relevant for new businesses that have invented innovative technology or product that could be copied by others. A patent grants your legal ownership of this invention and the exclusive right to it, thus providing your business with protection.