With the technological boom seen in India, more and more software companies are coming up in the country. Bangalore, Gurgaon, Noida, Hyderabad, Kochi, Mumbai and Pune have some of the best IT parks in India.

A plethora of companies are getting established every other month In India, which has now become one of the major contributors when it comes to the software and IT industry. Health IT specialist, computer forensic investigation, IT support, cloud architect, web development and engineering are just a few of the many aspects of this huge industry that one can work in. 

Naturally, with so many fields to explore, opportunities that lead to the budding of new companies in India increase. With Start-up India getting a huge push from the government, an incredibly large number of people are coming up with their own companies. 

However, not many people are clear about the process of setting up a company. There are legal procedures involved in it and you need to adhere to them to have a smooth functioning of things in the future. 

The basic procedure involves two steps where you get your company identified in the legal system of India. For that, you first need to get the consent of a registrar for the name of your company from the Registrar of Companies (ROC). Once you are done with this, you need to get your Company Identification Number (CIN). 

Post this, you need to submit all the legal documents with the concerned departments and fill up all the necessary information in the forms. You need to fill the information regarding shareholders, capital generated and the number of directors involved in the company. Make sure that the directors are not less than 2 and not more than 8. 

Now that you know the basics, let’s take a look into a more detailed view of steps involved in it. 

Legal process during the pre-registration phase

In the pre-registration process, your basic focus should be on three things:

  1. Director Identification Numbers
  2. Reservation of Company Name
  3. Electronic Signatures

When you start a company in India, the first thing you need to identify is the number of directors in your company. Every director should have their own Director Identification Number. If the directors do not already have their DIN, then they must apply for it. An identity proof and residence proof is enough to get this. You can use your PAN Card, Passport or Voter ID as your ID proof and your DL, electricity or telephone bill can act as your residence proof. 

The next step involves you applying for a name for the company. You can choose from a set of names available or you can come up with your own name. 

Once you finalise the name, you have to now go for the process of incorporation. For the incorporation process, you need to create a Memorandum of Association that includes details of the first director and company’s operations. You have to do this whole process online and if you are a bit confused about the whole process, you can easily do it with the help of a chartered accountant. 

Once you get the Certificate of Incorporation, you now need to open a current account in a well-known bank. For this, you need to attach copies of your Memorandum of Association and Certificate of Incorporation. 

The Digital Signature Certificate (DSC) is a safe method to keep all the electronically supplied information safe and secure. The Information Act (2000) asks for a valid signature for this process. The key thing you need to keep notice of is that you must get it from an authorised agency only. To stay away from any counterfeits, make sure that you get it done only from an agency that is appointed by the Controller of Certificate Agencies. 

An unlawful DSC can land you in a lot of trouble. Furthermore, you need to keep track of the validity of the certificate, as every certificate has just 1-2 years of validity after which you have to renew it. 

Setup an account in the MCA portal

The next step is to setup an account in the MCA (Ministry of Corporate Affairs) portal. It is an important step to make valid online transactions and you can do it easily with an online process. The whole process is completely free of cost. 

Steps to keep in mind while setting up your software company

  • You need to mention the type of business you are aiming to be, the type of product you are aiming to sell and your target audience. You also need to mention the technology you will use in the whole process
  • You need to identify the way you want to list your company; as a proprietorship or a private company or as a partnership. You need to plan according to your capital, goal and other aspects involved in the business like the size of the firm, the expected output and so on
  • In India, some states have different set of rules for business. Therefore, identify the state in which you intend to start your company and then study the details at length
  • Register your company to the ROC in the same state where your head office is setup
  • Without the certificate from ROC, you cannot start your hiring process so make sure that is well in place
  • You may register in a state or regional Department of Employment for an easier experience of hiring. This can help you recruit from any part of the country
  • Since there are so many technoparks in India, it is better you register under STPI (Software Technology Parks in India) to get a better reach for the business and tax benefits in general

All these tips will definitely help you setup your software company without any glitches. You need to follow all the legal procedures to ensure a smooth functioning of your company. Since the hiring processes too depend on that, following the legal process down to the T becomes even more important.

Also read: How to Choose a Company Name for Your Business