Business

• An economic activity which involves

regular production and/or exchange of
goods or services with the main purpose
of earning profits through the satisfaction
of human wants.
 Features of business
• Dealing in goods and services
• Production/ exchange
• Creation of utility (Form, Time, Place, Possession)
• Regularity and continuity
• Profit motive
• Risk and uncertainty
• FORM UTILITY: Enhancing the marketability of a product by
changing its physical characteristics. For example, boxed detergent
can be produced in liquid form, which may be more advantageous
for certain consumer requirements.
TIME UTILITY: Enhancing a product's marketability by making it
available at a convenient time. For example, a daily newspaper
home delivered so that the customer has it available immediately
when he/she awakes for the day.
PLACE UTILITY: Where the product or service is made available.
For example, if it is a retail establishment, people should be
provided with easy access. Mail order companies make it easy for
customers to shop whenever they want and then have their
purchases delivered to them.
POSSESSION UTILITY: Additional consumer value created by
allowing easy transferring of a product's ownership. For example,
various time payment, leasing, and credit purchase strategies can
be important in making a product more attractive to a consumer.
 Business

Industry Commerce

Trade Aids to trade

Industrial Enterprise : A business undertaking which deals with

growing, extracting , manufacturing or construction

Commercial enterprise : A business undertaking which is concerned

with exchange or activities which are incidental to to trade.
 Industry and Firm
Industry –
a group of firms that offer products or
class of products that are close substitutes
of each other. The set of all sellers of a
product or service.
FORMS OF BUSINESS
ORGANISATIONS
 TYPES OF BUSINESS
ENTERPRISES
• Private sector enterprises
• Public Sector enterprises
• Joint enterprises
 Private enterprises
• Sole proprietorship
The simplest form of business is sole
proprietorship. No business registration is
required under Indian law. The owner of a sole
proprietorship is personally entitled to all the
profits and responsible for all the losses arising
from the business
 Partnership
• Partnerships in India are regulated under the Indian Partnership Act,
1932 (“Partnership Act”). Partners of a firm are jointly entitled to all the
profits and are also jointly responsible for all the liabilities arising from
the business. A partnership does not have a corporate character
distinct from its members.

• A written partnership deed registered with the Registrar of Firms is not

required by law but is advisable for the reasons set out hereinafter.
– In the case of an unregistered partnership, no suit to enforce a right under a
contract or under the Partnership Act can be instituted by it against a third party.

– Similarly, no suit to enforce a right arising from a contract or conferred under the
Partnership Act can be instituted in any court by any person suing a partner in the
firm unless the firm is registered and the person suing is or has been shown in the
register of firms as a partner of the firm.

• Traditionally, Indian law does not recognize limited partnerships and

all the partners have unlimited liability and can act and represent each
other as agents in the business of the firm. Now, Limited liability
patnership.
 Partnership
• Min 2
• Max 10 in Banking
• Max 20 in other cases
Hindu undivided family (HUF)

-Under dayabagh system of inheritance, prevalent

in W.Bengal, Assam and Orissa.

A traditional joint and undivided family is a family

where all the members are living together. Such
a joint family also holds property jointly for all its
members. It is controlled by the Karta, who is the
head of the family. The Karta can run a business
using the joint property of the family. Such a
business is the business of the whole HUF and
is run for the benefit of its members. The profits
and responsibility for losses arising from the
business are borne jointly by all members
 Company
• Association of many individuals who
contribute to a common capital to conduct
a business for gain.
 Features of company
• Distinct legal entity
• Perpetual existence
• Limited liability
• Transferability of shares
• Separation of ownership and management
• Separate property
• Common seal
• One Share-One Vote
• Minimum number of members
A public company must have at least 7 members
whereas a private company may have only 2 members
Type of Companies
1. Public Company
2. Private Company
3. Companies deemed to be public
limited company
4. Limited and Unlimited companies
5. Holding and Subsidiary companies
6. Foreign Companies
Public Co. Vs Pvt Co.
• Mimimum number is members is 2 (7 in
case of public companies)
• Private Company means a company which by
its articles of association :-
– Restricts the right of members to transfer its shares
– Limits the number of its members to fifty. In
determining this number of 50, employee-members
and ex-employee members are not to be considered.
• Prohibits an invitation to the public to subscribe
to any shares in or the debentures of the
company
• In a public company, the shares are freely
transferable and there is no limit on the number
of members that the company might have. A
public company is required to have a minimum
of 7 shareholders/members. Further, pursuant to
the recent amendment of the Companies Act, a
public company is required to have a minimum
paid-up capital of Rs. 5 lakh. In addition, a
private company that is a subsidiary of a public
company is also considered to be a public
company.
Promotion and Incorporation
of a company
 Promotion
Refers to the entire process by which a company is
brought into existence.

