Article Published in the Express Magazine Dated July 01, 2001
General Attorney : Rajiv K. Luthra

My friends and I have just completed our education and would like to setup a business, manufacturing multimedia amplifiers, speakers, etc. Please advise us on the following:

a) How do we incorporate and register our manufacturing company and a trade name?
You have two options. You could either incorporate a company or enter into a partnership agreement with your friends. Both the options are well founded and both are very widely used. Since you are just starting your business, and if you are less than 20 partners, the better option would be to enter into a partnership agreement. In a partnership, the agreement is to share the profits of a business carried on by all, or any of the partners acting for all. The advantage of setting up a partnership firm is that there are almost negligible compliance issues to be adhered. The disadvantage is that the liability is unlimited.

On the other hand, in a company, there are several rules and compliance issues that need to be dealt with, the same being a legal entity with limited liability. As the business grows, the partnership can always be converted into a company.

To start a partnership firm, you are required to sign the partnership deed determining the mutual rights and duties of the parties and register your firm with the Registrar of Firms in the area where you propose to start your business. You have to furnish, vide a statement to the Registrar in the prescribed format, information about the firm name, principal place of business, name and address of each partner, name of any other place where the firm carries on its business, date of joining of each partner and duration of firm etc. This statement is required to be signed by all the partners or by authorized agents.

If you decide to incorporate a company, you have to obtain a name for the company by filing the requisite documents with the Registrar of Companies under whose jurisdiction the company's registered office would fall. Having obtained the approval from the Registrar for the name of the Company, the promoters of the proposed company are required to prepare the requisite documents, in their prescribed format. These include (i) Memorandum and Articles of Association of the Company; (ii) Statutory declaration by an authorized person; (iii) Notice of situation of registered office; (iv) Particulars of Directors from the subscribers authorizing any one person to act on their behalf at the Registrar's office. These are required to be filed with the Registrar within six months from the date of approval of the name of the Company by the Registrar .

Before establishing your name and the logo of your firm / company, verify from the trademark office that no other firm / company has the same or a similar name or trade mark registered or applied for registration. This shall protect you from any action by other firms/companies against you for infringement of trademark.

b) Do we have to get a license to manufacture any of the above-related products?

Sarabjit and Friends
The licenses are issued on the basis of the products you are manufacturing and, therefore, it is advisable that you prepare a list of the same and visit the State Industrial Development Corporation who would guide you on what items from your list need to get licenses. There may also be certain items which may fall in the category of a small scale industry, for which you may be required to register with the appropriate authority. Besides, the said Corporation may also be able to assist you to get certain loans which would be helpful in setting up the business.