Section 8 Company Compliance: A Complete Guide

Jun 17, 2025
Private Limited Company vs. Limited Liability Partnerships

Running a non-profit organisation in India comes with its own set of responsibilities, especially when structured as a Section 8 Company. While these entities enjoy several regulatory exemptions and benefits, they must also meet a range of compliance obligations to retain their special status and continue operations without legal hurdles.

This comprehensive guide walks you through everything you need about Section 8 Company compliance, from legal, tax, and regulatory requirements to timelines and forms.

Table of Contents

What is a Section 8 Company?

A Section 8 Company is a special category of non-profit organisation registered under Section 8 of the Companies Act, 2013. These companies are formed for charitable or social purposes such as:

  • Education
  • Promotion of arts and culture
  • Social welfare
  • Research
  • Environmental protection
  • Sports development

Key Characteristics:

  • No profit distribution: Profits, if any, are reinvested in promoting the organisation's objectives.
  • Name exemption: They do not use “Limited” or “Private Limited” in their names.
  • Regulatory advantages: Enjoy exemptions on stamp duty, income tax (if 12A/80G registered), and some ROC compliances.

Related Read: What is ROC Filing & Why It's Necessary?

Section 8 Companies differ from regular for-profit businesses in that their core purpose is impact, not income, which doesn’t make compliance any less important.

Section 8 Company Compliance

Maintaining compliance is not just about ticking legal boxes—it’s essential to retain the company’s non-profit status, ensure transparency, and stay eligible for grants, tax benefits, and government support.

Types of Compliance:

  1. Time-Based Compliance
    Based on fixed deadlines (e.g., annual returns, AGMs)

  2. Event-Based Compliance
    Triggered by corporate actions (e.g., change of directors, share allotment)

  3. Criteria-Based Compliance
    Based on financial thresholds or specific business conditions (e.g., GST annual returns if turnover exceeds ₹2 crore)

A. Compliance Requirements Under the Companies Act, 2013 (and Related Rules)

Here's a breakdown of key compliances that every Section 8 Company must fulfil:

Compliance event Form/ Action Due date/ Timeline
Registered office verification INC-22 Within 30 days of incorporation
Appointment of auditor ADT-1 Within 15 days of the AGM or 30 days of incorporation
Disclosure of directors’ interest MBP-1 First Board Meeting of the financial year
Intimation of disqualification DIR-8 Annually before reappointment
Annual General Meeting (AGM) Mandatory AGM Within 6 months from the end of the financial year
Board Meetings Minimum 2 per year At least once every 6 months
Financial statements AOC 4 Within 30 days of the AGM
Annual return MGT-7 Within 60 days of the AGM
Director KYC DIR-3 KYC Annually by 30th September
Share allotment (if applicable) PAS-3 Within 15 days of the allotment

Planning to start a non-profit? Begin your Section 8 Company registration with expert assistance today.

B. Compliance Obligations Under FEMA Regulations

If your Section 8 Company receives foreign investments or donations, FEMA compliance becomes mandatory.

Requirement Form Timeline
Reporting foreign allotment FC-GPR (via RBI’s SMF portal) Within 30 days of share allotment
Annual return on foreign assets/liabilities FLA Return (via RBI FLAIR system) By 15th July each year

C. GST Compliance as per the Goods and Services Tax Act, 2017

Section 8 Companies may need GST registration if their annual turnover exceeds the prescribed limits or if they engage in taxable activities.

Thresholds:

₹20 lakh (services) or ₹40 lakh (goods) for most states

Monthly/Quarterly Returns:

Form Purpose Frequency Due Date
GSTR-1 Outward supplies Monthly/Quarterly 11th of next month
GSTR-3B Summary return Monthly 20th of next month
IFF (Invoice Furnishing Facility) For quarterly filers under QRMP Monthly (optional) 13th of the month after

Annual Returns (If applicable based on turnover):

Forn Applicable to Due Date
GSTR-9 Turnover > ₹2 crore 31st December
GSTR-9C Turnover > ₹5 crore (audit) 31st December

D. Income Tax Compliance Under the Income Tax Act, 1961

While many Section 8 companies register under 12A and 80G to claim income tax exemptions, they must still follow standard tax compliances.

