A successful business is a great idea translated into action. The idea to start any business originates from the solution to a problem that impacts a community at large. Finding taxis and autos for hire was a troublesome experience for commuters and hence someone came up with a solution to book cabs on a mobile app. Similarly, home delivery of groceries and other items was another such idea that was the need of the hour and hence immediately struck a chord with people.

The e-commerce industry came into being because it identified a problem and came up with a solution which not just convenient but also easy on pocket.

E-commerce provides a business opportunity like no other. However, to start and set up an e-commerce company one must follow some rules.

Define your Objective

Before starting any company one must first clearly state the MISSION and VISION of the company and provide an overall direction to its way-forward. The vision statement should be expressive and well drafted so that it appeals to people and at the same time also gives direction to the organisation.

Identify Partners and Build a Team

The core team which includes your partners forms the foundation of any organisation. One must choose and select the partners looking at a long-term horizon. It is extremely important for partners to completely trust each other. Responsibilities should be divided among the core team members and each member should be accountable for their domain functions.

Selection of vendors for setting up the inventory

For any e-commerce company, the most important area of management is setting up of inventory of products. For the same, the company needs to onboard vendors/ sellers who can provide good quality of products.

Appoint a Chartered accountant (CA) to represent the company

Your appointed CA would be your go-to person when it comes to all the documentation and formalities for registering the company.

Also read: Meet the e27 Academy trainers who will power up your financial and go-to-market strategies

Registration of Company

When only one individual is opening a firm, he needs to go for proprietorship. Proprietorships are generally preferred for small businesses and its registration generally starts from Rs. 2,500 (arouns US$35) and above.

In case of two partners or more, one can decide whether to go for Limited Liability Partnerships (LLPs) or Private Limited Company. LLPs offers limited liability, offers tax advantages, can accommodate an unlimited number of partners, and is credible in that it is registered with the Ministry of Corporate Affairs (MCA).

While Private Limited Companies have greater applicability, LLP too offers nearly all the benefits of a private limited company, with none of the downsides of a partnership firm. Compared to a private limited company, a LLP is also significantly cheaper to start and maintain.

A private limited company at costs at least Rs. 15,000 (around US$210) to start. But once this is done, you need to shell out at least Rs. 15,000 a year to comply with the MCA’s rules and regulations, some of which begin as soon as you incorporate. Then there’s the need for an audit, which will again cost you a minimum of Rs. 15,000. That works out to Rs. 45,000 (US$630) a year.

An LLP on the other hand is much cheaper. It costs just around Rs. 11,000 (around US$154) to register and around Rs. 4,000 (US$56) to comply with MCA regulations. Moreover, you only need to conduct an audit once you have a turnover of over Rs. 40 lakh (US$76,000) and paid-up capital of over Rs. 25 lakh US$47,500). This means that for the price of starting a private limited company you can start and maintain an LLP in its first year.

The company should have arrange sufficient funds thereafter to initiate 10,000 shares of the company.

Some other requirements post that are:

  • MOA: A Memorandum of Association (MoA) represents the charter of the company. It is a legal document prepared during the formation and registration process of a company to define its relationship with shareholders and it specifies the objectives for which the company has been formed.
  • DIN: A Director Identification Number (DIN) is a unique Identification Number allotted to an individual who is appointed as a director of a company.
  • PAN Card: The company then needs to apply for a PAN card so that all financial transactions on behalf of the company can be duly accounted for.
  • GST No.:  As a mandatory practice, the company needs to apply for a GST number.
  • Current Bank Account: All companies need to maintain a current bank account with a minimum balance of requirement of 50,000/day.
  • Domain for website and Company Logo: The company needs to secure the available domain name for the website and hire a graphic designer to design the logo for the company.

The real test for any entrepreneur starts after completing all these legal and regulatory formalities. In the process of reaching out to and acquiring customers, one will be faced with many challenges on a daily basis. What will determine the failure or success of the company is its ability to cope up with these challenges and stay focussed towards its objective.

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