Business
How to setup an ecommerce company in India?
India is a land of budding entrepreneurs. The youth of India is disillusioned from the lure of getting a job and they do not mind taking risks to reap greater rewards. The internet boom in India has also caused some young people to take to the internet to fulfil their dreams of moneymaking. However, there are many formalities and legal proceedings, which must be addressed before a person, is able to own an online store.
To start a business in India is definitely no cakewalk. However it has improved a lot over the last five years. Legal, taxation and other process are not streamlined.
-Saurabh Nangia. Founder, Targeting Mantra
From Market Research to legal registration to selecting appropriate tools for business management, if you aspire to become an entrepreneur then you need to have nitty gritty of all business and legal matters. Market research will help you prepare a plan for your company, legal registration will be required when you are satisfied with your business plan and want to start it as your career, finally tools such as version management, account and records management will help you manage your business effectively and securely. A good record holding service will also help you in maintaining your sales records and thus you can always do taxes right and your operations are more efficient. Also all the legal requirements can be satisfied with good record keeping. Access to some documents should be controlled or they might be a major security breach and your trading secrets can be compromised. To setup an ecommerce company in India a proper procedure should be followed.
1. Market research and testing – The market for the idea must be extensively researched and narrowed down. Most of the ecommerce websites in India fail because they try to cater to a bigger market than they can handle and thus their customer service suffers. In addition, they lose out to big online department stores like Amazon and EBay and their business is forced to shut down. However if the market that is being catered to is small and the products that is on offer is specific the company can survive.
2. Legal Registration of the Company– In India, to set up an ecommerce business one must fulfil many formalities with the Ministry of Corporate Affairs. Unlike in other countries it is mandatory to register an ecommerce business with a legal address. To register an ecommerce business a company must have complete these formalities
- A valid address – The team must provide a valid address for the business. It can be a private address of a team member too. Nevertheless, to rent a certain office space is advised.
- Two Board of Directors with DINs – There must be at least two board of directors with valid Director Identification Numbers. A person can register himself as director for a company by paying a sum of around 300rs to Ministry of Corporate Affairs. Any competent lawyer can draw up documents for the DINs.
- A sum of 100,000 Rs Capital – At the end of financial year, the company must show a capital of 100,000 Rs in its books.
- A valid company name – A valid company name has two components. The first word denotes the unique name of the company. The second word denotes the nature of the company. For example Tata Consultancy Services, Reliance Telecom, Sapient Consulting etc.
- Other Laws – Certain laws are to be taken care of by a company. Laws like labour laws, taxes like VAT and GST might be applicable on the company and a competent chartered accountant is often required to take care of these.
- Many times employee insurance etc. has to be taken care of, but small teams run most of the ecommerce startups and hence it might not be required.
Many online law companies can help you in setting up an ecommerce company.
3. Tools required – It is perhaps the most ignored part in the setting up of the ecommerce company. Most start up teams do not spend enough time on research for tools that are required and hence their productivity remains low. Because of low productivity, their competition has an advantage over them and it causes the company to incur losses. A startup should make sure that they have the right tools for setting up an ecommerce company.
These tools are absolutely required by the startup companies. Get the complete list here
1) Online conferencing tool -Most of the ecommerce sites are setup by the people who are already working somewhere and thus cannot meet often. To ensure that there is no gap in communication a good conferencing tool is required. Tools like Skype and Yahoo Messenger can actually help a person as they allow group conferences with audio and video calls free over the internet and are easily available.
2) A file sharing Service- There must be a central file repository or else there definitely will be a gap in research and data. Without a central file sharing system, all the data will be scattered and thus productivity will be very less. There are many solutions for this in the market. However, Skydrive and Dropbox are the most widely used and easily available services.
3) Records Management Service – This is often the most neglected service by the ecommerce website owners. There is a wrong perception that data is managed easily online. However, they neglect the security of their data. SaracenDataStore is one such service provider, which can really help you in making your data secure. Such a service is very safe and data is stored behind the safety of impenetrable firewalls. A formal record management policy is necessary for any company.
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