Compliance Form Due Date
Tax payments (advance tax, if applicable) ITNS-280 Quarterly
TDS payments ITNS-281 7th of next month
TDS returns 24Q, 26Q Quarterly (by 31st of July/Oct/Jan/May)
Issue of TDS certificates Form 16/16A Within 15 days of return filing
Tax audit report (if income > ₹1 crore or ₹50 lakh for professionals) Form 3CA/3CB, 3CD By 31st October
Income tax return ITR-7 (for charitable organizations) By 31st October or 30th November (if audited)

E. Statutory Compliance Under Applicable Labour Laws

Section 8 Companies employing staff are also required to comply with applicable labour laws, such as EPF, ESI, and state-specific welfare fund contributions.

Compliance Form / Action Due Date / Frequency
Provident Fund (EPF) ECR (Electronic Challan cum Return) 15th of each month
Employees' State Insurance (ESI) Monthly ESI return 15th of each month
Labour Welfare Fund (state-specific) State-specific forms Half-yearly / annually
Professional Tax (if applicable) Varies by state Monthly/quarterly

Frequently Asked Questions

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are the compliances for a Section 8 Company?

A Section 8 Company, though nonprofit in nature, must still comply with several regulatory requirements under Indian law to maintain its active status and tax exemptions.

  • Registrar of Companies (ROC) Compliance under the Companies Act, 2013
  • Income Tax Compliance under the Income Tax Act, 1961
  • GST Compliance (if registered under GST)
  • FEMA Compliance (if receiving foreign funds/investment)
  • Labour Law Compliance (if employing staff)

What is the Checklist for Section 8 Companies?

Here’s a simplified compliance checklist for Section 8 companies:

  • ROC Filing
  • Board Meetings
  • AGM
  • Auditor Appointment
  • Director Disclosures
  • Income Tax Return
  • TDS Filing
  • GST Returns
  • Labour Law (EPF/ESI)

Note: This checklist may vary depending on the size, funding, turnover, and specific activities of the Section 8 company.

Can a Section 8 Company Strike Off?

Yes, a Section 8 Company can be struck off, but only under specific conditions and with approval from the Regional Director (RD) of the Ministry of Corporate Affairs (MCA).

Sarthak Goyal

Sarthak Goyal is a Chartered Accountant with 10+ years of experience in business process consulting, internal audits, risk management, and Virtual CFO services. He cleared his CA at 21, began his career in a PSU, and went on to establish a successful ₹8 Cr+ e-commerce venture.

He has since advised ₹200–1000 Cr+ companies on streamlining operations, setting up audit frameworks, and financial monitoring. A community builder for finance professionals and an amateur writer, Sarthak blends deep finance expertise with an entrepreneurial spirit and a passion for continuous learning.

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Related Posts

FSSAI Registration and License Process Explained

FSSAI Registration and License Process Explained

If you’re running a food business in India, chances are you’ve heard about FSSAI. But what exactly is it, and why is it so important? FSSAI stands for the Food Safety and Standards Authority of India- the apex regulatory body responsible for ensuring food safety and hygiene standards across the country.

For any food-related business operating in India, obtaining an FSSAI registration or license is mandatory. This ensures that the business complies with the Food Safety and Standards Act, 2006, enhancing consumer trust and legal credibility.

In this blog, we’ll walk you through everything you need to know about FSSAI, from types of licenses and who needs them, to how to apply, what documents you need, and even penalties if you don’t comply.

Table of Contents

FSSAI Registration

FSSAI Registration is the basic license issued to small-scale food businesses by the state food safety authorities. It applies primarily to small food business operators (FBOs) whose turnover falls below a certain threshold and who operate within a single state.

This registration is essential to legally operate a food business and ensures compliance with food safety norms. However, for larger businesses or those operating across multiple states, an upgraded license (State or Central License) is required.

Food Business Operators Who Need FSSAI Registration?

The following food businesses typically require FSSAI Registration:

  • Small Manufacturers: Small-scale producers of food items with limited turnover.
  • Transporters: Entities involved in the transportation of food within the state.
    Retailers: Small shops, grocery stores, or vendors selling food products directly to consumers.
  • Small Food Businesses: Street food vendors, hawkers, or home-based food businesses.
  • Medium Food Businesses: Hotels, Restaurants & Bars

Types of FSSAI Registration

Beyond legal compliance, filing ITR offers several advantages:

Type of License Turnover Limit Operational Scale Issued By
Basic Registration Up to INR 12 Lakhs annually Small food businesses within one state State authority
State License INR 12 Lakhs to 20 Crores Medium-sized businesses operating within a state State authority
Central License Above INR 20 Crores Large businesses, importers, exporters and interstate operations Central authority

Benefits of Obtaining an FSSAI Food License

Obtaining an FSSAI license offers multiple advantages:

  • Consumer Trust: Shows commitment to food safety, increasing customer confidence.
  • Legal Compliance: Avoids penalties and legal issues by following regulations.
  • Business Expansion: Facilitates scaling operations across states and international markets.
  • Brand Credibility: Enhances brand image by adhering to recognised safety standards.
  • Access to New Markets: Many retailers and e-commerce platforms require FSSAI certification.

