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How Much Does It Cost to Set Up a Company? costs are likely to vary depending on where you are based and how big you are likely to be - says ClearTax founder

By Archit Gupta

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A crucial step to starting up, is giving your idea a formal structure. There are several ways in which a business can be formalised. An understanding of the costs involved in formalising your idea, comes handy when you are bootstrapping or seeking investment. These costs are likely to vary depending on where you are based and how big you are likely to be.

Here is a rundown on the costs you should expect.

Filing incorporation forms

A business can be set up as a company or as a partnership or a proprietary business. This involves some form of regulatory paperwork. In India, The Companies Act, has laid the documents and forms which have to be submitted. These are deposited with ROC (Registrar of Companies).

Requirements:Thisinvolves selecting a name of the company, registering its directors, procuring digital signatures, submitting proofs of address and other such procedural aspects. Some of these requirements may vary according to the state you are based in. Getting an expert to do this process for you is highly recommended.

Costs: You will be paying for an expert's assistanceplus government fees.

Preparation of legal documents

A bunch of operating agreements have to be prepared and submitted as well. These are called memorandum or association, articles of association or a partnership deed in case you are planning to register a partnership firm.

Requirement:These legal documents are essentially an entity's rule book. They spell out its purpose, its operations, information about directors, how they are elected, about its shareholders or partners etc. Since these involve legal work, its best to engage an expert to handle this task.

Cost: It'sbest to hire a qualified expert to prepare these for you and help you understand them in depth. At ClearTax, these formalities, including filing incorporation forms via an expert will cost you Rs 13,500 + service tax.

Tax registrations

Your offering can be a physical product or a service. Depending upon which state you are based in, a VAT (value added tax) may apply to you if you are selling a product. If you will be providing a service, service tax registration may be applicable. Both of these are likely to be replaced with GST now.

Requirement: Setting yourselves up may involve getting a VAT/ service tax or in future a GST registration.Besides, you may have to get labour law approvals, or provident fund registration as well. You'll be required to get yourself a PAN (Permanent Account Number) and a TAN (Tax Deduction and Collection Number) for income tax purposes.

Cost: Engaging a one stop shop to deliver all of this can turn out to be cost effective as well as efficient. Professionals at ClearTax have dealt with most of these and can guide you appropriately.

Engaging an accountant or a lawyer

While most of the above items are a one-time activity, you will have some monthly or quarterly compliances too. If you have employees, you may be deducting TDS. TDS returns have to be submitted to government authorities. Service tax or GST returns have to be submitted periodically. You will be tracking your expenses and revenue. And will need someone to prepare a balance sheet and a profit and loss account of your business. It's likely that you will be entering into a number of legal contracts. Companies Act requires you prepare minutes meeting of directors. One has to keep the ROC updated with any changes in the structure of the company, its directors or shareholding pattern etc. Therefore, it may help to engage an accountant or a lawyer or better still a company that can take care of all your needs like ClearTax, which can take care of everything. Our accounting and book keeping services begin for as low as Rs 15,000 plus service tax for the whole year.

Archit Gupta

Founder & CEO, Clear

Clear (née ClearTax) is India’s leading Fintech SaaS company with the mission of simplifying finance. We are trusted by over 6 million Indians, more than 50,000 tax professionals, 1 million small businesses and 3,000 large Enterprises. For small and large businesses, our product suite covers invoicing, GST, range of managed services and credit. For tax professionals, we offer comprehensive GST, Income Tax and TDS solutions. For individuals, we offer tax and wealth management solutions. With this Series C round, we have raised $140 million in equity capital since inception. Our investors include Y Combinator, Composite Capital, Elevation Capital, Founders Fund and Sequoia Capital.

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