Legal requirements for starting eCommerce business in India

Whether you’re having an eCommerce website or planning to sell on marketplaces like Amazon and Flipkart, it’s obligatory to meet the legal requirements for starting an eCommerce Business in India. Doing the business legally is a long term approach. This guide covers the legal requirements you must meet while starting an eCommerce Business in India.

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Business Entity Registration

While starting an eCommerce business in India, the first step is to register your business entity. There are several business entities registrations in India. The ones that are most suitable for your business are:

One person Company/Sole proprietorship

One person company is a form of a business entity where a single individual handles all the business activities. The business owner is the sole recipient of profits/losses. There are no other laws that govern one person company.

Private Limited Company

Registration under Private Limited Company is recommended for people wanting to have a recognizable brand, standard work procedures, and limited liability. The form of business entity must have at least 2 and maximum 50 members. Also, a minimum capital of Rs. 1 lakh or higher should be paid up from time to time.

Partnership firm

Partnership firms are popular form of business entities that are owned and managed by a group of members for profit. They are relatively easy to start and are most suitable for small and medium-sized business.

 LLP (Limited Liability Partnership)

LLP is a new form of partnership where different professionals pool their resources. Under LLP, the liability of one member is unlimited whereas the other members have limited liability which depends on their contributions. This combines the flexibility of partnership and some benefits of a company at a lower compliance cost than a company. Such business entities are governed by LLP Act of 2008.

  

Choosing the right business entity

Choosing the right business entity depends on a lot of factors such as the type of business, the initial capital, and the number of team members. The most significant advantage of registering as a Sole-proprietor or in a partnership is the low operating cost and fewer legal formalities. The initial capital for a sole proprietorship or partnership can be as low as Rs. 30,000.

Another form of business entity for an eCommerce business is the registration under LLP. It’s one of the easiest form of business entity to incorporate. With simple compliance formalities, LLP is preferred by small startups, professionals, and small eCommerce businesses.

The primary advantage of an LLP over a partnership entity is that in an LLP, one partner is not liable for another’s misconduct. An LLP also provides limited liability protection to the owners from debts. Therefore, all partners in an LLP enjoy a form of limited liability protection for each’s within the partnership.

For a Private LTD. company, a minimum of two shareholders and a maximum of up to 200 shareholders are allowed. The minimum authorized capital of at least Indian Rupees 100,000 is required to form a private entity in India. There’s no upper limit

Documents required for Company Registration

Once you finalize the most suitable type of registration for your business entity, you will have to produce a list of documents for the process.

 

PAN Card: PAN Card copy of the proposed Partners/Business owner

Address Proof: The proposed Partner must also submit an address proof and residential proof.

  • Election Card
  • Aadhaar Card
  • Driving License
  • Passport
  • Electricity Bill
  • Telephone Bill

Residential Proof:  A residential proof must be submitted to register an LLP.

  • Electricity Bill
  • Telephone Bill
  • Bank Statement

The whole process of business registration may take up for 6 weeks. The time taken for registration depends on submission of relevant documents and the speed of government approvals. Post registration of your business entity, you need to get a current account for the same to carry out banking transactions.

 

Get a Current Account

 Here’s is the list of documents required for opening a Current Account for:

If you register under LLP

  • Certificate of Registration
  • Current phone number and e-mail ID of the entity.
  • Address proof of the entity
  • PAN of the entity.
  • Passport-size color photograph of each owner
  • List of designated partners.
  • PAN/ identity proof of owners
  • Address proof of owners.
  • LLP agreement.

If you register under Partnership Firm

  • Passport-size color photographs of authorized members of the firm.
  • List of owners holding more than 15% in the firm
  • Communication address proof of the entity
  • Identity and address proof of authorized members of the firm
  • PAN of the entity.
  • Partnership deed

If you register under One Person Company

  • Address proof and PAN card of the sole proprietor/entity
  • Latest passport-size color photograph of the karta
  • Identity and address proof of the karta
  • Phone number and e-mail ID.
  • Permanent Account Number (PAN). Latest passport-size color photograph of the sole proprietor/ entity. 

If you register under Private Limited Company

  • Board Resolution
  • Phone number and e-mail ID of the entity.
  • Certificate of incorporation
  • PAN of the entity.
  • Updated list of directors.
  • Memorandum of Association and Articles of Association
  • Address proof of the entity
  • Latest passport-size color photograph of each of the authorized members
  • Copy of one address proof and photo identification of each owner
  • Shareholding pattern
  • Permanent Account Number of owners
  • Address proof of owners.

The next step post getting a current bank account is to register for GST. For e-commerce websites, it is mandatory to obtain GST registration irrespective of the value of turnover.

Register for GST

Documents required for GST registration

  • Pan of the GST applicant
  • Proof of business registration
  • Identity and address proof of owners with photographs
  • Address proof for the place of business
  • Digital signature for the authorized signatory
  • Bank account statement with a few transactions

Start Selling Legally

It’s a lot of work to do. The whole process of registration and getting a payment gateway may take up for 6 weeks. But once you register your company, you can sell legally under your brand name on your eCommerce website or on Amazon or Flipkart. As your business grows, ensure that you trademark your brand name and logo because you don’t want a copycat retailer selling products under your brand name. The trademarking process takes about a day or two- post which you can start using the “TM” sign with your brand. So, get your business registered today and start selling legally.

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