There is a big hike in Software companies in India recently along with India being the 2nd largest startup ecosystem in the world.
There are various stages to follow to register a software company in India. So, This article talks about the procedure to start a software company in India. Before starting a software company in India, we have to select the right type of company as product or service based.
Let’s understand how many types of software companies in India and understand the process to know how to register company officially in India with Company registration.
Types Of The Software Companies In India:
To start a software firm in India, we have to select correct category of the software company.
In India, there are 2 types of software companies –
1) Service OR Consulting Based Software Company
2) Product OR Development Based Software Company
1) Service Or Consulting Based Software Company
Service or consulting-based software companies provide services regarding information technology, business consulting, outsourcing, & software engineering services to customers.
Best software consulting and service companies in India are as below –
TCS, Infosys, Wipro, IBM, Tech Mahindra, Accenture, as well as many others.
Type of services provided by the companies are –
- Custom business solutions
- Database migration services
- Customization services
- Application development
- Outsourcing
- ERP solutions
- Collaborative commerce
- Programming services
- Quality assurance and testing services
- Multimedia offering
2) Product or development-based software company
These kind of software company have set of products or a product or those are providing a major section of the revenue. The best software product, as well as a development-based software company in India are, as below –
- Amazon
- Microsoft
- Cisco
- Zoho
- Inmobi
- Tally
Steps to start a new Software Company
Below steps to be followed to start with a new Software company :
- Write a business plan
- Choose your business organization or structure
- Select the region in India on which you want to focus
- Register your software company with ROC (The Registrar of Companies)
- Select the location in which you intend to start your software company
- Hire competent staff
- Register as an employer with the state or region Department of Employment in India
- Register with Software Technology Parks of India (STPI)
1. Write a business plan
A business plan for a software company must include descriptions of the technology and the skills and expertise that your company will be using to develop the software. Mention the detailed description of your niche market, since the type of software product you will develop, that will be directly related to your clients.
Let’s say, if you choose to develop software for health & medical use, your market is the health & medical field, and you should provide a description of this industry as well as of many other companies developing same software.
2. Choose your business structure or organization
According to the details provided on India’s government website, if your company requires employees with specific technical knowledge, expertise & skills, the best structure for your business can be a partnership. But, the size & strength of your software company & whether you intend to provide services only to your local community, or nationwide are two factors that may affect the type of company you select. If you choose to focus on the mobile S/W industry, your good option is to focus on a national market probably. In this situation, a limited company structure is the best suitable for your business probably.
3. Select the region in India on which you want to focus
You may choose to sell software products nationwide, but depending on the type of software you produce, It may be beneficial for you to focus on various high-density areas.
Suppose you plan on developing and selling software to the pharmaceutical industries, you should focus business deals in the western side of the country. According to mapsofindia.com, this industry has a higher concentration in this field.
4. Register your software company with ROC (The Registrar of Companies)
Institutions as well as Entrepreneurs are seeking to start a software company in India. To start the company they need to follow several requirements and procedures, which are provided by India’s enterprise regulations, including provisions on business endeavors within the IT sector. Other requirements may depend on the business’s range & scale of services.
Let’s look at the Legal Entities for a Software Company In India:
Before starting a Software Business in India, entrepreneurs need a legal entity for the business they want to start. There are some popular legal entity which are enabled to open the Business In India.
- Sole Proprietorship : Probably, This is the the best legal entity to try & go for new ideas in starting with nominal cost. It will not be a full flash company but owners can call it as a Sole Proprietorship firm.
- Partnership Firm : It is a good opportunity for business, when the business owner has Co-Founders and try altogether to work for the business idea with a minimum legal cost.
- Private Limited Company : A true company for businesses in India. Around more than 92% of business owners register as a Private Limited Company their companies in India.
