Before starting a business, it is important that you understand what documents you will need to kickstart your venture. This will help you start with ease and meet all the basic legal requirements in India. In this article, we will talk about the business documents that one needs to run a business.
Business documents required in India
While the documentation requirements of some businesses might differ from others, a company in its most nascent stage broadly requires the documents mentioned below. Please note, these are the documents required for any business that wants to register itself under the Government of India. The documentation requirement differs in regards to freelance or individual ownership.
Behind any company that is up and running, there are a number of pillars who have invested their money. These pillars are called shareholders.
They are given certain shares in the company in exchange for their money. Basically, this means that the shareholder becomes one of the owners of the company and has certain rights in crucial decision-making processes.
A shareholder agreement is a legal document that is made between the company and the shareholders. It lists out the rights, powers and provisions that they get. It ensures that no rule is violated and the rights are preserved.
This document provides a clear understanding of the relationship between the company and its shareholders. In the long run, this helps in quicker solutions for any dispute that might occur and ensures smooth collaboration.
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How to get a shareholder agreement and what does it comprise of?
A shareholder agreement can be drafted by your business lawyer or by a legal expert. Usually, a shareholder’s agreement consists of the following basic provisions:
- In what proportion a shareholder is going to hold the shares?
- Will there be a different class of shares for different category of shareholders
- If there are new issues of shares in the market should the existing shareholders get the privilege of getting those shares first?
- Can the board of directors stop the issuance of any such share or can they stop the transfer of shares?
- What are the rules for transferring of shares?
- What are the ways to solve a dispute, how would a contract end and the exit policies?
Oftentimes you must have seen colleagues turn co-founders. Well, this is the document they need. A Founders’ Agreement is an official contract that is signed between all the co-founders of the firm.
This document states all the responsibilities, ownership, and initial investments made by each of the founders. It is advised to make a founders’ agreement at the incorporation stage of a business as it will lay out the responsibilities and roles of each of the co-founders. It is also advisable to have a written format of this document.
How to get a shareholder agreement & what should a founders agreement comprise of?
Just like the shareholder agreement, you can draft a founders agreement on a stamp paper with the help of your business lawyer or any
Now, let us look at the essentials that are a must in any founders’ agreement. They are:
- Definition of the business
- Details of capital raised (by founders and investors)
- Ownership details (in the company)
- Roles and responsibilities of each of the co-founders
- Compensation (salary drawn by each of the co-founders)
- Details of exit formality for founders
- Dissolution of the firm
- Details of dispute resolution
- Miscellaneous provisions (assignment of intellectual property rights, non-compete clauses, etc.)
Certificate of incorporation
Just like every individual is obliged to get their birth certificate, every company is required to get a Certificate of Incorporation for themselves. A Certificate of Incorporation is the legal document that makes the company formation valid or brings the company into existence. This comprises of the following components:
- The name of the corporation with its abbreviation
- A statement of business purpose
- The corporation’s registered office’s address and the name of the registered agent for the address
- Number of the shares of stock that are authorized to be issued and a description of the different types of stocks that can be issued by the company if there are more than one type
- The name and address of the corporation’s incorporated
This is in line with the Companies Act 2006. Simply put, it’s your company’s birth certificate. Here is the process you need to follow to get this certificate for your business:
How to apply for a certificate of incorporation
Step 1: Acquire Director Identification Number (DIN)
As per the Companies Act, 2006 it is mandatory for every director to obtain their DIN. You can create an account on the MCA website and fill the form here. You will also be required to update the Registrar of Corporate about the information.
Step 2: Acquire Digital Signature Certificate (DSC)
The Information Act 2000 requires a valid digital signature on all the documents to ensure that the documents submitted are original and authentic; This is the only way to a quick and fast submission of the documents electronically.
Step 3: Application for a company incorporation certificate
The final step includes adding the company name, registering the office location/address, details of company directors, manager and secretary. Here, you will be asked to fill Form 1, Form 18 and Form 32.
On submitting all the forms, the MCA will review and approve the application and a further confirmation email regarding the approval will be sent to your inbox.
No objection certificate (NOC)
There are chances you have signed at least one NOC in your life. Remember the time you purchased a second-hand vehicle or availed a loan from a bank!