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FSSAI Registration Eligibility

Below is the eligibility criteria for FSSAI registration:

  • Annual turnover up to ₹12 lakhs.
  • Operates only within a single state.
  • Includes small-scale manufacturers, traders, retailers, hawkers, and temporary stall owners.

FSSAI License Eligibility

Businesses requiring State or Central Licenses typically fulfil these conditions:

  • Annual turnover between ₹12 lakhs and ₹20 Crores (State License).
  • Annual turnover exceeding ₹20 crores (Central License).
  • Operations across multiple states or involved in import/export.
  • Large-scale food processors and manufacturers.

Food Capacity Limit Required for Obtaining FSSAI Registration

License Type Production/Handling Capacity
Basic Registration Up to 100 kg or 100 litres per day
State License Between 100 kg/litres to 2 tons per day
Central License Above 2 tons per day

Note: These limits may vary based on specific food categories and local regulations.

Documents Required for Obtaining the FSSAI Registration/License

Common documents needed include:

  • Identity Proof (Aadhar, PAN Card)
  • Address Proof of Business Premises (Rent Agreement/Utility Bill)
  • Passport-sized Photographs of the Applicant
  • Certificate of Incorporation (for companies)
  • Food Safety Management Plan or Statement of Food Products
  • NOC from the local municipality or health department
  • Proof of possession of premises (ownership or lease)

How to Apply for FSSAI Registration Online?

Applying for an FSSAI Registration or License online is a straightforward process — and the best part is, you can do it all from the comfort of your home or office.

Step 1: Visit the Official FSSAI Website

Head over to the official Food Safety Compliance System (FoSCoS) portal: https://foodlicensing.fssai.gov.in

Step 2: Create an Account

Click on “Sign Up” and fill in your details like name, mobile number, email ID, and state of operation. Once registered, you’ll receive login credentials via email or phone.

Step 3: Fill in the Application Form

After logging in, choose the appropriate license type based on your business size and turnover (Basic, State, or Central). Then, fill in the required details such as:

  • Business name and address
  • Type of food business (manufacturer, distributor, caterer, etc.)
  • Contact information
  • Business turnover and food handling capacity

Step 4: Upload Required Documents

Upload scanned copies of all the necessary documents.

Step 5: Pay the Application Fee

Once the form is complete and documents are uploaded, proceed to pay the applicable fee online. The amount depends on the license type and duration selected (1–5 years).

Step 6: Submit the Application

Double-check all details before clicking “Submit”. Once submitted, you’ll receive an application reference number which you can use to track your status.

Step 7: Track Your Application Status

Use the “Track Application” feature on the dashboard to monitor progress. You’ll receive notifications if additional info or documents are required.

Once submitted, your application will be reviewed by the local food safety officer. They may conduct a physical inspection (for licenses) or approve the application directly (for Basic Registrations). Upon approval, you’ll receive your FSSAI certificate online.

FSSAI License Cost & Validity

License Type Fee Structure Validity
Basic Registration INR 100 per year 1 to 5 years
State License INR 2000 to 5000 per year 1 to 5 years
Central License INR 7500 per year 1 to 5 years

Costs may vary based on license duration and type.

FSSAI Registration Status

How to Check Status:

  1. Visit the FSSAI portal.
  2. Log in using registered credentials.
  3. Navigate to the “Application Status” section.
  4. Enter your Application/Registration number.
  5. View the current status (Pending, Approved, Rejected).

FSSAI Penalty and Offences

The Food Safety and Standards Authority of India (FSSAI) takes food safety very seriously — and rightly so. Non-compliance can lead to hefty penalties, legal action, or even imprisonment, depending on the nature and severity of the offense.

