Registering a small business in India: what you need first
Udyam, GST, a proprietorship, an LLP or a company: what each is for, what is optional at the start, and the questions to ask a chartered accountant before you pay anyone.
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People starting a business are told they need a dozen registrations before they have a single customer. Some of that is true and some is an agent's sales pitch. The honest position is that what you need depends on what you sell, to whom, where, and how much you expect to earn, and that the order matters more than the paperwork.
This article explains the main terms in plain words. It is not legal or tax advice. Take your specific situation to a chartered accountant before you register, and check anything you are told against the official government site.
What you should come away with
- Start with the work, a first customer and a bank account, then add registrations as they become necessary
- Udyam registration is free and done online on the official portal; be wary of anyone charging for it
- GST registration depends on what you sell, where, and your turnover: ask a professional
- A proprietorship is simplest; LLPs and companies add cost and compliance for protection and credibility
- Keep personal and business money separate from day one
- Calendar every filing; late fees are the commonest avoidable cost
Begin with the structure, because everything else follows it. A sole proprietorship is the simplest: it is just you, trading under a name, with no separate legal existence. It is quick and cheap, and you are personally responsible for the business's debts. A partnership, a limited liability partnership and a private limited company are separate arrangements with more setup, more filings and more cost, in return for sharing risk, bringing in other owners or investors, or giving customers more confidence. Many people start as a proprietorship and change structure when there is a reason to.
Udyam registration is the government's registration for micro, small and medium enterprises. It is done online on the official Udyam portal and the portal states that registration is free. It can help with certain schemes, loans and the protections that apply to micro and small suppliers when customers pay late. Anyone offering to register you for a fee is selling you something you can do yourself, so check that you are on the official site.
GST is a tax on supply of goods and services. Whether you must register depends on your turnover, what you supply, whether you sell across state lines or through certain online platforms, and the rules for your state. Thresholds and rules have changed over time, so do not trust a number from an article or a forum, including this one. Ask a chartered accountant or check the official GST portal. Registering when you do not need to means filing returns you could have avoided; not registering when you must means penalties.
Other things depend on the business. A food business needs a food safety licence. A shop or an establishment may need a local licence. Some trades need professional or trade registrations. Check with your local authority and your sector's regulator rather than assuming.
Keep a separate bank account for the business from the first rupee, issue invoices, and record every sale and expense, even in a simple sheet. This makes registration, tax filing and any loan application much easier later, and it protects you if there is a dispute.
Lastly, choose your adviser carefully. Ask a chartered accountant what you must do now, what can wait six months, and what each step costs in fees and in compliance time. A good adviser will tell you what you do not need yet.