You’ve validated your idea, and found your cofounder, and have even drafted and signed a Founders’ agreement. Now what? Before you start accepting payments or signing clients, you’ll need to make it official, aka registering your company. This has a lot of advantages, and also opens up a lot of doors for you, like tax saving, applying for grants, getting pre-seed funds from angel investors or VC’s, and also helps in protecting you from liabilities & many other regulatory headaches.

Is Incorporating at the Start a Smart Choice?

Many first-time founders rush to register their company before they’ve even tested their idea. They do not understand that it is in fact a huge misstep, and leads to many red-tape hurdles, recurring costs, and pressure to bring in the revenue even before pmf (product market fit) is achieved.

You are also not sure if the idea will even work, or if you have enough resources to execute it, or if there is enough market interest, or if you even have a long-term commitment towards your startup idea. With many online and offline agencies and processors have popped up in this digital age, it is quite easy to incorporate. The trouble starts when the idea doesn’t work, or partnerships break, or you want to shut your startup down indefinitely for whatever reason.

Many first time founders are also not aware that there are a lot of recurring costs and taxes associated with running a company. A company is required to maintain operations and legal compliance. These expenses include government filings, accounting fees, and operational overhead like payroll, rent, and insurance premiums.

As a startup you need to always stay lean until there is a steady revenue. Be smart and move towards incorporation only when you are sure about fulfilling all basic obligations of having basic runway money for the first one or two years expenses, or have a steady revenue generating formula ready from the get go.

You should remember that incorporation isn’t step one of building a startup, it comes in at least in step four of the process of starting a startup. It is usually done once you are very sure that you are at least able to get some paying customers and are generating some kind of revenue from the market.

If you are still in the idea validation phase or testing multiple directions, incorporating too soon can add unnecessary compliance costs, paperwork, and tax obligations. The key is to assess whether your startup has reached a point where formalizing it as a company creates more opportunities than constraints, and only then move ahead with the registration process.

When to Register a Company?

Even though as stated above that registering early is not a smart move, there are always special cases when it is a strategic move to register or incorporate early, depending on your goals, stage of growth, and clarity of vision.

For founders with a well-defined product, clear team structure, and plans to raise funds or sign contracts, early incorporation adds credibility and legal protection. It allows you to open a business bank account, issue shares to your co-founders, founding members & investors, which can help you operate your startup professionally.

You should also be aware of the risk of compliance, once you’re registered. A risk that is a threat to an organization’s finances, organization, and reputation due to violations of rules, regulations, and laws governing its activity.

What Business Entity to Choose?

You as an entrepreneur might have usually come across these below doubts such as:

“I should probably choose a Private Limited Company. What a solid trust it will create with my clients.”

“I should open a LLP. I already have a partner and we don’t want too much compliance burden.”

“I have a small business, and I am not looking for any short term significant growth. I also want to save on running costs, so Sole Proprietorship is best for me.”

You can use the FLIRTT Model during incorporation of your company. (PLC/LLP Sole Proprietorship).

Let us first understand what the FLIRTT Model is, and how it helps us in arriving at a conclusion about what to choose.

  • F Stands for “Funding“
  • L Stands for “Liability“
  • I Stands for “Investor“
  • R Stands for “Revenue Sharing Model“
  • T Stands for “Taxability and Related Compliance“
  • T Stands for “Transferability“

More details can be found in our article about 3 Best Company Incorporation Types For Indian Startups.

Steps to Register a Company (in India)

Once you’ve done your due diligence, you can proceed with the registration process. Also make sure all your documents match with the ID’s you are going to submit during the registration process.

We will lay down the necessary steps for pre and post registration below.

Pre-Incorporation Compliance:

  • Acquire a Class 3 Digital Signature Certificate (DSC): This is required for signing documents online, and it usually takes around 1-2 days. It can be acquired through certified agencies such as NSDL or eMudhra.
  • File a DIR-3 Director Identification Number (DIN) on the MCA portal, and it can be filed along with your company registration.

Document required for a DIN:

Identity Proof (Any one of the following)

  1. PAN Card
  2. Driving License
  3. Passport
  4. Voter ID Card
  5. Others (to be specified)

Residence Proof (Any one of the following)

  1. Driving License
  2. Passport
  3. Voter ID Card
  4. Telephone Bill
  5. Ration Card
  6. Electricity Bill or Rental Agreement (NOC from the owner if the property is rented)
  7. Bank Statement
  8. Others (to be specified)
  • Application for Name Approval (SPICe Part A): Here you need to choose a unique name (check this prior to application to avoid rejections) and submit it on the MCA portal, which gets approved in around 1 to 2 days. You can either choose from (a) RUN (Reserve Unique
    Name): ₹1,000 (non-refundable) or from (b) SPICe (Simplified Proforma
    for Incorporating Company): Free name reservation.
  • File Company Incorporation Form (SPICe Part B): You need to now submit documents, director details, MOA/AOA, and your office address. This process takes around 1 to 3 days.

Submit SPICe (INC-32) AGILE-PRO (INC-35) for:

  1. Company Registration (Pvt Ltd/OPC)
  2. PAN & TAN (Mandatory)
  3. GST Registration (Optional)
  4. EPFO & ESIC Registration (if hiring employees)
  • Now get the PAN, TAN & Certificate of Incorporation. This process takes around 1 to 2 days, and all of them will be issued together, mostly via email.

Post-Incorporation Compliance

  1. Open a Bank Account (Using COI & PAN).
  2. GST Registration (Mandatory if turnover > ₹40L/₹20L for services).
  3. Startup India Registration (Optional for tax benefits).

Timeline & Cost

  1. Time: 7–15 days (if documents are correct).
  2. Cost: ₹7,000–₹15,000 (excluding professional fees).

For Professional Help and for hassle-free registration, consider:

  1. Chartered Accountant (CA)
  2. Company Secretary (CS)
  3. Online Legal Platforms

You should also be aware that Startups falling under Startup India initiative, which are approved by DPIIT (Department for Promotion of Industry & Internal Trade) are usually provided with a good amount of tax exemptions. You should try to take advantage of these government provided schemes as and when required.

This is the fourth of the many resources among the Startup 101 series. You can check out more articles on this topic, as and when we keep writing and publishing them. Our goal is to provide an open, unbiased and helpful resource, which can help you build your startup, and avoid common pitfalls.