What Are The Legal Requirements To Start The Food Business In India?
To start a food business like Restaurant, Bakery, and Food Truck, etc., in India, following are the minimum 10 steps which are required to follow to legally commence your food business -
1. Decide the name of your business
2. Decide the type of entity for your business among the following -
A. Proprietorship –
No REGISTRATION Required by Government to start the business but,
MSME Registration: MSME or Udyog Aadhaar registration can be obtained in the name of the business to establish that the Sole Proprietorship is registered under the Ministry of Micro, Small and Medium Enterprises.
TAN Registration: TAN Registration must be obtained for the Proprietor(owner) from the Income Tax department if the Proprietor is making salary payments wherein TDS deduction is required.
GST Registration: GST registration must be obtained if the Proprietor is selling goods or services that cross the GST turnover threshold limit for registration. In most states, GST registration is required for service providers having annual revenue of more than Rs.20 lakhs and in case of traders - annual revenue of more than Rs.40 lakhs.
Import Export Code: Import Export Code or IE Code can be obtained from the DGFT in the name of the business - in case of a Proprietorship business undertaking export and/or import of goods into India.
As there is no procedure for registering the name of a Sole Proprietorship business, any other person can also use the same name for their business. However, in case a Proprietor wishes to protect the business name and the name is unique, a trademark registration can be obtained for the business name.
B. Partnership –
The only criteria to commence business as a partnership is the finalization and execution of a Partnership Deed between the Partners.
There are two types of Partnership - a registered Partnership and an unregistered Partnership.
There are no penalties for non-registration of a partnership firm, and a partnership firm can even be registered after formation.
A partner of an unregistered firm cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.
No suit to enforce a right arising from an agreement can be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered.
An unregistered firm or any of its partners cannot claim set-off or other proceedings in a dispute with a third party.
The registration of a partnership firm is done through the Registrar of Firm in which the partnership firm is situated.
The application for registration of Partnership Firm must contain the prescribed registration form for incorporation of a company, identity proof/address proof of Partners, certified a true copy of the Partnership deed entered into and proof of the principal place of business.
As identity and address proof of the Partners, any of the following two documents can be submitted:
- PAN Card
- Drivers License
- Aadhar Card
- Voters ID
Proof of the principal place of business can be established by submitting the following documents:
- Sale deed in case one of the Partner owns the place of business
- Rental agreement copy if the premises are rented
- Copy of latest electricity bill or water bill or property tax receipt
· When the Registrar of Firms is satisfied by Application, a record of entry of the statement is made in the Register of Firms and Certificate of Registration is issued.
· Income tax return of a partnership firm is filed in Form ITR-5.
C. One Person Company (OPC)
Only a natural person who is an Indian Citizen and resident in India can incorporate OPC.
Resident in India means a person who had resided in India for a period not lesser than 182 days in the prior calendar year.
Legal entities like Company or LLP cannot incorporate an OPC.
The minimum authorized capital is Rs 1,00,000.
A nominee must be appointed by the promoter during incorporation.
Businesses involved in financial activities cannot be incorporated as an OPC.
OPC must be converted to a private limited company when paid-up share capital exceeds Rs.50 lakhs or turnover crosses Rs.2 crores.
The process for incorporation of a One Person Company can be divided into four steps as under:
- Obtaining Digital Signature
- Obtaining Name Approval
- Incorporation Filing
- Commencement of Business
The digital signature certificate must be obtained for the sole promoter and the nominee for processing the incorporation. Application for DSC would require passport size photos of the applicant, identity proof and address proof.
In parallel to the Digital Signature application, the application for name reservations can be submitted to the MCA. Name approval applications are processed by the MCA in 24-72 hours. The name suggested must conform to the naming standards, and the name of the OPC must end or include the words (OPC).
After obtaining name approval, incorporation application can be filed to the MCA with signed Memorandum of Association (MOA) and Articles of Association (AOA). Further, the identity proof, address proof and residence proof of the member and nominee would be required. In addition to the MOA, AOA, identity proof, address proof, other incorporation documents like affidavits and declaration of the sole promoter must be submitted. Further, the consent of the nominee director must also be attached in Form INC-3.
On filing for incorporation, approval is granted by the Registrar of Companies (ROC). In case there are any issues with the documents submitted, the application for incorporation can be resubmitted.
Once the incorporation certificate is obtained, the OPC would initiate the process for the bank account opening.
Once the bank account is opened, the promoter must deposit the amount mentioned in the MOA of the Company.
Once, the equity capital is infused into the Bank's current account; the Company can file for the commencement of business with the MCA. Commence of the Business certificate must be obtained with 180 days of incorporation to avoid a penalty.
In case notice of the situation related to the registered office was not filed during incorporation, it must be filed after incorporation within 30 days. Documents required for filing INC-22 are:
- Lease deed or Rent agreement together with rent receipts.
- Copies of utility bills as described above that are not older than 2 months
- A proof that the Company is allowed to use the address as the registered office of the Company if the same is owned by any other entity or person and is not taken on lease by Company.
D. Limited Liability Partnership (LLP)
The cost for registration of LLP is normally higher than the cost for registration of a partnership firm.
LLPs are registered in India under the Ministry of Corporate Affairs, Central Government.
