Disclaimer: The Information in this Guide is meant for New Entrepreneurs who wish to set up a Business / Industry of their own. The content of this Guide does not constitute advice tailored to any specific Business or Industry it is more general in nature. The Department of Industries & Commerce, Govt. of Assam shall not be held liable for any direct, indirect or consequential loss or damage arising as a result of use of this content .
A business is an organization or enterprising entity engaged in any lawful economic, commercial, industrial or professional activities.
A company transacts business activities through the production of a good, offering of a service or retailing of already manufactured products. An entity is still a business if its motive is to make profits.
A business can be a for - profit entity or a nonprofit organization that operates to fulfill a charitable mission.
It most often forms after the development of a business plan which outlines the strategic intentions and logistics in making those intentions occur.
A business plan is a fundamental tool that any start up business needs to have in place prior to beginning its operations.
Some basic steps to set up a business are given below which aims to provide a new entrepreneur an insight into the processes for setting up a Business. The objective is to guide the first generation entrepreneur so that he /she can be successful entrepreneur.
One of the scarier moments in an entrepreneur's life occurs when he or she chooses what business to go into. Identify key attributes of that business which you want to do.
Consider the following before you choose your business:
Keep in mind; if you don't enjoy doing it, you're not likely to convince anyone else to either, there is basically no amount of money that will change this. Find something you like doing that overlaps with an existing user need, beyond that its mostly hard work and luck.
Experimenting with new ideas is always time taking and risky, so why to reinvent the wheel when there can be an existing business model which can adopted easily.Some of the common sectors are
Location of the business is the most vital factor which influences its success or failure.
It is a long-term decision which should take into consideration not only the present requirements of the organization but also its future expansion plans. Hence, the most advantageous location is that at which the cost of gathering material and fabricating it plus the cost of distributing the finished product to the customers will be at a minimum.
Factors affecting the selection of a location:
Market research is any organized effort to gather information about target markets or customers. It is a very important component of business strategy. Market research is one of the key factors used in main-taining competitiveness over competitors. Market research provides important information to identify and analyze the market need, market size & competition.
Market-research techniques encompass both qualitative techniques such as focus groups, in-depth interviews, and ethnography, as well as quantitative techniques such as customer surveys, and analysis of secondary data. Market research, which includes social and opinion research, is the systematic gathering and interpretation of information about individuals or organizations using statistical and analytical methods and techniques of the applied social sciences to gain insight or support decision making.
Good product or service can't be the best fit to the society without effective market research. Pre assumption about the current market scenario is kind of a gambling. In order to ensure that you are on right track, you need to undergo market research.
There are two types of market research:
Primary information is the data that the company has collected directly or that has been collected by a person or business hired to conduct the research. Business can do their own analysis at a specific geographic location, use search engine to identify the rivals, prepare structured questionnaire to do focus group interviews to learn about the consumer preference.
Secondary information is data that an outside entity has already gathered. This can include population information from government census data, trade association reports or presented research that another business operating within the same market sector has already gathered. There are more online sources which can be used for possible help. Your chamber of commerce has good information on the local area.
When beginning a business, you must decide what form of business entity to establish. The right form of Business Ownership is very crucial because it determines the power, control, risk and responsibility of the entrepreneur as well as the division of profits and losses.
The nature of business is the most important
factor. Businesses providing direct services
like tailors, restaurants and professional services like doctors, lawyers are generally organized as proprietary concerns.
While, businesses requiring pooling of skills
and funds like accounting firms are better organized as partnerships.
Manufacturing organizations of large size are
more commonly set up as private and public
The main factors to be considered are:
In India the following Business Entities can be formed within the prevailing laws:
Some of the forms of Business Organizations are:
Sole Proprietorship: It is a one-man organization where a single individual owns, manages and controls the business which involves moderate risk, small financial resources, low capital requirement and risk involvement is not high too. For e.g. automobile repair shops, small bakery shops, tailoring,etc.
Partnership Firms: A partnership is formed by an agreement, which may be either written or oral. When the written agreement is duly stamped and registered, it is known as "Partnership Deed". Ordinarily, the rights, duties and liabilities of partners are laid down in the deed. But in the case where the deed does not specify the rights and obligations, the provisions of THE INDIAN PARTNERSHIP ACT, 1932 will apply. Partnership is an appropriate form of ownership for medium sized business involving limited capital. For example small scale industries, wholesale and retail trade; small service concerns like transport agencies, real estate brokers; professional firms like chartered accountants, doctors' clinic, attorney or law firms etc.
