MSME Registration for Small, Micro and Medium Sized Organization

Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 gave us clear definitions as to what exactly are the meaning of Small, Micro and Medium Sized Enterprises. These definitions are based on the amount of investment in Plant & Machinery in case of production or any further processing of goods, and investment in equipments in case of Services.

Definition in relation to Goods

Enterprises	Investment in plant & machinery
Micro	Upto 25 lakh rupees
Small	More than 25 lakh rupees - 5 Crore rupees
Medium	More than 5 Crore rupees - 10 Crore rupees

Definition in relation to Services

Enterprises	Investment in plant & machinery
Micro	Upto 10 lakh rupees
Small	More than 10 lakh rupees - 2 Crore rupees
Medium	More than 2 Crore rupees - 5 Crore rupees

Ministry of Micro, Small and Medium Enterprises is responsible for formulation of all the laws and rules & regulations for implementation of such laws relating to MSMEs.

Micro, Small and Medium Enterprises form a major part of the economic sector of any developing country. MSME Act was introduced with an objective to support small, micro and medium sized enterprises to  promote equitable development.

IS MSME Registration Mandatory?

The answer to this question is, NO. MSME Registration is only a choice provided to the enterprises and is not a compulsory requirement. It is a choice given to the SSI/MSME category entrepreneurs weather to get MSME registration or not. MSME registration is not an obligation and also comes with number of benefits including:

-          Subsidies under tax laws

-          of Power tariff subsidies, help in development of specialized industrial estates etc.

-          Exemption under Direct Tax Laws

-          Easy availability of Bank Loans that too at reduced interest rates.

Are SSI Registration & MSME Registration different?

Many confuse Small Scale Industries Registration with MSME registration, but the fact is that SSI Registration is replaced by MSME Registration. And there is no fuzz relating to it, as MSME Registration Process is quite simple. The appli8cant is required to have Aadhaar Card.

And if the applicant has not started business, they can apply for provisional registration. It is valid for a period of 5 years and can be reapplied after that.

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MSME Registration and Its Importance

Registering a start up company as a micro, small or medium scale enterprise under MSMED Act in India automatically conveys a plethora of benefits on the enterprise. The MSME registration is a totally optional process for all relevant enterprises but companies prefer the certification because of the following reasons:-

·         Under Credit Guarantee Fund Scheme, micro and small enterprises get bank loan without collaterals;

·         Registered businesses are entitled to charge compound interest on delayed payments from buyers

·         Banks charge comparatively lower rate of interest from MSME registered companies.

There are many more such advantages that registered companies enjoy. Hence it is sensible to register your business with the Ministry of MSME at the onset itself.

What are the Criteria for MSME registration?

The Ministry clearly specifies the outline defining segregation of enterprises into micro, small and medium scale business entities:-

·         Micro industries are ones where the investment in the business is not more than Rs. 25 lakh in the manufacturing sector and not exceeding Rs. 10 lakh for industries in service sector.

·         Small industries are the ones whose investment does not go beyond Rs. 5 crore in the manufacturing segment and Rs. 2 crore for companies involved in services.

·         Medium scale enterprises are one whose investment does not go beyond Rs. 10 crore for manufacturing companies and Rs. 5 crore for ones involved in service sector.

What is MSME Registration Process?

MSME registration can be done online as well as offline. The offline process involves filing the relevant form and submitting it along with self-attested documents like Personal Aadhar number, Industry name, and bank account details, address proof of the registered office, certificate of incorporation, Partnership Deed, bill copies of machines purchased, sales and purchase bills.

MSME Registration online

Online MSME registration can be done from the government website. The registration form requires the applicants to fill in details like Aadhar Number, name of entrepreneur, social category, gender, physically handicapped, name of enterprise, type of organisation, PAN, address of the factory/plant, registered office address, mobile number, email id, date of business commencement, bank account number, IFSC code, main business activity of enterprise, NIC 2 Digit code, additional details of the business, number of employees, investment amount in plant and machinery in lakh. The scanned copies of Aadhar card is required to be uploaded here.

Udyog Aadhar Registration

Udyog Aadhar is a unique 12-digit number that is an official government identification number. The Udyog Aadhar is granted by the Ministry of Micro, Small and Medium scale enterprises. Once the MSME registration is done, the ministry provides the relevant certification and the Udyog Aadhar number. While this number can be applied for online as well as offline – with the Udyog Aadhar number the unit gets special government subsidies, 15% subsidy for upgradation of technology and 50% subsidy for getting patent registration; financial support to participate in industry specific exhibitions in foreign countries etc.

The Udyog Aadhar Memorandum, also called UAM is a document meant for self-certification of certain mandatory particulars of the MSME like its bank details, owner’s Aadhar details etc.

Is SSI Registration the same thing?

Yes, it is one and the same thing. SSI registration is for small scale business units and their ancillary units. The SSI unit needs to be registered with the Director of Industries at the state government level. With such registration, the enterprise gets special provisions like priority sector lending, excise exemption scheme, also exemption under direct tax laws, and interest on delayed payment etc.  

