STEPS TO FACILITATE AN ENTERPRENEUR IN INDIA

I. Type of Business Organisation

Proprietorship: A sole proprietorship is the oldest and the most common form of business. It is a one-man organization where a single individual owns, manages and controls the business. Public limited: A public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. All its activities are strictly governed by laws, rules and regulations. contains the provisions regarding the legal formalities for setting The Indian Companies Act,1956 up of a public limited company.

 Partnership Firm: A relation between two or more persons who have agreed to share the profits of a business carried on by all of them or any of them acting for all. The owners of a partnership business are individually known as the "partners" and collectively as a "firm". The provisions of The Indian Partnership Act, 1932 will apply. Co-operatives: A society which has as its objectives the promotion of the interests of its members in accordance with the principles of cooperation. Feature which differentiates the co-operatives from other forms of business ownership is that its primary motive is service to the members rather than making profits. It is subject to the provisions of the Co-operative Societies Act, 1912 or State Cooperative Societies Acts.

II. Financing a Start Up Business

Sources of Finance: The Long-Term Finance may be Raised by the Companies from the following Sources:-

Capital Market
The Government controls the issue of shares and debentures under the Capital Issues (Control) Act, 1947. Special Financial Institutions There are many all-India institutions like Industrial Finance Corporation of India (IFCI); Industrial Credit and Investment Corporation of India (ICICI); Industrial Development Bank of India(IDBI) , etc. At the State level, there are State Financial Corporations (SFCs) and State Industrial Development Corporations (SIDCs). These national and state level institutions are known as 'Development Banks'. Besides the development banks, there are several other institutions called as 'Investment Companies' or 'Investment Trusts' which subscribe to the shares and debentures offered to the public by companies. These include the Life Insurance Corporation of India (LIC); General Insurance Corporation of India (GIC); Unit Trust of India (UTI), etc.

Leasing Companies
Foreign Sources
Foreign Collaborators: - The Indian companies may secure capital from abroad through the subscription of foreign collaborator to their share capital or by way of supply of technical knowledge, patents, drawings and designs of plants or supply of machinery. International Financial Institutions: - World Bank and International Finance Corporation (IFC) provide long-term funds for the industrial development all over the world.

Non-Resident Indians: - persons of Indian origin and nationality living abroad are also permitted to subscribe to the shares and debentures issued by the companies in India.

Retained Profits or Reinvestment of Profits

Short-Term Finance may be Raised by the Companies from the following Sources:-

Trade Credit Installment Credit Accounts Receivable Financing Customer Advance Bank Credit Commercial Banks play an important role in financing the short-term requirements of business concerns. They provide finance in the following ways: -

Loans Cash credit

Overdrafts
Discounting of bills

III. Making a Product Choice

Setting up of a unit depends on the product choice of an entrepreneur which can be related to bakery/confectionery products, meat/poultry processed products or fruits/vegetable products.

Products for Small Scale Units:- The reservation of products for exclusive manufacture in the small scale sector is encouraged for the growth of Small Scale Industries by the government. Large/Medium units can, however, manufacture such reserved items provided they undertake to export 50% or more of their production.

The List of items reserved for exclusive manufacture in Small Scale Sector (as on 13 March 2007) includes items from food processing sector also.

S.No

S.No as per gazett e notific ation 3 7 8A 9 10 11 12 13 16

Product code

Product Name

1 2 3 4 5 6 7 8 9

202501 205101 20530102 209201029 21100101 21100102 21100103 21100104 21920101

Pickles & Chutneys Bread Pastry Other than cases of state agro co-operatives & Growers co-operatives Hard boiled sugar candy Rapeseed oil (except solvent extracted) Mustard oil (except solvent extracted) Sesame oil (except solvent extracted) Groundnut oil (except solvent extracted)
Other than cases of state agro cooperatives & Growers cooperatives

Industry-Specific Agencies: Various promotional industry specific agencies and organizations have been set up by the Central as well as the State Governments. These organizations undertake monitoring, research, market - development, export promotion or such other work for a particular industry.

