This is part I in a series of posts about issues faced by Teknatus Solutions Private Limited in India from 2007 – 2010. Being the first part, I’m going to look at the steps needed to get a business registered in India. I’ll examine the case of a foreign national/foreign company looking to setup an Indian subsidiary.
Rules in India for registering a company a quite onerous and time consuming. However, shutting down a company is even more difficult so make sure you need to register a Private Limited company or a LLP before going down this road.
Disclaimer: This is not legal or financial advice. Consider this nothing more than an explanation of what I did, and why I did it this way.
Find a Recommended Chartered Accountant (CA) and Lawyer
As with any country, when starting a business, it’s advisable to have a good accountant and lawyer working with you. In India, CAs provide a great deal of legal advice as well as accounting advice. I suggest finding a CA and lawyer in your city that is recommended by someone you know and trust. It took me some time to find a good one that fit into my budget but when I did, his firm took a great deal of burden off me in setting up the company and dealing with the various bureaucracies.
Apply for a PAN (Permanent Account Number) Card
The first thing required to do anything in India is to get a PAN Card if you don’t already have one. If you’re a foreigner or NRI, you probably don’t have one. If you’re a foreigner or NRI moving to India, apply for a PAN Card as soon as possible. The Indian government recently announced that they will begin accepting PAN card applications at embassies and consulates so please check with your local consulate/embassy first. If you’re in India already, the best thing would be to call the IT (Income Tax) Department Hotline and ask them where the closest PAN card processing center for foreigners and NRIs is. Some centers, do not accept applications from foreigners or NRIs. If you’ve already found a good CA or lawyer then they can probably take care of this for you. However, I found that Chartered Accountants, Agents, and Brokers in India were not very effective in obtaining a PAN Card for foreign nationals, though, they were always very confident that they could get it done quickly and easily. Instead, calling the IT Hotline and going in person to apply can be much cheaper and quicker.
- Call the IT Hotline for the closest processing center
- Go to the processing center with 2 passport photographs (Indian size passport photos, not US size passport photos), a proof of address such as an MTNL/BSNL phone bill, bank statement, or passport copy with your address on it.
- Submit the application and if all is in order, you should have your PAN card within a week.
Apply for a DIN (Director Identification Number)
A DIN is required for any and all Director’s of an Indian company. The DIN number is used by a Director for various government and official correspondence as well as opening up bank accounts, etc. As soon as you receive your PAN Card, you should apply for a DIN if you are going to be a Director of the company.
- Apply for a provisional DIN
- Pay the DIN application fee as described
- Print out and mail in the DIN Application within 60 days of applying for the provisional DIN. It should be noted here that foreign nationals will need to provide a copy of their passport with the application. The passport will need to be notarized by the local Indian Embassy or Consulate. Before they will notarize the passport, you will also need an apostile from your local city or state government. If you already in India, you will need to go to the Ministry of Foreign Affairs or the local FRO office and have them notarize your passport copy before it can be submitted. If you get the passport notarized by your country’s embassy, you have a 50% chance of being rejected and you’ll need to apply again.
Apply for a DSC (Digital Signature Certificate)
Apply for a Company
This step is probably one of the more complicated ones and I do suggest having your CA handle this step. I found that having my CA get the DIN, DSC, and submit the application of incorporation to the RoC (Registrar of Companies) was fairly cost effective and saved me a great deal of time and aggravation. However, if you choose to go ahead and do it yourself, you should look into the MCA offices in your area and follow the steps necessary to form a Private Limited company in India.
In either case, you must do the following:
- Find four possible names, in order of preference, that you would like to use for your company. The company names cannot be in use already and the company name must end in “Private Limited” for a privately held company.
- Once a name has been approved by the RoC, submit the Memorandum of Association and Articles of Association. These two documents are critical and for the most part, they are fairly standardized. Your CA will provide these to you for filling in the blanks and then submit them to the RoC on your behalf. Your CA will also guide you in what other supporting documents are necessary.
- If everything is in order, you will receive the Certificate of Incorporation
Apply for a Company PAN Card
Once you receive the Certificate of Incorporation, you will need to apply for a company PAN Card. You will not be able to open up a company bank account without a company PAN Card. Typically, you can apply at the place where you submitted the application for your personal PAN Card or your CA/lawyer can usually handle this for you.
Apply for a Company TAN (Tax Account Number)
The TAN will be used for collecting or depositing tax deducted at source (TDS). Like most forms in India, you can fill out the form online, print it out and send in a hardcopy. A list of processing centers can be found here. Consider having your CA or lawyer handle this along with the company PAN card.
The steps I’ve outlined here are pretty general and one thing to note is that the rules and requirements for many things in India change depending on who you speak to you or who’s got your file on their desk. For example, my DIN application was rejected because my passport copy was notarized by the embassy and NOT the Indian consulate or the Indian FRO office. However, the other Director’s DIN applications was successfully processed. Hence, you should know the requirements and know the process but it makes life much easier if you have a trusted resource to handle the bureaucracy for you. If you’re having trouble finding a lawyer or CA in India to handle things for you, post a comment and hopefully, we can get you the right person.
- Ministry of Corporate Affairs
- Director Identification Number
- Digital Subscriber Certificate
- DSC Issuers
- MCA Steps to Incorporation
- Indian Income Tax Department