Here’s a breakdown of common offences under the Food Safety and Standards Act, 2006, and their corresponding penalties:

Offense Penalty
Operating without a license Fines up to ₹5 lakh or jail time
Selling adulterated or misbranded food Fines up to ₹10 lakh
Selling unsafe or substandard food Imprisonment and fines
Not following food safety standards Penalties depend on the violation

Renewal of FSSAI License

Renew your license at least 30 days before it expires. The process is similar to applying for a fresh — just log in, fill out renewal forms, upload updated documents, and pay the fees. Missing renewal deadlines can lead to fines or even suspension of your license.

FSSAI License for Cloud Kitchen

Cloud kitchens, operating without a physical dine-in space, are also required to obtain FSSAI licenses. Typically, they fall under:

  • Basic Registration: If turnover and scale are small.
    State License: For larger cloud kitchens with higher turnover.

The application process is the same, focusing on food safety management specific to cloud kitchens.

Conclusion

FSSAI registration and licensing are essential for any food business in India. They help keep your customers safe, build your brand, and keep you on the right side of the law.

So, if you're running any kind of food business, be it a small catering outfit, a packaged snack brand, or an export-oriented manufacturing unit, FSSAI must be part of your growth strategy. It’s a small step toward compliance, ensuring that you’re meeting the highest standards of food safety and hygiene.

Frequently Asked Questions

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Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

Register your business
rize image

Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What is the difference between an FSSAI license and registration?

Proprietorship compliance refers to the set of legal, financial, and tax-related requirements that a sole proprietorship must fulfil. This includes:

  • FSSAI Registration is for small food businesses with an annual turnover of up to ₹12 lakh. It’s a basic registration issued by the State Authority.
  • An FSSAI License is required for larger businesses and is categorised into:
    • State License (₹12 lakh–₹20 crore turnover, within one state)
    • Central License (above ₹20 crore turnover or interstate operations)

Is GST compulsory for an FSSAI license?

No, GST is not mandatory to obtain an FSSAI license or registration. However, for certain food businesses, especially those that sell online or supply to other businesses, having a GST registration can be beneficial or even required.

Who is eligible for FSSAI?

Any Food Business Operator (FBO) involved in manufacturing, processing, storing, distributing, or selling food in India is eligible and required to get FSSAI registration or a license. This includes:

  • Home-based food sellers
  • Restaurants, cafes, and cloud kitchens
  • Food processors and repackers
  • Online food sellers
  • Importers/exporters of food products

What is What is the minimum turnover for an FSSAI license?the turnover limit for a proprietorship?

  • Basic FSSAI Registration: Turnover up to ₹12 lakh/year
  • State License: Turnover between ₹12 lakh and ₹20 crore/year
  • Central License: Turnover above ₹20 crore/year or operating in multiple states

Is an FSSAI license mandatory for small businesses?

Yes. Even small food businesses, such as home kitchens, hawkers, and petty retailers, must obtain Basic FSSAI Registration. It's a legal requirement under the FSS Act, 2006, to ensure food safety.

What is the fee for an FSSAI license for 5 years?

Fees depend on the type of license:

  • Basic Registration: ₹100/year
  • State License: ₹2,000 to ₹5,000/year
  • Central License: ₹7,500/year

Is an FSSAI license mandatory for a home kitchen?

Yes, if you are preparing food at home for commercial sale (e.g., home tiffin services, catering), you must register with FSSAI under Basic Registration.

How can I check if my FSSAI license is real or fake?

Yes, if you are preparing food at home for commercial sale (e.g., home tiffin services, catering), you must register with FSSAI under Basic Registration.

  • Visit the FSSAI License Check Portal
  • Enter your FSSAI License or Registration Number to verify details like:
    • Business name
    • Validity
    • Type of license
    • Status (Active/Expired)

Akash Goel

Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.

His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.

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How to Start a Franchise Business in India? Complete Guide

How to Start a Franchise Business in India? Complete Guide

Starting a franchise business in India is a lucrative opportunity for aspiring entrepreneurs. Franchising allows individuals to operate a business under an established brand with a proven business model. It offers benefits like brand recognition, operational support, and reduced risk compared to starting an independent venture.

This blog will walk you through everything you need to know about franchising in India.

Table of Contents

What Is The Meaning of Franchising a Business?

Franchising is a business model where a franchisor grants the rights to an individual (franchisee) to operate under its brand, using its products, services, and business processes. The franchisee pays a fee and agrees to operate under the franchisor’s guidelines in exchange for brand licensing, training, operational support, and marketing assistance.