Secretariat for Industrial Assistance (SIA) has been set up by the Government of India in the Department of Industrial Policy and Promotion in the Ministry of Commerce & Industry to provide a single window service for assistance.

In most of the states the organizations present to assist and promote industries are: -

Investment Promotion Agencies (IPA) State Industrial Development Corporations (SIDC) Small Scale Industries Development Corporations (SSIDC) State Financial Corporations (SFC) District Industries Centres (DIC)

Single Window Service and Escort Service

IV. Choosing the Location of the Industry

Location of the business is the most important factor influencing its success or failure. Selection of the Region Selecting a region for setting up an enterprise is dependent on the following factors: Availability of Raw Materials Supply of Labour Proximity to the Product Market Availability of Transport Facilities Supply of Power Climatic Factors

Government Regulations and Policies

Law and Order Existence of Complementary and Competitive Industries

Selection of the exact Site:

After the selection of the particular region, the problem of the choice of the most convenient site is relatively easy. Now, the two most important considerations to be taken into account are: Price of Land: CREDAI (Confederation of Real Estate Developer's Associations of India) is the apex body of the organized real estate developers/builders across India. Disposal of Waste: Guidelines for proper functioning and upkeep of disposal sites.

V. Sourcing Process, Raw Materials, Machineries and Equipments

The next important step for a firm is to select appropriate technology and equipment to produce the product. In addition to this, the source of raw material has to be decided upon. In case of raw materials, the Export Import Policy of the Government regulates imports. However, in the case of technology, the Foreign Direct Investment (FDI) Policy and the Foreign Technology Transfer Agreements govern the imports. Related Links: Small Industries Development Organisation (SIDO) Directorate General of Foreign Trade Department of Commerce National Small Industries Corporation Ltd.

VI. Naming and Registering a Business

In India, incorporation of a company is governed by the Companies Act 1956. The Act is administered by the Central Government through the Ministry of Corporate Affairs and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board, Director of Inspection, etc. Application for registration of a company accompanied by the selected names, Memorandum of Association and Articles of Association and other necessary documents is to be filed with the Registrar of companies of the State in which the company is proposed to be incorporated.

Under the Companies Act, an entrepreneur can form two types of companies, namely a private company or a public company.

A Private Company is one, the articles whereof contains the following restrictions: restricts the minimum paid up share capital but which shall not be less than rupees one lakh; restricts the rights of members to transfer its shares, if any;

limits the number of its members to fifty excluding the past or present employees of the company who are members of the company;
prohibits any invitation to the public to subscribe for any shares or debentures of the company; does not invite or accept any deposits from persons other than its members, directors or their relatives Also, the minimum number of members in a private company is two and such a company must have the words 'Pvt Ltd' as the last part of its name.

A Public Company, as defined in the Companies Act, has the following features:-

its shares are freely transferable;

there is no ceiling on its membership; it can invite general public to subscribe to its shares;

it has a minimum paid up capital of Rs.5 lakhs or such higher paid up capital as may be prescribed;
it is a private company which is a subsidiary of a public company. Also, the minimum number of members in a public company is seven and such a company must have the word 'Ltd' as last part of its name.

Procedures for Registration of a Business List of offices of Registrar of Companies Registration Forms Guidelines by the Ministry of Corporate Affairs Instruction kit for filling eForms

For more details visit our Section on "Legal Aspects"

VII. Regulatory Requirements

An entrepreneur has to take into account the basic regulatory requirements. The most important regulation is the Companies Act, 1956, which regulates all the affairs of a company. The next important regulation relates to environment. The environmental regulatory requirements envisage a wide legislative framework covering every aspect of environment protection. Also, separate set of laws and rules for emission of hazardous wastes have been enacted. The Ministry of Environment and Forests (MoEF), is the nodal agency for regulating all such environmental aspects. Environmental Regulations Companies Act

Related Links:

Ministry of Corporate Affairs The Companies Act, 1956 Ministry of Environment and Forests The Environment (Protection) Act, 1986