How to start an IT or Software Company in India

Indian Information & Communication Technology (ICT) space is sized at over 400 billion, one of the largest in the world. The IT & ITeS space alone is sized at over USD 180 billion. Indian IT exports play a very critical role in the global IT & technology industry. Around 50% of the Indian IT exports comprise services. Consulting services and BPO comprise 20% and 19% of the exports respectively. Slowly and gradually India is also expanding its foothold in other categories such as IT hardware, product development, etc. 

India is also the second-largest internet market in the world after China. However, India’s internet consumer space is just the tip of the iceberg. There are plenty of headspaces available for internet companies to grow in India. This is one of the reasons, global internet giants such as Google, Facebook, Amazon, etc. are betting big on the Indian market. Google is investing USD 10 billion in India. Facebook and Amazon are investing USD 5.7 and 5.5 billion respectively. 

India’s IT and technology market is a lucrative space for businesses to grow, develop, and evolve. There is ample space for both large as well as small enterprises to grow and develop in India. In the next 5 years, the IT industry in India is expected to grow at a staggering speed and will reach USD 350 billion. 

Meanwhile, with a lot of legal procedures and complexities involved, starting a software company in India is interesting as well as challenging. If you are looking to start an IT or Software company but are not aware of the legalities and formalities, then you can find below the complete process of starting an IT company.  

Pre-Registration Process

To start a software company in India first you have to choose the apt category of the company. There are usually two types of software companies in India, service or consulting-based software companies or Product or development-based enterprises. You can choose any of these types depending upon the domain expertise. For starting a business in India you need a legal entity and hence need to register the software company. The popular legal entity in India includes Sole Proprietorship Firm, Partnership Firm, LLP, or a Private Limited Company. More than 90% of the companies in India are registered as Private Limited Companies. To register your software company as a private limited company you need to fill up a form and provide some vital documents like:

  • PAN card of the owner as well as Partners
  • Any of the address proof such as Voter-ID, Aadhar card of the owner as well as partners
  • Address proof of the business like a utility bill or rent agreement

Registering Process

In India, every company has to be registered under the New Companies Act 2013 and there are several rules and regulations which you need to follow while registering a company. The very first task that lies ahead is to get the company name approved with the permission of the Registrar of Companies. After this, you will need to obtain a Company Identification Number and submit all the legal forms and documents by specifying all the essential information related to the company. You also need to mention the shareholders, share capital, funds, and all related information needed to fill in the legal form. After all the documents are approved you can apply for the registration certificate. 

Legal Formalities

The legal formality for starting a software company in India is a two-step process, pre-registration, and post-registration processes. The pre-registration process includes:

Obtain Directors Identification Number or DIN - A software company first has to choose its directors that must be between 2 and 8, not less or more than that. All the directors must have Director Identification Numbers (DIN). If they do not have, they can apply for DIN by submitting their ID and address proof. 

Choose a Company Name - After DIN, the company needs to choose a name for the software company. The business has to choose a name keeping in mind the Ministry of Corporate Affairs (MCA) guidelines for naming the company. If the chosen name is not available then you have to come up with an alternative name. 

Application for Incorporation Certificate – The next step is to apply for obtaining the incorporation certificate. For the incorporation procedure, you need to draft a Memorandum of Association along with the company’s first director and its operations. 

Obtain Digital Signature Certificate – According to the IT Act 2000 provision, every company is supposed to have a valid Digital Signature on the electronically submitted documents. This is done to ensure the security of documents that are electronically filed. The digital signature certificate should be obtained only through CCA-appointed agencies and should not provide DSC provided by any other agency that is not approved.

Create an Account on MCA Portal 

After legally registering the software company you need to create a registered user account that is completely free on the MCA portal for performing different tasks like filling up an e-form, online fee payment, making transactions as a business, and registered user.

Steps of Registering Software Company

  • You have to provide a short detail of the business such as the product type, field, and the technology that will be used. Besides, you also need to provide details regarding software, right from its development to supply to the market. 
  • Next, you need to select the type of company to be established depending on factors like company form, size of the firm, amount of risk, target market, along budget. You can establish a sole proprietorship, private, or partnership firm depending on your wish to operate nationwide or globally.
  • You then need to decide on the region where you wish to start the company and should know about the business laws of that respective region. 
  • You should register your software company under the ROC category and while registering one needs to apply to the same office where the head office is established. 
  • After receiving the registration certificate from ROC you can start with the hiring process.
  • You should register with the Department of Employment to hire legally and by applying in one state you will be able to hire from all over India. 
  • You should register under the Software Technology Parks India or STPI category, as this will provide you with comprehensive legal benefits along with some other benefits.
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