The franchising model benefits both parties:

  • Franchisor Benefits: Rapid expansion, increased brand reach, and revenue from franchise fees.
  • Franchisee Benefits: Access to a recognised brand, reduced startup risk, and operational guidance.

Key aspects of franchising include:

  • Brand Licensing: The franchisee gets permission to use the franchisor's brand name and trademarks.
  • Operational Support: Training, marketing, and business strategy support are provided.
  • Profit-sharing Agreements: Franchisees pay royalties or a percentage of revenue to the franchisor.

Types of Franchises

Franchises can be categorised based on their structure and operational model:

Product Distribution Franchise:

  • Franchisee sells the franchisor’s products under its brand.
  • Examples: Automobile dealerships (Maruti Suzuki), and soft drink bottlers (Coca-Cola).

Business Format Franchise:

  • Franchisee adopts the entire business model, including operations, branding, and marketing.
  • Examples: McDonald’s, Domino’s, KFC.

Manufacturing Franchise:

  • Franchisee manufactures and sells the franchisor’s products under its brand name.
  • Example: Food and beverage brands allowing third-party bottlers.

Job Franchise:

  • A low-cost model where individuals operate small-scale service businesses.
  • Examples: Cleaning services, travel agencies, real estate consultancy.

How Long Does It Take To Franchise a Business?

Franchising a business typically takes between six months to two years, depending on factors like:

  • Industry type and regulatory requirements.
  • Business readiness and operational scalability.
  • Development of legal and training documents.
  • Marketing efforts to attract franchisees.

How Much Should It Cost To Franchise a Business?

The cost to franchise a business can vary significantly based on factors like industry, business model, and support provided. On average, franchising a business may cost between ₹5 lakh to ₹50 lakh or more in India. Key expenses include:

  • Franchise Fee: ₹2 lakh to ₹10 lakh (varies by brand reputation).
  • Legal and Registration Fees: ₹50,000 to ₹2 lakh.
  • Training and Support Costs: ₹1 lakh to ₹5 lakh.
  • Marketing and Branding Expenses: ₹1 lakh to ₹3 lakh.
  • Infrastructure Setup: Varies depending on the business type.

Additional factors like franchise location, infrastructure requirements, and marketing strategy impact the overall investment.

Advantages of Franchising a Business

  1. Rapid Expansion: Scale business operations quickly with minimal capital investment.
  2. Lower Financial Risk: Franchisees fund their business setup, reducing financial burden.
  3. Brand Recognition: Established branding makes it easier to attract customers.
  4. Operational Support: Franchisees receive training, marketing, and business guidance.
  5. Access to Motivated Franchisees: Entrepreneurs invest time and money, ensuring dedication to success.

Disadvantages of Franchising a Business

  1. Loss of Control: Franchisees operate independently, which can lead to inconsistencies.
  2. Reputation Risk: Poorly managed franchises can damage brand image.
  3. Legal & Financial Complexity: Requires detailed agreements and ongoing compliance.
  4. Ongoing Training & Support: Continuous investment in franchisee development is necessary.

Franchise Vs Licensing: What’s The Difference?

Franchising Licensing
Control High Control Low control
Legal obligations Extensive with detailed agreements Less strict, focussed on intellectual property rights
Investment Higher due to training, support, and operational costs Lower primarily for brand usage
Brand usage Franchisee must follow strict brand guidelines Licensee can identify how the brand can be used
Revenue model Royalties, franchise payments, ongoing payments One-time or periodic licensing fees

How to Start a Franchise Business - 8 Key Steps

Step 1: Determine If Franchising is Right For Your Business

Before diving into franchising, evaluate whether your business is scalable, profitable, and replicable. Ask yourself:

  • Is there consistent demand for my product or service?
  • Can my business model be easily duplicated in different locations
  • Do I have strong branding and operational processes in place?

Not all businesses are fit for franchising. A successful franchise model requires a proven track record, solid profit margins, and strong brand appeal to attract potential franchisees.

Step 2: Protect Your Business’s Intellectual Property

Your brand is one of your most valuable assets. Before offering franchises, secure trademarks, copyrights, and proprietary processes to prevent misuse and ensure brand consistency.