No Objection Certificate (NOC) is a legal document that is issued by any company, individuals or a corporation. It has a list of items against which the signee has no objection. This document is used by businesses during employment, trade, immigration, partnership and a lot more. This legal document can be used for or against in the court of law. No Objection Certificate usually consists of basic details of the parties involved, and it is addressed to whosoever is concerned.
How to get a no-objection certificate
You can get a template of NOC for yourself which can be used on a recurring basis by your business lawyer or a legal expert. It can be printed on a stamp paper or a normal letterhead.
Company PAN card
Permanent Account Number (PAN) is a must-have a document for anyone who comes under the bracket of the taxpayer. This means it can be an individual, a sole proprietorship, partnership or a private limited company. Be it an Indian company or a foreign company, you need to get registered and have a PAN card. You can get a company PAN for yourself by following an easy process.
Documents required to apply for a PAN card
- An identity or address proof
- A copy of the certificate of incorporation
- A copy of a no-objection certificate issued by MCA (Ministry of Corporate Affairs)
Tax Identification Number is a unique number assigned to a business by the Commercial Tax Department of the state that has received the application. It is an 11-digit number that serves as an identity for a business, which is registered under VAT for the trade of goods and services. Documents required for TIN might vary between states.
Documents required to apply for a TIN number
- Identity proof
- Address proof
- Address proof of the business that has applied for it
- PAN Card of the proprietor
- 4 to 6 passport sized photographs of the concerned proprietor
How to apply for the TIN number in India
Below is the procedure for the application of TIN. However, it is subject to change based on the state that has received the application.
- Sign up on the VAT portal of the relevant state government with a unique login ID
- Fill up the application available on the portal with required details and upload the essential documents
- The submitted application is verified by the Commercial Tax Department of the concerned state, following which a provisional certification and TIN is allotted
- A VAT inspector employed by the state government visits the business address as a part of the final verification and issues the final certification
A non-disclosure agreement is a contract wherein two parties sign a document while agreeing not to disclose any confidential information outside of work. The main purpose of the non-disclosure agreement is to protect sensitive information. It is a legally binding contract between the two parties.
Non-disclosure Agreement: Meaning, Importance & Benefits will help you understand everything about NDA.
How to get an NDA for your business
To get an NDA for your business, you can take help of your business lawyer. Please note, it is not mandatory to get an NDA printed on a stamp paper. An NDA can be printed on a letterhead of the company and signed by the parties on both sides of each page of the NDA.
However, If you choose to print the NDA on a stamp paper, get it printed on a non-judicial stamp paper or e-stamp paper (available in certain states). Always have the NDA signed in the presence of witnesses? After this, you are required to get the NDA notarized to bring it to the legal power.
Each taxpayer is assigned a state-wise PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). A GSTIN is mandatory by the government for businesses with an annual turnover exceeding Rs.20 lakh. If you are a registered dealer, you need to file GST returns and make a payment if GST liability exists. Additionally, a GSTIN also helps when you are looking to avail a loan to fund your business.
Read GST Registration: Eligibility, procedure, Documents & Penalties before you plan to get GSTIN for your business!
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Employee offer letter
Do you remember waiting for that one letter from the company you have been waiting to be a part of? Well, that’s an offer letter! An employee offer letter is one of the most important documents at the time of employee on-boarding. It is a formal letter given by the company offering employment to a selected candidate.
An offer letter is drafted on the letterhead of the company and is a very critical document containing important information relating to the employee’s terms of employment.
If the candidate is satisfied with the terms of the contract and is willing to join the company, then he must accept the offer within the time period stipulated in the offer letter. This is because the company can withdraw the offer on expiry of such a stipulated time period.
Please note: Like a proper offer letter, there should also be a legally approved resignation letter for any employee who exits the company.
Both, the offer letter and the exit letter can be drafted in your company’s letterhead by the administration, undersigned by the CEO or alike.
With this, you will have all the documents that you need in hand while you take-off with your big idea!
It is recommended to create a duplicate of all of these crucial documents and always have a soft copy by your side. While you get those documents for your business, make sure you are getting assisted by registered legal professionals! We hope this listicle help you start off on your idea.