Pick the right structure, register it, open the right bank account and stay compliant, for every kind of business: from a one-person freelance practice to a private limited company or a non-profit. Includes a worked example: an IT placement firm in India earning from clients in the USA.
Whatever you're starting, the path is broadly the same. Steps 1–5 set the business up; steps 6–10 make it ready to trade and keep it on the right side of the law. Tap a step to jump to it.
Before step 4, write down a simple plan: what you sell, to whom, at what price, your monthly costs and how long your money lasts. Banks ask for the same numbers when you apply for a loan; try our EMI calculator if you plan to borrow.
The structure decides who is liable if things go wrong, how profits are taxed, how much paperwork you'll have each year and whether investors can come in. Follow the questions:
A starting point, not the final word. Tax, family and funding plans matter too, so confirm with a Chartered Accountant or Company Secretary.
| Structure | Owners | Liability | How it's created | Tax on profits* | Yearly paperwork | Best for |
|---|---|---|---|---|---|---|
| Sole proprietorship | 1 | Unlimited: personal assets at risk | No entity registration; uses the owner's PAN | Owner's personal slab rates | Very low | Freelancers, small shops, testing an idea |
| Partnership firm | 2–50 | Unlimited, joint and several | Partnership deed; registration with the state Registrar of Firms | 30% + surcharge & cess | Low | Family or friends' businesses |
| LLP | 2 or more (no maximum) | Limited to agreed contribution | MCA (FiLLiP form) | 30% + surcharge & cess | Medium | Professional and service firms |
| One Person Company | 1 member + nominee | Limited | MCA (SPICe+ form) | About 25% | Medium | Solo founders who want limited liability |
| Private limited company | 2–200 members; 2+ directors | Limited | MCA (SPICe+ form) | About 25% | High | Startups raising funds, ESOPs, bigger clients |
| Public limited company | 7+ members; 3+ directors | Limited | MCA (SPICe+ form) | About 25% | Very high | Raising money from the public, listing |
| Section 8 / Trust / Society | Varies | Limited (Section 8); varies otherwise | MCA licence, or state trust / society registrar | Exempt once registered for exemption | Medium | Non-profits |
*Approximate basic rates. "About 25%" is the 22% concessional company rate plus surcharge and cess. Small proprietors and partnership firms can choose presumptive taxation, where tax is paid on a fixed percentage of turnover. Ask your CA which works out better.
First, for every structure: check the name. Search the IP India trademark registry so you don't copy someone's brand, and for an LLP or company, check availability on the MCA portal. Then open the structure you chose:
Remember: you are the business, so business debts are your personal debts, and you can't bring in partners or investors without changing the structure.
Every year: Form 11 by 30 May, Form 8 by 30 October, and an audit only if turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh.
Every year: statutory audit, AGM, financial statements (AOC-4), annual return (MGT-7/7A), director KYC and the income-tax return. A person can be a member of only one OPC.
Same SPICe+ route, with at least 3 directors and 7 members. More governance applies: certain public companies need independent directors and board committees, and shareholders must approve big borrowings. Choose it only when you need money from the public or plan to list.
These need specialist advice before you start.
| Registration | Who needs it | Where |
|---|---|---|
| PAN | Every business (a proprietor uses their own) | Protean / UTIITSL; automatic for companies and LLPs |
| TAN | If you deduct TDS (salaries, rent, contractors) | Protean; automatic for companies and LLPs |
| GST | Turnover above ₹20 lakh (services) or ₹40 lakh (goods only); lower in some states. Some must register from day one, for example those selling goods to other states. Voluntary otherwise. Small businesses can opt for the composition scheme (up to ₹1.5 crore for goods, ₹50 lakh for services) | gst.gov.in • GST calculator |
| Udyam (MSME) | Optional but useful for every business; free and Aadhaar-based | udyamregistration.gov.in |
| Shops & Establishments | Most shops, offices and commercial premises, under your state's law | State labour department or municipality (many are on the National Single Window System) |
| Professional tax | Employers and professionals in states that levy it, such as Maharashtra, Karnataka and West Bengal | State tax portal |
| Trade / sector licences | Trade licence from many municipalities; food businesses need FSSAI; drugs, financial services and others have their own regulators | FSSAI FoSCoS, municipality, regulator |
| Import Export Code (IEC) | Needed to import or export goods. Not mandatory for exporting services, though some banks ask for it | dgft.gov.in |
| Trademark | Recommended for every brand name and logo | ipindia.gov.in |
| EPF | Establishments with 20 or more employees | epfindia.gov.in |
| ESIC | Establishments with 10 or more employees (wage ceiling applies) | esic.gov.in |
| POSH Internal Committee | Workplaces with 10 or more employees | Internal: constitute the committee and display the policy |
India's four new labour codes (wages, industrial relations, social security, and occupational safety) came into force on 21 November 2025, replacing many older labour laws. Related rules are being notified in phases, so check the Ministry of Labour and your state's portal before hiring.