To follow the process, you must provide 4 different names for your company that are not already present. You should also create a Articles of Association and Memorandum, which is the structure of your company. Fill out the Notice of the Situation of the Registered Office of the Company and Particulars of the Director, Manager or Secretary forms and the Declaration of Compliance. You can search and get these forms in the online Indian government portals. To fill out these forms, you need to provide at least basic information about your IT company, your own and board of director’s personal information. Registration fees are just thousand Indian rupees ( Rs.1000) on an average.
To register a software company some important documents required:
- Pan card of the owner as well as partners (photocopy).
- Aadhar card, Driving license or Voter id or Aadhar card as address proof of the owner or partners.
- Business address proof like, rent agreement copy and utility bills copy. Even you can register your house address as a business place.
Other legal registration and public licenses for opening a software company in India are –
- Service tax registration for a consultancy business
- Software license agreements
- GST registration when producing software in CDs or any other devices
- Trademark registration to protect your brand name.
- STPI license which is beneficial for the new companies for the zero taxes and no export duty on H/W(Hardware) or S/W(Software) products.
- Copyright registration on your source codes
- Patent registration on technology
5. Select the location in which you intend to start your software company
Consider the employee strength & size of your software company, the technologies & number of employees available in the place. One benefit of running a software company is that stuffs like manufacturing, research and development, and storage are often non-issues. You may start with a small office with enough space to place a couple of computers for your employees, & then shift to a big office as your company starts making a good profit.
6. Hire competent staff
When the company is started and running, owners should focus on recruiting expertise from the market. India is a hub where there are plenty of well-trained professionals are available, specially in the sector of software technology.
A software company is a type of business that need you to hire individuals with higher education, high technological skills, and high knowledge of software development. Hire three or four software engineers, plus two or three computer programming professionals with an associate’s degree to begin. You can recruit a higher number of expert employees as the company grows. If you choose to focus on a specific industry, such as the medical industry, ensure you hire software engineers with knowledge and experience in developing medical software.
7. Register as an employer with the state or region Department of Employment in India
Maharashtra, Kerala, Jammu & Kashmir and Tamil Nadu are the four such states, they provide online registration. Registering at the Department of Employment in one state allows you to post job advertisements and look for well suitable candidates for the open positions in your company.
8. Register with Software Technology Parks of India (STPI)
While registration depends on the preferences of the company, a company that belongs to STPI can receive benefits, such as tax breaks.
Submit a business plan, source of funding, statement of your project with a thorough draft of a financial plan and the marketing strategy detailing projections for up to five years.
Key highlights In Brief To Be Followed While Setting Up A Software Company
- 1st, one has to give a brief description of the business like the type of product, the type of technology which you are going to use, field and company’s target. You have to mention information related to the software like how it will be developed and published in the market, etc.
- Choose the form of the company, whether it is a sole proprietorship or partnership or private. The key factor that decides the form of the company is sizes of the company, target market, the range of risk, as well as budget. Ensure your plan is according to your goal whether to go globally or nation-wide.
- Choose the region and get information related to the business laws running in that perspective region.
- Get your software company register under ROC. While registering it is required to file a form to the same office where the head office is located.
- Choose the location where you want to firm your office. Post getting the certificate from ROC, you should start looking for hiring resources/employees.
- Register your company in the state or region Department of Employment for offering jobs and legal hiring. Through which, applying in one state can offer you to hire employees from anywhere in India. Without registration may cause trouble in future in your employees hiring process.
- Register under STPI (Software Technology Parks India). This may help to reach the benefits like, complete legal and tax breaks benefits.
Conclusion
When registering a software company, there are many laws and regulations to go through. The company laws and constitutional laws that we now observe in India are derived from British regulations. All businesses in our country should be licensed under the ‘New Companies Act 2013′.
Planning & opening a software company in India requires much energy and efforts. However, there are certain instructions & ways to be followed for a successful outcome. Entrepreneurs or company owner should not neglect the steps & get knowledge from other companies’ mistakes and experience and accept the challenge. Best of Luck!!