An online e-commerce store is one of the most common businesses around the world. It is also one of the most successful businesses and a great option for small businesses and entrepreneurs.
The very first step in the online store establishment process is its registration. An e-commerce store is set up as a private limited company as per the guidelines mentioned in the Companies Act.
How much does it cost to start an eCommerce store?
The cost to start an eCommerce store depends on the amount the business owner wants to invest. The minimum amount differs from INR 6000 to INR 30000 depending on a number of directors, authorized share capital and fees.
What are the types of Private Limited Companies?
1. Limited by shares
In limited by shares private company, the liability of members is limited to the amount unpaid to the company considering the shares they are holding.
2. Limited by guarantee
In limited by guarantee, the liability of members is limited to the amount of money they guarantee at the time of company closure.
3. Unlimited liability
In an unlimited liability category, there are options through which personal assets can be sold.
What are the steps required for an E-commerce business?
Following are certain steps that are a must and must be considered while setting up an online store –
1. Research Ecommerce Business Models
Understanding several business models is important. It is the first step and thus it must be undertaken in an effective manner.
Certain business models popular in eCommerce are Business 2Commerce, Business 2Business, Customer 2Business, Business 2Customer, Customer 2Customer, D2C, wholesaling, dropshipping etc.
Conduct an eCommerce niche research
A business must select a niche in which it can undertake all sorts of business activities. Selecting a business niche requires an adequate amount of research.
Understanding customer’s needs and their problems are the most significant aspect that must be considered by the entrepreneur. The goal is to be as specific as possible.
2. Finalize target market
After a good research, the entrepreneur must decide on a target market, which is basically a group of individuals who would be selling your products or services to.
3. Brainstorm and decide the products or services that will be offered
After the target market is set and ready to go, the entrepreneur can go ahead and look for product ideas.
The product he sells must be a solution to the problem of his target market. He must deliver exceptional quality products to create and retain loyal customers.
4. File an application for eCommerce business registration and select a company name
Registration of an eCommerce store must be done before undertaking various business activities. It is important to understand all the crucial steps and get all the necessary permits and licenses.
5. Start marketing and promoting the store
After the registration is acquired, the store must start its marketing and utilize promotional strategies in order to spread the word about the business.
What are the types of eCommerce business revenue models?
Understanding revenue models is significant for small entrepreneurs as that is one of the major reasons for the establishment of an eCommerce store.
- Drop-Shipping
- Wholesaling and Warehousing
- Private Labeling and Manufacturing
- White Labeling
- Subscription
What business licenses are required for eCommerce business registration?
Following are certain documents are major requirements before undertaking business functions of an online store –
- Shops and Establishment Registration
- VAT Registration
- Service Tax Registration
- Professional Tax
What types of products can be sold on an eCommerce website?
- Physical products
- Digital products
- Commoditized products
- Niche Products
An online eCommerce store must be registered as a private limited company. In the next sections, important aspects of a private company will be discussed.
A Private Limited Company is defined as an establishment which is held under private ownership.
It is a privately held small business entity in which the owner liability is limited to their shares. Section 2(68) of the act states that a private company can be started with no requirement of a minimum paid-up share capital.
Starting Store Through Registering a Private Limited Company
A company that is set up as a private limited company comes with several characteristics. In this section, we will talk about some of the elements of a private company –
- A private limited company has limited Liability
- It has a feature of Separate Legal Entity
- There is no requirement to prepare annual reports in the initial years of a private limited company
- The directors can be easily terminated in a private limited company
- Minimum requirement of 2 directors to start a company
- A foreign national can also be a part of a company
- The proposed director must be at least 18 years of age
- It has more stability in comparison to other types of companies
- A private limited company attracts more customers
- Every private limited company use “pvt. Ltd”, at the end of their company name
What are the advantages of a Private Limited Company?
An e-commerce store is set up as a Private limited company as per rules in the Companies Act. The company also has many benefits that an e-commerce store enjoys. In this section, we will talk about certain benefits that a private company provides –
- It increases the credibility of the business
- It attracts more customers
- It helps in obtaining bank credit
- It provides a great level of stability
- It offers growth and expansion opportunities
What is the procedure for Online Private Company Registration?
An e-commerce store can be started by applying for private limited company registration online.
Filling of the SPICe plus form
The SPICe plus form is a significant form as it helps in the fulfilment of several documents with regards to the company.
This form fulfils requirements such as name reservation, company incorporation, and DirectorIdentification Number (DIN) allotment, issuance of PAN, EPFO, ESIC and TAN.
The creation of a bank account is also undertaken with the help of this form. Other forms that must be filled are –
- AGILE PRO
- SPICe+ AOA
- SPICe + MOA
- GST Registration
Following are steps in the online registration of a private limited company–
- Select the option “SPICe +” form under MCA services
- Next, select the option “New Application”
- If the application is already registered, select the option “existing application”. Fill in the application number with the proposed name.
- Select the type of company
- Select “Class of company” and “Category of Company”
- Select “Sub-category of Company”
- Specify the main division of the industrial activity of the company
- Provide details of the proposed name
What documents are required for Private Limited Company Registration?
Following are documents that are required for the registration of a private company
- Articles of Association and Memorandum of Association which contains all necessary details with regards to the company
- Declaration by the subscribers and by the directors
- Two months of utility bills
- Certification of company incorporation
- A resolution passed by the company
- A recommendation declared by the company
- The interest of the directors from other entities
- Approval of the Nominee
- Identity proof and address of the subscribers and nominees
- Identity proof and residential address of the applicant
- Declaration of the unregistered companies
What are post incorporation compliances of Private Limited Company?
- Corporate stationery
- Name board
- Letterhead
- Statutory Register
- Appointment of Auditor
What are the funding options for Private Limited Company?
- Bank finance or Bank loans
Businesses and small companies can obtain loans and advances from various financial institutions to start a company. In order to obtain a loan, the company must qualify for financing from a bank.
- Venture capital
Venture capital is a form of private equity financing provided by venture capital firms to small businesses.
- Angel investors
An angel investor is an individual, who provides capital to a business, startup etc. this gives a great start to the business.
- Crowdsourcing
This is the process in which a company can obtain work, take advises from a large group of people etc. It helps bring in innovative and creative ideas in the business which improves company effectiveness.
Checklist to be taken into consideration for Private Limited Company Registration
- It must contain a minimum of 2 directors
- A minimum of 2 shareholders is required, although both of them can be one person.
- One of the Directors must be a resident of India
- There is no minimum paid-up capital requirement for private limited company registration.
Conclusion
An online eCommerce store can be set up in a few days if all the guidelines are followed effectively.
Private limited company registration is one of the most important that must be followed by the business owner.
The documentation and forms must be filed within the stipulated time period soon after which the business can be started.
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