• It starts with the conceptualisation of the birth a

company and determination of the purpose for
which it is to be formed.

• The persons who conceive the company and invest

the initial funds are known as the promoters of the
company.

• The promoters enter into preliminary contracts with

vendors and make arrangements for the
preparation, advertisement and the circulation of
prospectus and placement of capital .
• Functions performed by the Promoters
• Decision of the name of the company can be accepted by the
registrar
• Arranges printing of MoA and AoA
• Details of the Company are added such as MoA, AoA, Nomination
of the director, Bankers, Auditors and registered office of the
company.
 Incorporation
• Incorporation by Registration :
The promoters must make a decision regarding
the type of company i.e a public company or a
private company or an unlimited company, etc
and accordingly prepare the documents for
incorporation of the company.
• In this connection the Memorandum and
Articles of Association (MA & AA) are crucial
documents to be prepared.
Memorandum of Association of a
company
• Is the constitution or charter of the
company and contains the powers of the
company. No company can be registered
under the Companies Act, 1956 without
the memorandum of association.
 Contents of Memorandum :
Name clause

Domicile clause
The state in which the registered office of company is to be situated is mentioned in this
(
clause )

Objects clause

Main objects of the company to be pursued by the company on its incorporation

Objects incidental or ancillary to the attainment of the main objects
Other objects of the company not included in (i) and (ii) above.

Liability clause
This clause tells about the duties and responsibilities of the Owners; i.e., whether the share holders are liable
for their share capital or promise.

Capital clause
The amount of share capital with which the company is to be registered divided into shares must be
specified giving details of the number of shares and types of shares. A company cannot issue share
capital greater than the maximum amount of share capital mentioned in this clause without altering
the memorandum.

Association clause
(A declaration by the persons for subscribing to the Memorandum that they desire to form into a
company and agree to take the shares place against their respective name must be given by the
promoters )
 Articles of Association

• Powers, duties, rights and liabilities of Directors

• Powers, duties, rights and liabilities of members
• Rules for Meetings of the Company
• Dividends
• Borrowing powers of the company
• Calls on shares
• Transfer & transmission of shares
• Forfeiture of shares
• Voting powers of members, etc
There are many benefits of company registration or incorporation.

• Company become legal distinct entity

• Company acquires perpetual succession
• Company property is not regarded as the property of shareholder
• Establishment of Business Account
• Company can ask ventures to raise funds
• Employees take interest towards the company
 Startup Definition (As defined by
DIPP)
Startup means an entity, incorporated or registered in India :

• Not prior to seven years, however for Biotechnology Startups not prior to ten years,

• With annual turnover not exceeding INR 25 crore in any preceding financial year,
and
• Working towards innovation, development or improvement of products or
processes or services, or if it is a scalable business model with a high potential of
employment generation or wealth creation
• Provided that such entity is not formed by splitting up, or reconstruction, of a
business already in existence. Provided also that an entity shall cease to be a
Startup if its turnover for the previous financial years has exceeded INR 25 crore or
it has completed 7 years and for biotechnology startups 10 years from the date of
incorporation/ registration. Provided further that a Startup shall be eligible for tax
benefits only after it has obtained certification from the Inter-Ministerial Board,
setup for such purpose.
Points to be remember :-
A corporation, entity or a business is termed as a start-up if
• The entity is registered under Companies Act, 2013
• It is registered under section 59 of Partnership Act, 1932, as a
partnership firm
• Or registered under Limited Liability Partnership Act, 2002, as a
limited liability partnership
•
Choosing a Form of Business Organisation:

• Limited Liability Partnership (LLP)Limited Liability Partnership (LLP) is

a new corporate structure that combines the flexibility of a partnership and
the advantages of limited liability of a company at a low compliance cost. In
other words, it is an alternative corporate business vehicle that provides the
benefits of limited liability of a company, but allows its members the
flexibility of organising their internal management on the basis of a mutually
arrived agreement, as is the case in a partnership firm.
• LLP is governed by the provisions of the Limited Liability Partnership Act
2008,
• An LLP is a body corporate and legal entity separate from its
partners. It has perpetual succession.

Being the separate legislation (i.e. LLP Act, 2008), the provisions of
Indian Partnership Act, 1932 are not applicable to an LLP and it is
regulated by the contractual agreement between the partners.

Every Limited Liability Partnership shall use the words "Limited

Liability Partnership" or its acronym "LLP" as the last words of its
name.
 How to register your startup with Startup India
To get the “Startup” recognition under per Startup
India you just have to follow theses 7 steps-

1. Incorporate your business

• You must first incorporate your business as a Private Limited
Company or a Partnership firm or a Limited Liability Partnership
• You have to follow all the normal procedures for registration of any
business like obtaining certificate of Incorporation/Partnership
registration, PAN and other required compliances.