Limited Liability Partnership (LLP): Under LLP the liability of at least one partner is unlimited whereas rest all the other members have limited liability, limited to the extent of their contribution in the LLP. Unlike in general Partnership, this kind of Partnership does not get terminated by the death or insolvency of the Limited partners. It is governed by the Limited Liability Partnership Act of 2008.
Private Limited Company: A Private Limited Company is a voluntary association of not less than two and not more than fifty members, whose liability is limited, the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures.
Public Limited Company (PLC): A Public Limited Company has a minimum of seven members with no maximum limits. It invites the general public to subscribe to its shares and also allows its shareholders to transfer its shares.
Hindu Undivided Family Business (HUF): An HUF is a separate entity that can be created by members of a family, wherein the members are lineal ascendants or descendants. Hindus, Buddhists, Jains and Sikhs can open HUFs. A single person cannot create an HUF. Usually the senior most member of the family is considered the karta, the person who manages the affairs of the HUF. It is governed by the Hindu Succession Act of 1956.Once a person gets married, an HUF is automatically created. But to be recorded by tax authorities, it needs to have an income generating asset, which can only come as a gift from a relative or through a Will for all members of the HUF.
Societies: When the purpose of the business is to provide service rather than to earn profits and to promote a common economic interest, cooperative societies are the best alternative. It is also preferred as it is easier to raise capital through the assistance from financial institutions and Government in this form of business.
Co-operative: It is a voluntary association of ten or more members residing in the same locality who join together on the basis of equality for the fulfillment of their economic or business interest. It is subjected to the provisions of The Assam Co-Operative Societies Act, 1949.
All the business must be named and registered with the competent authorities as below:
Sole Proprietorship -
This type of firm doesn't require any sort of registration of its name and can
straight way apply for necessary approvals to start the business for e.g Trade License, VAT Registration,
Pan Card etc.
Partnership Firm -
Partnership Firm can be created by a legal agreement between the partners. It is not
mandatory to register the same. But it is advisable to register the same with the
Registrar of Firms & Society, which is very helpful in legal maters in future.
You can apply online through www.easeofdoingbusinessinassam.in
Private & Public Limited Company-
Registrars of Companies (ROC) appointed under the Companies
Act, 1956 are vested with the primary duty of registering companies. You can incorporate a new company by filing Form INC-29-Integrated Incorporation Form.This is a new online service introduced recently by Ministry of Corporate Affairs.
At present Registrar of Companies located in Shillong looks after registration of companies for the entire North Eastern States (excluding Sikkim).
For more information visit http://www.mca.gov.in/MinistryV2/incorporation_company.html
Hindu Undivided Family (HUF)-
A Hindu Undivided Family can be created by following ways:
1.Blending of individual property with the family Hotchpot
2.Receipts of Gifts
3.Doing Joint labour for the benefit of HUF
4.Inheritance through a specific bequest under a Will
5.Partition of a larger Hindu Undivided Family
PERMANENT ACCOUNT NUMBER:
Under the Income Tax Act, 1961, each person must quote his or her Permanent Account Number (PAN) for tax payment purposes and the Tax Deduction Account Number (TAN) for depositing tax deducted at source. The Central Board of Direct Taxes (CBDT) has instructed banks not to accept any form for tax payment (challan) without the PAN or TAN, as applicable. The PAN is a 10-digit alphanumeric number issued on a laminated card by an assessing officer of the Income Tax Department.
In order to improve PAN-related services, the Income Tax department (effective July 2003) outsourced their operations pertaining to allotment of PAN and issuance of PAN cards to Unit Trust of India(UTI) Investors Services Ltd, which was authorized to set up and manage IT PAN Service Centers in all cities where there is an Income Tax office. The National Securities Depository Limited (NSDL) has also launched PAN operations effective June 2004, by setting up TIN Facilitation Centers.
The PAN application is made through the above mentioned service centers using Form 49A, with a certified copy of the certificate of registration, issued by the Registrar of Companies, along with proof of
company address and personal identity.
IT PAN Service Centers or TIN Facilitation Centers will supply PAN application forms (Form 49A), assist the applicant in filling out the form, collect filled-out forms, and issue an acknowledgment slip. After obtaining PAN from the Income Tax department, UTIISL or NSDL as the case may be, will print the PAN card and deliver it to the applicant.
The application for PAN can also be made online but the documents still need to be physically dropped
off for verification with the authorized agent.