SSI Registration online

The SSI registration online can be from the website of the Ministry of MSME. In fact, the application form for SSI registration and MSME registration is exactly the same including the details that need to be furnished. The Provisional Registration certificate is granted in the pre-operation stage. The provisional certificate is applicable for a period of five years. Once operations commences, the unit needs to apply for the Permanent registration. However if the business does not start its production in the initial five years, it can re-apply for the provisional certificate.

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Section 8 Company Registration A Practical Approach

In India if you wish to register a Non- profit Organization it can be done in three forms;

·         Trust

·         Society and

·         Section 8 Company

In India Section 8 Company is the most preferred business structure for NGO registration. In this article we will discuss about what a Section 8 Company is and how can it be registered.

Basic attributes of a Section 8 Company Registration

If you are planning to set up a non-profit organization via Section 8 Company Registration following attributes must be known before initiating Section 8 Company registration;

• Minimum two directors and two shareholders are required for Section 8 Company registration.
• Section 8 company registration cannot be done as an OPC. It can only be registered as either as a private company or a public company.
• Section 8 company registrations cannot be done with profit making objective as it operates with charitable objects.
• Proposed name for Section 8 Company registration must not be undesirable or shall not be offensive to any group of people.
• Words like Association, Foundation, forum, Council, forum etc. must for part of the proposed name for Section 8 Company registration.
• The name must reflect the activity to be undertaken after Section 8 Company registration.
• Section 8 Company registration must be done with an objective of promotion and furtherance of medical facilities, education, art, culture, sports, commerce etc.
• In order to proceed with Section 8 Company registration after name approval applicant is required to acquire License from Central Government.
• Any profit cannot be distributed among the members as dividends.
• All the profits made are invested back in the organization for furtherance of its main objects.

What is Section 8 Company Registration Procedure?

STEP 1: Digital Signature Application submission

As all the forms are required to be verified and signed by the applicants thus they are required to apply for Digital Signature Certificate. All the subscriber of shares and proposed directors are required to apply for DSC and submit all the required documents along with passport size photograph of the applicant.

STEP 2: Apply for Name Reservation

The applicant shall finalize on a name for the proposed non profit organization and file for name reservation. Name reservation application is submitted via RUN service available on the Ministry of Corporate Affairs portal. Full form of RUN is Reserve Unique Name. Maximum two names can be applied for through RUN service. This application is processed within 2-3 days’ time. Once a name is approved by the authorities it will be reserved for 20 days within which time the Section 8 Company registration is required to be completed.

STEP 3: Prepare Incorporation Documents

After name approval is done prepare all the necessary documents required for Section 8 company registration. These documents include;

·         MOA

·         AOA

·         Statement of Assets and Liabilities

·         Estimated profits and loss statement for 3 years

·         List of directors

·         Dir-2 of all directors

·         Inc- 9 of all subscribers and directors

·         Declaration from professional etc.

STEP 4: Apply for License

In order to complete Section 8 company registration the applicant is required to obtain license from Central Government. Application for this license is to be filed in Form INC-12 and AOA, MOA etc. are to be submitted as attachments.

STEP 5: Submit SPICe Form

Once the License is issued in Form INC 16 to the applicant the only step left in Section 8 Company Registration is to file the Incorporation application through SPICe Form. Along with basic attachments copy of license issued shall also be attached in the section 8 company registration application.

Once the application is verified and the authorities are satisfied certificate of incorporation is issued.

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What is Business Plan? A Step by Step Guide

A business plan is a written statement or document that gives detailed description of a business or a division, mentioning its objective and goal and the method of achieving the same. In fact before starting the operations of a business, defining the business plan is a pre-requisite for various reasons, getting the right kind of investment being one of them. The business should be reviewed annually for understanding gaps and shortfalls, if any.

Preparing a business plan requires specialized knowledge of the domain. In order to prepare an impressive and winning business plan – a plan that is realistic, practical and achievable – it is important to hire experienced and premier business plan consultants so that a viable plan is drawn up.

What are the reasons for preparing a business plan?

Commercially, business plan is prepared to reach out to two types of audiences – the internal audience or external audience. Business plans that are prepared to impress and attract funding from banks and even investors are the ones that focus on external audience. These plans are also good to portray when companies are put up for sale or when looking out for new alliances. Business plans are prepared for the internal audience which mainly constitutes of employees and the management, in circumstances when one needs to explain and share certain business goals with them.

Formal business plans are given shape in case of starting a new business, or looking for a financier or looking to grow the business.

Constituents of a business plan

In general, a typical business plan comprises of all or few of the sections below:-

a.       An executive summary which is basically a summarization of the entire plan.

b.       Mission statement that defines the reason behind the existence of the business

c.       A description of the business

d.       Analysis of the particular industry and environment

e.       Analysis of the Strength, weaknesses, opportunities and threats to the business

f.        Analysis of the market, potential customers and the existing competitors.

g.       Detailed plan of operations, sales and marketing strategies and financial plan.

h.       Summary of the management team

i.         Achievements and milestones, in case of existing businesses.