The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in an LLP, one partner is not responsible or liable for another partner's misconduct or negligence.
LLPs must have a minimum of two partners to be registered.
Post incorporation, an LLP can have unlimited partners.
In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, in case of an LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP.
The following are the documents required for registration of LLP in India:
For the Partners
- PAN Card or Passport for Foreigners.
- Drivers license or Aadhar card, residence card or election identity card or any other identity proof issued by the Government.
- Less than 3 months old bank statement or telephone bill.
Registered Office Proof
- The authorization from the Landlord (Name mentioned in the Electricity Bill or Gas Bill or Water Bill or Property Tax Receipt or Sale Deed) to use the premises by the company as its registered office. This is usually referred to as NOC from Landlord; AND
- Proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, which is not older than two months.
LLPs must file income tax returns using Form ITR 5. Form ITR 5 can be filed online through the income tax website using the digital signature of the designated partner.
MCA Annual Return: LLP Form 11 is due on or before the 30th of May each year. Form 11 contains details of the number of partners, total number of partners, total contribution received by all partners, details of body corporate as partners and summary of partners.
In addition to LLP Form 11, Form 8 must be filed within 30 days from the end of 6 months of the financial year along with some prescribed fee. Hence, LLP Form 8 would be due on or before 30th October of each financial year.
In addition to the above, GST registration, GST return filing, and TDS return filing would be required for the LLP - based on the sales turnover and various other criteria.
E. Private Limited Company
To register a private limited company, a minimum of two persons to act as Directors and shareholders are required.
The shareholders of a private limited company can be a corporate entity or a natural person.
Director can only be a living person with one Director being a resident and Indian Citizen.
A person is designated as a resident if he/she spends over 186 days in India.
A private limited company is legally recognized as a separate entity. Hence, a company can have its PAN, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
The documents required for company registration can be grouped under three heads:
Documents for Directors: Two identity proof documents like Aadhaar, PAN, Passport, Drivers License or any other Government-issued identity document would be required. Indian nationals are mandatorily required to provide PAN. Foreign nationals are mandatorily required to submit attested or apostille passport copy.
In addition to the identity proof, the Directors must submit residence proof that is less than three months old. Proof of residence documents includes bank statements, electricity bill, water bill, gas bill, and telephone bill.
Documents for Registered Office: Companies registered in India must mandatorily maintain a registered office within India. In the case of leased property, the copy of lease deed for the registered office premises along with an NOC from Landlord and EB bill/property tax receipt/water bill copy of the registered office property. In case of own property, copy of sale deed along with the EB bill/property tax receipt/water bill copy of the registered office property.
Documents for Corporate Entities: In case one of the shareholder or subscriber to the MOA and AOA is a Corporate Entity (Company, LLP, etc.,) then Certificate of Incorporation of the Body Corporate must be attached along with the resolution passed by the Body Corporate to subscribe to the shares of the company under incorporation.
All companies registered in India are required to maintain compliance under various regulations. Failure to maintain compliance can lead to penalties or disqualification of Directors.
The Board of Directors must appoint a practicing Chartered Accountant within 30 days of incorporation.
Within 180 days of incorporation, the capital mentioned in the MOA [Memorandum of Association] must be deposited in a bank and commencement certificate must be obtained from MCA.
Companies registered in India must file income tax returns each year in Form ITR-6.
Companies registered in India must file MCA annual returns each year in Form AOC-4 and MGT-7.
DIN KYC procedure must be completed each year for the Directors of the company.
3. Fire Safety Certificate
A fire license or no-objection certificate is a document mandatorily required to obtain building plan approval from the Local Municipal Authority. Residents can acquire a fire license from the Fire Services Department that is regulated by the State Government.
4. Shop and Establishment License
Documents required for Shop and Establishment License
- Passport size photo of the applicant.
- Photo of the shop along with the owner.
- List of management employees and directors, if applicable.
- Details of the company, employees, and their wage rates
- Address proof of establishment
- Affidavit to be shared with the applicant
Information required before Shop & Establishment license
- Employer’s name and manager name.
- Postal address of the establishment.
- Name of the establishment.Establishment category of the restaurant, amusement park, hotel, etc.
- The number of employees.
5. NOC from RTO for food trucks.
6. NOC from Municipal Corporation
7. FSSAI Vendor’s License - FSSAI is a statutory body governing food safety and regulation in India. FSSAI license is an approval that provides for food safety and a sense of safety to the customers. This also stands as a reputation for being a restaurant that has followed all the protocols.
According To Product Provided At Your Shop – Check Further Eligibility Here -
Generally, Documents Required for Registration
1. Passport Photograph
2. ID Proof e.g. AADHAAR, Voter ID, PAN, etc.
3. Proof of possession of premises (if different as mentioned in ID Proof)
4. Declaration form
8. Liquor license - Many urban restaurants have started selling liquor as the main base over the business for luring customers. But selling liquor does not always depend on the price and status of the restaurant. It also depends on the city and locality, for instance, if the restaurant is somewhere near the temple or school then availing liquor license would be next to impossible.
9. Kitchen Insurance - Generally, insurance protects you against third-party claims such as property damage, bodily injury, or personal injury.
10. Health/Trade license: This license is being given over the concern of public welfare by the local municipal authorities.
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