For more details see ( www.incometaxindia.gov.in, www.utiisl.co.in and www.tin.nsdl.co.in ).
TAX DEDUCTION ACCOUNT NUMBER:
You can obtain a Tax Deduction Account Number (TAN) for income taxes deducted at source from the Assessing Office in the Income Tax Department of your Area.
The Tax Account Number (TAN) is a 10-digit alphanumeric number required by anyone responsible for deducting or collecting tax under the provisions of Section 203A of the Income Tax. The section also makes it mandatory for the TAN to be quoted in all tax-deducted-at-source (TDS) and tax-collected-at- source (TCS) returns, all TDS/TCS payment challans, and all TDS/TCS certificates issued.
Any authorized franchise or agent appointed by the National Securities Depository Services Limited (NSDL) can accept and process the TAN application. The application for a TAN can be made either online through the NSDL website(www.tin-nsdl.com)or offline at TIN facilitation centers.
A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a marketing, financial and operational viewpoint. Entrepreneur should undertake the task of preparing the business plan personally. A self composed plan from an entrepreneur will ensure to fulfill all proposed aspects and enable them to take right decisions at right time.
Businesses involve huge amount of monetary transactions and failure to make good decisions may lead to incurring expenses which can be avoided with thorough planning. While drafting a business plan, the entrepreneur tries to prevent the uncertainties by projecting them in advance as possible risk in near future.
Listing the names of key persons involved in the business and their qualifications and industry experience.
A brief description of the industry your firm is focusing on or the new venture's strategy.
The short term and long term objectives of the new business ventur.
Briefly state how much finance is required indicating the degree of flexibility you are willing to show in case the investor suggests any changes in your plan.
Allocation of Financial assets to every business operation.
In order to ensure the investor about the prospective growth along with a competitive position of the product or services in the target market the business plan should incorporate this as a tool.
Every possible impact of the environmental influences such as political, econom-ic, technological, Socio-demographic and ecological factors that affect your area of business.
The quality control measures to be put into place for ensuring quality of the product/service.
By through market research, segment the target market to identify and focus on the communication strategy such as promotion, advertisement, branding etc.
Sales forecast is primarily dependent on three factors -size of the market, market share and the pricing phenomenon.
A new venture must show estimated profit and loss statements and cash flow statements.
Make an hierarchical flow chart of key persons and the profile of the individuals to be hired.
Describe the legal form of your business whether it is a sole proprietorship or a partnership, public limited co., private limited co. or society, etc.
As a legal and moral obligation, the entrepreneur must, in the business plan, envision risks the investor would be undertaking in case he makes a choice to invest in your business. This will protect you from civil and criminal liability.
The strength , weakness, opportunities and threats should be honestly described to come to a realistic conclusion to go for the Business or not.
Setting up of basic infrastructural facilities for commencing business operations involves:
Land and Construction of Building - For acquisition of the plot of land, the entrepreneur can approach various departments like the Industries & Commerce Department and Local District Offices.The Building plan & architectural design of the factory must be approved by the concerned authority before starting the construction of the building.
Well established and broadly connected transport network i.e. rail, road or port.
The availability of the basic amenities like, water, power supply is equally essential.
Setting up of a good telecom facility for the industry is necessary for the growth and expansion of the business.
The State and Central Government offers incentives like Capital Investment Subsidy, Power Subsidy, Vat remission Scheme, Insurance Subsidy Interest Subsidy and many other such incentives depending on the location, size of investment and category of the industry.
A business firm requires finance to commence and to continue its expansion and growth. A Financial Plan is needed to predict the requirement of finance, sources to raise it and apply it for future causes. Financial plan basically depends on determining the area of operations and amount of capital needed it to finance it.
Methods of Raising Capital and its Sources
Institutions comprising of banks, financial institutions, non banking financial companies and venture capital companies cater to the diverse financial needs of the industry. Various banks offers their schemes to finance the needs of the MSMEs. A firm may raise funds for different purposes depending on the time periods ranging from very short to fairly long duration and the business can be financed by the following means:
Important documents that needs to be provided when approaching the bank/financial intuitions:Techno-Economic Feasibility study of the proposed project:
It should include the following:
This is in general, however depending on nature of Business, Location and place of establishment specific approvals, registration or licenses must be taken from other departments. To know more visit Know your Approvals section of www.easeofdoingbusinessinassam.in
We hope the Guide is helpful to you in setting up your Business / Industry in Assam.
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