Step 3: Prepare Your Franchise Disclosure Document (FDD)

The Franchise Disclosure Document (FDD) is a legal document that provides prospective franchisees with full transparency about their business. This document must comply with franchise laws and typically includes:

  • Franchise fees and ongoing costs
  • Training and support provided
  • Franchisor and franchisee responsibilities
  • Earnings potential (if disclosed)
  • Legal obligations and dispute resolution process

A well-structured FDD builds trust with potential franchisees and helps you stay compliant with franchise laws.

Step 4: Draft a Franchise Agreement

The franchise agreement is a legally binding contract outlining the rights and responsibilities of both the franchisor (you) and the franchisee. Key elements to include:

  • Operational guidelines – How franchisees must run the business
  • Fee structure – Initial franchise fees, royalties, and marketing fund contributions
  • Territory rights – The defined area where the franchisee can operate
  • Training and support – What assistance franchisees will receive
  • Exit clauses – Terms under which a franchise can be sold or terminated

This document ensures both parties are aligned and protects your brand from misuse.

Step 5: Register Your Company

Depending on your state and region, you may need to register your franchise with government authorities before selling franchise units. Registration is not mandatory, but it is required to obtain GST registration depending on the turnover.

Head over to Razorpay Rize to Register your Company.

Step 6: Compile an Operation Manual

A franchise operations manual is a step-by-step guide that helps franchisees run the business successfully while maintaining brand consistency. It should cover:

  • Day-to-day business processes
  • Hiring and training staff
  • Customer service guidelines
  • Marketing and advertising strategies
  • Financial management and reporting

Step 7: File or Register Your FDD

Once your FDD is finalised, keep it securely stored for easy access and updates as needed. While the FDD is a mandatory document, filing requirements vary by state.

Step 8: Set Strategy To Achieve Your Sales Goal

Develop marketing and recruitment strategies to attract the right franchise partners. The strategy should be tailored to your business, community, and growth objectives. Here are some effective ideas to consider:

  • Provide a referral incentive for those who bring in qualified franchisee applicants.
  • Develop a strategic marketing plan from the start to capture attention.
  • Recruit sales professionals who understand your business and its story.

5 Strategies to Help You Succeed at Franchising

  1. Maintain Brand Consistency: Implement strict guidelines for uniformity across locations.
  2. Select the Right Franchisees: Screen candidates for skills, experience, and commitment.
  3. Provide Ongoing Training & Support: Regularly update franchisees with best practices.
  4. Implement Effective Marketing Strategies: Invest in advertising and localised promotions.
  5. Ensure Strong Financial Management: Monitor franchise performance and optimize cost structures.

Case Studies of Successful Franchise Businesses

Franchising is a proven business model that allows entrepreneurs to leverage established brands and systems for success. Below are examples of successful franchise businesses, showcasing their revenue, profit margins, and operational highlights.

1. McDonald's

  • Industry: Quick-Service Restaurant (QSR)
  • Investment: ₹6–14 crores
  • Profit Margin: 50–60%
  • Break-even Period: 4–5 years
    McDonald’s is one of the most profitable franchises globally due to its standardized operations and strong brand recognition. In India, its franchise model offers high footfall and consistent demand, making it a lucrative investment.

2. Baskin Robbins

  • Industry: Ice Cream and Dessert
  • Investment: ₹10–20 lakhs
  • Profit Margin: 50–60%
  • Break-even Period: 6–12 months
    With over 800 outlets in India, Baskin Robbins has built a strong presence in the dessert market. Its diverse flavors and year-round demand ensure steady sales and excellent returns for franchisees.

3. Haldiram

  • Industry: Food and Snacks
  • Investment: ₹30 lakhs–₹6 crores (depending on store format)
  • Profit Margin: 50–60%
  • Break-even Period: 2–3 years
    Haldiram is a trusted name in Indian snacks and sweets. Its franchise model offers multiple formats, including quick-service restaurants and dine-in outlets, ensuring high profitability backed by a loyal customer base.

4. Marco’s Pizza

Marco’s Pizza achieved remarkable growth with a revenue increase of 23.5% in one year by opening 113 stores. The brand focuses on strategic revenue-boosting approaches, making it one of the fastest-growing pizza franchises globally.

5. Lenskart

  • Industry: Eyewear Retail
  • Investment: ₹25 lakhs
  • Profit Margin: Approx. 33%
    Lenskart is India’s largest eyewear brand, offering trendy products such as prescription glasses and sunglasses. With innovative features like "Try Before You Buy," its franchise model generates average monthly sales of ₹9 lakhs, making it ideal for urban markets

Final Thoughts

Franchising can be a great way to start a business without building everything from scratch. You get a known brand, a proven business model, and ongoing support but it’s not a shortcut to success. It still takes effort, investment, and commitment to make it work.