Banks' savings-account rules, based on RBI directions, say a savings account is for personal, non-business use. A business should have a current account in its own name. It allows unlimited transactions, shows clients you're a proper business and keeps your books clean. (Compare account types in our savings, current & term deposits guide.)
| Business type | Documents banks usually ask for |
|---|---|
| Sole proprietorship | Proprietor's KYC, plus two proofs of business in the trade name, such as the Udyam certificate, GST certificate, Shops & Establishments licence, a complete income-tax return showing the business income, utility bills or IEC. If two aren't possible, the bank may accept one after verifying the business premises. |
| Partnership firm | Registration certificate, partnership deed, firm's PAN, address proof, and KYC of the partners and authorised signatories |
| LLP | Certificate of incorporation, LLP agreement, PAN, partners' resolution, and KYC of the designated partners, beneficial owners and signatories |
| Company / OPC | Certificate of incorporation, MOA and AOA, PAN, board resolution, and KYC of the beneficial owners, directors and signatories |
| Trust / Society / Section 8 | Registration certificate, trust deed or bye-laws, PAN, resolution, and KYC of trustees or office-bearers |
Why the bank asks about "beneficial owners" and the source of funds: see KYC: documents & norms, opening accounts for firms, companies and trusts and why banks ask questions (AML).
MSMEs are classified by both investment in plant, machinery or equipment and turnover (limits revised from 1 April 2025):
| Category | Investment up to | Turnover up to |
|---|---|---|
| Micro | ₹2.5 crore | ₹10 crore |
| Small | ₹25 crore | ₹100 crore |
| Medium | ₹125 crore | ₹500 crore |
Read more: MSME: Udyam, MUDRA & CGTMSE • loan eligibility checker • how banks assess working capital • your business credit report & CMR rank.
Under DPIIT's revised definition (4 February 2026), an entity can be recognised as a startup if:
Benefits include self-certification under certain labour and environmental laws, cheaper and faster patents and trademarks, easier public procurement and, for eligible companies and LLPs incorporated before 1 April 2030, a 3-year 100% tax holiday on profits (needs separate approval). Apply on startupindia.gov.in.
| What | Applies to | When |
|---|---|---|
| Income-tax return | Every business | 31 October if the accounts are audited; otherwise 31 July or 31 August (business cases), as notified for each year |
| Advance tax | When yearly tax exceeds ₹10,000 | 15 June, 15 September, 15 December, 15 March |
| Tax audit | Business turnover above ₹1 crore (₹10 crore if nearly all receipts and payments are digital); professionals above ₹50 lakh | Before the return |
| GST returns | GST-registered businesses | GSTR-1 and GSTR-3B monthly, or quarterly under QRMP (turnover up to ₹5 crore); annual GSTR-9 above ₹2 crore turnover |
| TDS returns | If you deduct TDS | Quarterly |
| EPF / ESIC | Covered employers | Monthly, by the 15th |
| LLP filings | LLPs | Form 11 by 30 May; Form 8 by 30 October |
| Company filings | Companies and OPCs | AGM within 6 months of year-end; AOC-4 within 30 days and MGT-7/7A within 60 days of the AGM; director KYC; DPT-3 by 30 June; MSME-1 half-yearly if dues to MSEs exceed 45 days |
| Renewals | As applicable | Shops & Establishments, trade licence, FSSAI; the GST LUT for exporters every financial year |
The new Income-tax Act, 2025 applies from 1 April 2026, so section numbers in older articles have changed. The obligations above continue. A good accountant and a shared compliance calendar avoid most penalties.
The situation: a founder in India runs an IT recruitment and placement service. Their website traffic, leads and paying clients are US companies. How should they set up, and how do they get paid?