2. Register with Startup India

• Then the business must be registered as a startup. The entire
process is simple and online. All you need to do, is log on to
the Startup India website and fill up the form with details of your
business and upload certain documents.
 3.Documents to be uploaded (in PDF format only)-

a) A letter of recommendation/support

• A letter of recommendation must be submitted along with the

registration form. Any of the following will be valid-
– (i) A recommendation (regarding innovative nature of business) from an Incubator
established in a post-graduate college in India ,in a format specified by Department of
Industrial Policy and Promotion (DIPP); OR
– (ii) A letter of support by an incubator which is funded (in relation to the project) by
Government of India as part of any specified scheme to promote innovation; OR
– (iii) A letter of recommendation (regarding innovative nature of business), from an
Incubator recognized by Government of India in DIPP specified format; OR
– (iv) A letter of funding of not less than 20% in equity by any Incubation Fund/Angel
Fund/Private Equity Fund/Accelerator/Angel Network duly registered with SEBI that
endorses innovative nature of the business; OR
– (v) A letter of funding by Government of India or any State Government as part of any
specified scheme to promote innovation; OR
– (vi) A patent filed and published in the Journal by the Indian Patent Office in areas
affiliated with the nature of business being promoted.
• b) Incorporation/Registration Certificate
– You need to upload the certificate of incorporation of your company/LLP
(Registration Certificate in case of partnership)
• c) Description of your business in brief
– A brief description of the innovative nature of your products/services.

• 4. Answer whether you would like to avail tax benefits

– Startups are exempted from income tax for 3 years. But to avail
these benefits, they must be certified by the Inter-Ministerial
Board (IMB). Start-ups recognized by DIPP, Govt. of India can
now directly avail IPR related benefits without requiring any
additional certification from IMB.
• 5. Finally
you must self certify that you satisfy the
following conditions:
– a) You must register your new company as a Private Limited Company,
Partnership firm or a Limited Liability Partnership
– b) Your business must be incorporated/registered in India not before 5
years.
– c) Turnover must be less than 25 crore per year
– d) Innovation is a must– the business must be working towards
innovating something new or significantly improving the existing used
technology.
– e) Your business must not be as a result of splitting up or reconstruction
of an existing business.
• 6. Immediately get recognition number
– That’s it! On applying you will immediately get a
recognition number for your startup. The certificate of
recognition will be issued after examination of all your
documents.
– However, be careful while uploading the documents.
If on subsequent verification, it is found to be obtained
that the required document is not uploaded/wrong
document uploaded or a forged document has been
uploaded then you shall be liable to a fine of 50% of
your paid up capital of the startup with a minimum
fine of Rs. 25,000.
• 7. Other areas-
• a) Patents, trademarks and/or design registration
• If you need a patent for your innovation or a trademark for your business, you can
easily approach any from the list of facilitators issued by the government. You will
need to bear only the statutory fees thus getting a 80% reduction in fees.
• b) Funding
– One of key challenges faced by many startups has been access to finance. Due to lack of experience,
security or existing cash flows, entrepreneurs fail to attract investors. Besides, the high risk nature of
startups, as a significant percentage fail to take-off, puts off many investors.
– In order to provide funding support, Government has set up a fund with an initial corpus of INR 2,500 crore
and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year) . The Fund is in
the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in
the capital of SEBI registered Venture Funds.
• Key features of the Fund of Funds-
• The Fund of Funds shall be managed by a Board with professionals from industry
bodies, academia, and successful Startups
• Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
• The Fund of Funds shall contribute to a maximum of 50% of the SEBI registered
Venture Funds (“daughter funds”). In order to be able to receive the contribution, the
daughter fund should have already raised the balance 50%. The Fund of Funds shall
have representatives on the board of the venture fund based on the contribution
made.
• The Fund shall ensure support to a broad mix of sectors such as manufacturing,
agriculture, health, education, etc.
 Registration of the Company
• Once the documents have been prepared,
vetted, stamped and signed, they must be
filed with the Registrar of Companies for
incorporating the Company with the
relevant documents.( M/A and A/A etc)
• Certificate of Incorporation
Once all the above documents have been filed
and they are found to be in order, the Registrar
of Companies will issue Certificate of
Incorporation of the Company. This document
is the birth certificate of the company and is
proof of the existence of the company. Once,
this certificate is issued, the company cannot
cease its existence unless it is dissolved by
order of the Court
 Commencement of Business

• A private company or a company having

no share capital can commence its
business immediately after it has been
incorporated. However, other companies
can commence their activities only after
they have obtained Certificate of
Commencement of Business. For this
purpose, the additional formalities have to
be complied with .
• These are four major steps:

1. Acquiring Digital Signature Certificate(DSC)

2. Acquiring Director Identification Number(DIN)
3. Filing an eForm or New user registration
4. Incorporate the company