What are the major steps involved in Business Plan?

The different stages that a typical business plan consultant will work through during making a business plan include:-

·         Researching and analysing the current model; the industry, the market conditions, competition scenario, production and operation capabilities of the organisation and overall industry, demand and supply conditions for the particular product or service etc.

·         From the findings of the above step, the consultant will collaborate with the business owner and management team to plan the next course of action.

·         Once the plan is drafted, it is put down on the paper so that concerned parties can review it.

·         On reviewing, there will be points that would require editing and reformatting. After much to and fro and detailed discussion, the final format gets ready and then the formal business plan is ready for the external and internal audience.

The business plan consultant’s job is highly complex. Every business – new or old – needs a plan made by a professional.

Hiring a consultant who is certified to do so is the foremost parameter to check for a business. Also getting to know about their previous record and experience helps determine if they are the right people for your type of industry, business, product etc. Checking with few of their past customers will help you decide if the business plan consultant is the one that can give proper shape and definition to your business goal.

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What is MSME Registration in India?

MSME is termed as Micro, Small and Medium Enterprise and also include any other category of business which falls under. MSME enterprises are becoming a prime factor for developing countries to grow and helps to improve economic stability, promoting equitable development for all.  The government of India is also supporting such enterprises by providing various aid such as subsidies, schemes, and incentives to promote MSME. For availing such benefit from Central or State government, the enterprise needs to get registered under MSMED Act. Micro, Small and Medium enterprise whether a manufacturing or service sector needs to get registered under MSMED Act. Registration under MSMED is not compulsory, but to avail benefits for business, one should register it.

Definitions of Enterprises engaged in providing services:

·      Micro Enterprise: An enterprise where the investment does not exceed Rs. 10 Lakhs.

·      Small Enterprise: An enterprise where the investment is more than Rs.10 Lakhs but does not exceed Rs. 2 Crores.

·      Medium Enterprise: An enterprise where the investment is more than Rs. 2 Crores but does not exceed Rs. 5 Crores

Definitions of Enterprises engaged in providing Manufacturing:

·      Micro Enterprise: An enterprise where the investment does not exceed Rs. 25 Lakhs.

·      Small Enterprise: An enterprise where the investment is more than Rs. 25Lakhs but does not exceed Rs. 5 Crores.

·      Medium Enterprise: An enterprise where the investment is more than Rs. 5 Crores but does not exceed Rs. 10 Crores

However, as per the Press Release of 07the February, 2018, Section 7 of the Micro, Small and Medium Enterprises Development (MSMED)  Act, 2006 will accordingly be amended to define units producing goods and rendering services in terms of annual turnover are as follows:

·     A micro enterprise will be defined as a unit where the annual turnover does not exceed 5 crore rupees;

·     A small enterprise will be defined as a unit where the annual turnover is more than 5 crore rupees but does not exceed Rs 75 crore;

·     A medium enterprise will be defined as a unit where the annual turnover is more than 75 crore rupees but does not exceed Rs 250 crore.

·     Additionally, the Central Government may, by notification, vary turnover limits, which shall not exceed thrice the limits specified in Section 7 of the MSMED Act.

Presently the MSMED classifies the Micro, Small and Medium Enterprises (MSMEs) on the basis of investment in plant and machinery for manufacturing units, and investment in equipment for service enterprises.

Who can apply for MSME Registration?

·     Proprietorship firms,

·     partnership firms,

·     LLPs,

·     Private Limited Company’s, and

·     Public Limited Companies

When to apply for Registration?

MSME Registration can be done after the commencement of business. The date can be a past date but not a future date.

Benefits under MSME Registration?

·     Easy sanction of bank loans,

·     Lower rates of interest,

·     Excise exemption scheme

·     The exemption under Direct Tax Laws,

·     Development of specialized industrial estates,

·     Tax subsidies,

·     Power tariff subsidies and,

·     Capital investment subsidies,

MSME Registration Process:

Registration Process is divided into two parts namely Pre-operative and post-operative.

Registration before setup of unit: Depending upon the legal entity of the business whether a sole proprietor or a company, needs to submit PAN, Aadhar, Register office proof, MOA and AOA in case of company and other documents demanded by the authority. The Registration Certificate of MSME is issued for a maximum period of two years from its date of issue. The certificate is valid until the commencement of the production or for a period of two years from the date of issue, whichever is earlier.

Registration after the commencement of production: Once the entity is registered under MSME, the business gets various privileges during its post-operation period. The certificate is not mandatory and it can be applied once the production process starts.

Conclusion

The Development of Micro, Small and Medium Enterprise involves various acts and rules, among which MSMED Act is one of them. After the implementation of the Act, there have been many changes for the benefit of Micro, Small and Medium Enterprise in India. It is not compulsory to register under MSMED for every entity, however, it is beneficially to get it registered.

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