The key is choosing the right franchise. Think about what fits your skills, budget, and long-term goals. A great brand in the wrong location or with poor financial planning can still struggle. Do your homework, understand the costs, and be ready to follow the franchisor’s guidelines.

Frequently Asked Questions

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Frequently Asked Questions

How do I open up my own franchise?

To start your own franchise-

  • You’ll need to create a business model that can be replicated. This involves building a strong brand, developing detailed operational processes, and ensuring your business is profitable.
  • Next, you’ll need to register as a franchisor, create legal agreements (Franchise Disclosure Document & Franchise Agreement), and establish a support system for franchisees.
  • Once everything is in place, you can start recruiting franchise partners.

Do I need to register my franchise?

Yes, in most countries, you need to register your franchise before offering it to potential franchisees. The requirements vary by region—some require a Franchise Disclosure Document (FDD) and legal agreements, while others may have additional licensing requirements.

Which franchise is best for beginners?

For beginners, it’s best to choose a franchise with low initial investment, strong brand recognition, and comprehensive support. Some beginner-friendly franchises include:

  • Food & Beverage: Subway, Dunkin’
  • Retail: Miniso, FirstCry
  • Education & Coaching: Kumon, The Learning Experience
  • Service-Based: Urban Company

Look for franchises with a simple operating model and strong training programs to make the transition smoother.

Which franchise is most profitable?

Profitability depends on location, investment, and management. Before investing, analyse franchise fees, profit margins, and ongoing costs to determine the best fit.

Are franchise fees monthly?

Most franchises charge ongoing royalty fees, which can be monthly, quarterly, or annually. These fees are typically a percentage of your revenue (ranging from 4% to 12%) or a fixed amount. Some franchises also charge additional marketing or operational fees.

Is licensing an alternative to franchising?

Yes, licensing can be an alternative to franchising, but it’s a different business model. In licensing, you grant permission to use your brand, trademark, or product without controlling business operations. In franchising, you provide a complete business model, training, and support while maintaining control over operations. Licensing offers more flexibility but less oversight, while franchising ensures brand consistency but comes with more regulations.

Akash Goel

Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.

His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.

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Startup Registration vs MSME Registration: Key Differences Explained

Startup Registration vs MSME Registration: Key Differences Explained

As India’s entrepreneurial ecosystem grows rapidly, so does the need to understand the different pathways to formalise a business. Two common routes available to new and small businesses are Startup Registration (under the Startup India initiative) and MSME Registration (now Udyam Registration under the Ministry of MSME).

While both offer government recognition and support, their purpose, growth models, funding access, and compliance paths are distinct. Whether you're building a tech-driven disruptor or running a traditional service business, knowing the difference can help you make better strategic decisions.

Table of Contents

What is a Startup?

A startup is a young company founded to solve a problem through innovation, technology, or a novel business model. Unlike traditional businesses, startups are designed to grow quickly, scale globally, and often operate in uncertain or untested markets.

Key traits of a startup include:

  • Innovation-first approach: Either in product, process, or business model
  • Scalability: Designed to serve large or global markets with minimal incremental costs
  • Technology-driven: Often built on tech platforms or software solutions
  • High risk, high reward: Operates in dynamic environments with a focus on fast growth

Startups registered under the Startup India scheme receive benefits such as tax exemptions, fast-track IP protection, and easier compliance processes.

What is an MSME?

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy. They focus more on incremental growth, cost efficiency, and local market needs. MSMEs are generally rooted in traditional sectors, such as manufacturing, retail, and services, and aim for sustainable profitability over rapid scaling.

Unlike startups, MSMEs usually:

  • Focus on improving existing processes or delivering standard products/services
  • Operate with limited risk appetite
  • Prioritise steady revenue and employment generation
  • Leverage known technologies and business models
Classification Micro Small Medium
Investment Investment in Plant and Machinery or Equipment:
Not more than Rs. 2.5 crore
Investment in Plant and Machinery or Equipment:
Not more than Rs. 25 crore
Investment in Plant and Machinery or Equipment:
Not more than Rs. 125 crore
Turnover Annual Turnover not more than Rs. 10 crore Annual Turnover not more than Rs. 100 crore Annual Turnover not more than Rs. 500 crore

MSMEs are recognised under the Udyam Registration system and benefit from credit schemes, subsidies, and easier access to bank loans.

