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How to Start an Ecommerce Business

How to start ecommerce business

How to Start an Ecommerce Business

Ecommerce businesses are booming in India – thanks to the growing internet and smartphone penetration in India.  Starting a ecommerce business is relatively easy in India with very little capital requirement, making it an ideal choice for millions of young entrepreneurs. In this article we look at how to start an ecommerce business in India.

Steps for starting an ecommerce business
Steps for starting an ecommerce business

Ecommerce Business Models

Before taking the steps to start an ecommerce business, the Entrepreneur must decide on a business model. There are two ways an ecommerce business can be launched, becoming a seller on an established ecommerce platform or creating a new ecommerce website. For most Entrepreneurs starting an ecommerce business, becoming a seller on an established ecommerce platform is the most ideal choice. Established ecommerce platforms like FlipKart, Snapdeal, Amazon have a framework businesses to register with them and sell on their platform backed by their technology, marketing efforts and delivery capabilities. This makes starting to sell online a very easy process and requires no effort for website development, website maintenance, digital marketing, etc., To know more about How to sell on FlipKart or How to sell on Snapdeal, visit IndiaFilings Learning Center.

Starting an ecommerce business by creating your own website is another way to start an ecommerce business. This method is however more difficult and requires more effort. While launching an ecommerce website maybe easy with tools like OpenCart or Magento, the challege lies in marketing – acquiring visitors for the website. Therefore, starting an ecommerce business by launching a website is more recommended for those Entrepreneurs looking to sell niche products or have a long-term vision for establishing a large successful ecommerce business backed by private equity investors.

Business Registration

Once the Entrepreneur has decided on a business model, business registration is the first step in making the dreams of the Entrepreneur a reality. Most ecommerce business require lots of equity capital to start and operate, as Banks in India are mostly averse to providing bank loan for ecommerce startups. Therefore, it is best to start a ecommerce business as a private limited company as it provides 1) limited liability protection, 2) transferablity 3) ability to have equity partners or private equity investors and 4) a separate legal entity. Irrespective of the capital investment in the private limited company, the company can be registered with an authorised capital of Rs.1 lakh and then increased as more investment in the form of private equity or bank loan in invested.

It is not recommendable to start a ecommerce business as a Limited Liability Partnership (LLP) or One Person Company (OPC). LLPs do not allow for equity investment in the business and OPC do not allow for more than one promoter. Therefore, the ideal business entity for starting an ecommerce business is private limited company only.

Opening a Bank Account

After registration of business entity, opening a bank account is the next step in starting an ecommerce business. If a Private Limited Company was incorporated, then opening a bank account in the name of the business is very easy. The entrepreneur can approach any bank with copies of PAN Card, Memorandum of Association, Articles of Association and Certificate of Incorporation of Company to open a bank account. If any other entity was incorporated, then you can refer to the article on “Opening a Business Bank Account in India” for more information about opening a bank account.

Tax Registration

After obtaining PAN Card for the business and opening a bank account, the required tax registration must be obtained for the business. If the business plans to sell goods or products in India, then VAT / TIN Registration must be obtained from the state Sales Tax Department. In case the business plans to provide services online, then service tax registration must be obtained.

If the business plans to sell online through marketplaces like FlipKart or Snapdeal, then VAT / TIN Registration must be obtained to complete the seller registration process. On obtaining TIN registration, copy of documents like PAN Card copy, Certificate of Incorporation of the Company and cancelled cheque can be submitted to start selling online through FlipKart or Snapdeal. If the business plans to sell good or services online through its own website, then a payment gateway maybe required to start the ecommerce business.

Payment Gateway for Ecommerce Business

An online payment gateway allows for processing of credit card, debit card, net banking and cash card transactions through the ecommerce website. To get a payment gateway for a ecommerce website, the following documents must be submitted to the payment gateway provider:

  • Bank account in the name of the business
  • PAN Card of the business
  • Certificate of Incorporation
  • Memorandum of Association
  • Articles of Association
  • Identity Proof
  • Address Proof
  • Website Terms of Use
  • Website Privacy Policy

Once the above documents are submitted, a payment gateway will be provided for the ecommerce business to enable online payments. The following are some of the payment gateway providers in India;

For more information about starting a business in India, visit