Advance rulings on recruitment services have gone both ways. Draft contracts carefully and take a CA's opinion.
Payments from foreign clients for services are "current account transactions" under FEMA. They're allowed without RBI permission, as long as the money comes through an authorised bank or RBI-authorised payment platform. There are two main routes:
| Route A: Bank wire | Route B: Payment platform | |
|---|---|---|
| How the client pays | International wire to your bank's SWIFT code | A domestic US transfer to US account details the platform gives you |
| Costs | Sender's bank fee, intermediary bank fee and your bank's exchange-rate margin | Platform fee and exchange margin; often lower for small amounts |
| Limits | No per-transaction cap | ₹25 lakh per transaction |
| Best for | Large invoices, established clients | Small and medium invoices, many clients |
| Examples | Any bank authorised to deal in foreign exchange | Wise Business, Payoneer, Skydo, Razorpay, Stripe, PayPal and others: first confirm the provider is RBI-authorised (or works through an authorised bank), compare fees, and check it issues a FIRA |
More on how banks handle foreign money: forex operations & remittances and FEMA & cross-border rules.
The question every new exporter asks: "Can I just receive the money in my personal savings account?"
No. The money belongs to the business and must go into its own current account. Routing it through a director's or partner's personal account creates income-tax, GST-export and FEMA problems.
Legal, but not ideal. FEMA allows an individual to receive service payments in a savings account, and many freelancers start that way. But savings accounts are meant for non-business use, so regular business credits can lead the bank to ask questions, limit or freeze the account.
Best practice. Open a current account in the business name, enable inward foreign remittances, and add an EEFC account to hold dollars.
What's an EEFC account? An Exchange Earners' Foreign Currency account lets an exporter keep export earnings in foreign currency with an authorised bank. You can convert to rupees when the rate suits you, or pay foreign costs (software, ads, overseas contractors) directly without converting twice. It earns no interest. See our notes on foreign currency accounts.
Use a separate current account from day one. It makes tax, loans and audits far easier.
Rebranding after a legal notice costs far more than a search before launch.
Agree equity, roles, vesting and exit in writing, even between friends.
LLP agreement within 30 days; a company's INC-20A within 180 days; GST LUT before the first export invoice.
No FIRA, wrong purpose code, or payments into a personal account can cost you the zero-rated export status.
Companies taking money from outsiders as loans or deposits must follow strict rules. Check before you accept.
Beyond 45 days you owe interest, and the tax deduction for the expense is delayed.
Your personal CIBIL and the business's CMR decide future loans. Repay on time, every time.
As a sole proprietor, you don't register the business as an entity. But you still need the registrations that apply to you (GST above the limit, a Shops & Establishments licence for premises, sector licences), and you must report the income in your tax return. Banks also need proof of the business to open a current account.
An LLP usually costs less: there's no audit until turnover crosses ₹40 lakh or contribution crosses ₹25 lakh, and fewer filings. A private limited company always needs an audit and more filings, but it's the better choice if you want investors or ESOPs.
Yes. An NRI who is an Indian citizen can form an OPC. NRIs can also be partners in an LLP or shareholders and directors in a company, but an LLP needs at least one designated partner resident in India and a company at least one director resident in India. Investment from abroad follows FEMA and FDI rules.
Not if your turnover is below ₹20 lakh (₹10 lakh in some states). But registering voluntarily lets you file a LUT, invoice without GST and claim refunds of GST you pay on expenses, which is usually worth it.
Yes, if the platform is RBI-authorised (or works through an authorised bank) and gives you a FIRA. Compare fees and exchange margins, and remember the ₹25 lakh per-transaction cap for such platforms.
Under FEMA, export proceeds must be received within 15 months from the invoice date (since RBI's amendment of 13 November 2025). Agree shorter payment terms in your contract anyway.
If you recruit people in India for jobs abroad, yes: a Recruiting Agent licence from the Ministry of External Affairs under the Emigration Act. For domestic placement, check your state's rules and the Shops & Establishments registration. If you only recruit for US clients from US-based candidates, no special Indian licence applies, but the normal business registrations do.
We checked this guide against the official sources below in October 2026. Rules, limits and fees change, so confirm on the official site before you act.
Ask in our Discussion forum. This guide is general information, not legal or tax advice: for your specific case, consult a Chartered Accountant, Company Secretary or lawyer.