Growth and Scalability

  • Startups are designed for rapid growth, often scaling 10x in short timeframes, especially in sectors like fintech, SaaS, healthtech, or edtech. Growth is typically fueled by technology, network effects, and venture funding.
  • Conversely, MSMEs prioritise gradual, sustainable growth, often within a well-defined geographic or sectoral niche. Their scaling is rooted in stability, profitability, and local expansion, not exponential leaps.

Risk Appetite and Funding

  • Startups thrive in high-risk environments, betting on new ideas or technologies. They actively seek external funding from angel investors, venture capitalists, or startup-specific government schemes (like Fund of Funds for Startups).

  • MSMEs are typically risk-averse, aiming for consistent revenue. They rely on traditional funding like bank loans, government subsidies, and schemes like CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises).

Ready to launch your business? Get expert assistance with Startup registration and unlock exclusive benefits today.

Innovation and Adaptability

  • Startups focus on disruption; they aim to change how industries work by introducing new tools, services, or models. Agility, rapid experimentation, and quick pivots are part of their DNA.

  • MSMEs tend to prioritise adapting existing technologies or methods to improve efficiency. Their innovation is often incremental, refining what already works rather than reinventing it.

Regulations and Compliance

Both startups and MSMEs benefit from supportive government policies, but the nature of compliance and regulatory support varies.

For Startups:

  • Eligible for benefits under the Startup India scheme
  • Tax holiday for 3 years under Section 80-IAC
  • Faster IP protection and easier public procurement norms
  • More legal scrutiny as they scale, especially in sectors like fintech, health, or data

For MSMEs:

  • Registered under Udyam Registration
  • Access to collateral-free loans, subsidies, and credit guarantees
  • Simplified compliance norms, especially for micro and small enterprises
  • Priority in government tenders and incentives for manufacturing/export

Employment Contribution

  • Startups create fewer but highly skilled jobs, especially in product development, data science, marketing, and growth. Their contribution lies in creating future-ready roles and digital talent.

  • MSMEs are India’s largest employers after agriculture. They generate mass employment, particularly in manufacturing, services, and rural sectors, contributing significantly to India’s GDP and industrial base.

Market Reach

  • Startups often think global from day one. Companies like Freshworks, Byju’s, and Zerodha are built to serve a digital-first, borderless audience.
  • MSMEs typically cater to local or regional markets, with products tailored to domestic demand. Some medium-sized enterprises expand globally through exports, especially in textiles, handicrafts, or auto components.

Advantages of a Startup

  • High innovation potential and the ability to disrupt industries
  • Agility in decision-making and operations
  • Rapid scalability with lower marginal costs via digital tools
  • Access to VC funding, tax benefits, and government grants
  • Lean teams and remote-first models reduce operational overhead

These traits make startups ideal for solving complex problems at scale, especially with technology as a lever.

Advantages of an MSME

  • Consistent contributors to India’s economic growth
  • Flexibility to adapt to local market changes and demands
  • Support regional employment and entrepreneurship
  • Strengthen local supply chains and ecosystem resilience
  • Benefit from low compliance burdens and cost-effective operations

MSMEs play a foundational role in inclusive growth, uplifting rural economies and providing livelihood opportunities at scale.

Frequently Asked Questions

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Private Limited Company
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1,499 + Govt. Fee
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  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Can a startup register as an MSME?

Yes, a startup can register as an MSME (now called Udyam Registration) as long as it meets the investment and turnover criteria defined for Micro, Small, or Medium Enterprises under the MSME classification.

What are the benefits of registering startups as MSMEs?

Registering a startup under the MSME (Udyam) scheme offers several advantages, especially in terms of financial and operational support. Key benefits include:

  • Access to Collateral-Free Loans
  • Subsidised Patent and Trademark Fees
  • Priority in Government Tenders
  • Interest Subsidies on Loans
  • Easier Access to Credit and Finance
  • Eligibility for Government Incentives and Subsidies

Who cannot register under MSME?

Not all businesses or entities are eligible for MSME registration. The following cannot register as an MSME under the Udyam scheme:

  • Non-business Entities
  • Foreign Companies and Subsidiaries
  • Large Enterprises
  • Agricultural Activities
  • Duplicate or Multiple Registrations

Akash Goel

Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.

His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.

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