How to Start a Micro Business in India? And Process to register a Micro Business in India
Introduction
Starting a micro business or setting up micro enterprises in India has become an attractive option for aspiring entrepreneurs who want to begin small and grow steadily. With low investment, simplified compliance, and access to government schemes, micro enterprises offer a great opportunity to build a sustainable business. Whether you’re planning a home-based venture or a local service outlet, micro businesses are the backbone of grassroots economic growth. This guide covers everything you need to know about micro enterprises, from eligibility and registration to the process and benefits.
What is Micro Business?
A micro business is the smallest type of enterprise under the MSME (Micro, Small and Medium Enterprises) classification in India. As per the revised MSME definition (effective from July 1, 2020), a micro business or micro enterprise is one that:
- Has an investment in plant and machinery or equipment of not more than ₹1 crore, and
- Has an annual turnover of not more than ₹5 crore.
Micro businesses are often run by individuals or small teams and can operate in various sectors manufacturing, services, trading, or even online businesses. They are typically home-based or locally established ventures like small shops, service providers, freelancers, artisans, or resellers. Despite their small size, micro enterprises play a crucial role in job creation, rural development, and grassroots economic growth.
Objective of a Micro Business
- Employment Generation: Micro enterprises help create large-scale employment for individuals with limited resources and investment.
- Support for Low-Income Job Seekers: They aim to provide quality jobs to job seekers who lack access to capital or infrastructure.
- Economic Development in Backward Areas: One of their key goals is to boost trade and industry in economically weaker or underdeveloped regions.
- Contribution to National Growth: By uplifting backward areas, they contribute to overall national economic development.
- Regional Development: Micro businesses support balanced regional growth by integrating remote areas into national plans.
- Utilization of Local Resources: They help mobilize India’s vast natural resources effectively, especially in underdeveloped economies.
- Improvement of Living Standards: These businesses work towards raising the quality of life for citizens regardless of their location.
- Adapting to Modern Challenges: As advanced technologies emerge, micro enterprises face challenges in maintaining competitiveness.
- Government Support: The Indian government has introduced several initiatives to simplify operations and encourage the growth of micro businesses.
Advantages of Micro Business
- Assisting in the growth of an individual’s equity: Micro businesses empower individuals to invest their skills and resources effectively. They help in accumulating personal assets and financial independence. This fosters entrepreneurial growth and long-term wealth creation.
- Aids in the Job Creation: Micro enterprises are labor-intensive and can operate with minimal capital, making them ideal for generating employment. They create direct and indirect job opportunities across sectors. This significantly supports inclusive economic growth.
- Export Promotion and Government Subsidy: Many micro businesses contribute to exports through local crafts, textiles, and services. The government offers various subsidies and schemes to promote their global reach. This enhances India’s trade balance and foreign exchange earnings.
- Assists in raising the standard of living: By providing income sources to low-income households, micro enterprises uplift their financial condition. They allow individuals to afford better education, healthcare, and housing. This leads to improved quality of life in communities.
- Economic power is distributed among industries: Micro businesses prevent the concentration of economic power in a few large industries. They diversify the economy and promote fair competition. This balance ensures stability and equitable development across regions.
- Help in reducing the Unemployment rate: With minimal barriers to entry, micro businesses absorb a significant portion of the unemployed population. They especially support youth, women, and rural workers. This helps bridge the employment gap in underserved areas.
- Protects against global economic shocks and instabilities: Micro enterprises often cater to local demand and are less dependent on international markets. Their decentralized nature makes the economy more resilient. They act as a buffer during global downturns and crises.
- Help in the development of backward and rural areas: Micro businesses promote entrepreneurship in remote and rural regions. They utilize local resources and talents to stimulate economic activity. This leads to infrastructure growth and balanced regional development.
We provide quick and reliable MSME registration, Pvt Ltd registration, LLP registration, OPC registration, sole proprietorship registration, and other services to help you legally start and grow your business.
How to Start a Micro Business in India?
Starting a micro business in India is a great way to turn your skills or ideas into a source of income. It doesn’t require huge investments, and with the right planning, even a small idea can grow into a successful venture. Here’s a simple step-by-step guide to help you begin:
1. Choose the Right Business Idea
Start with something you’re good at or passionate about. This could be anything; homemade food, handicrafts, tailoring, tuition classes, or even an online store. Micro enterprises often begin with one person and grow slowly over time.
2. Plan Your Business
Before jumping in, make a basic plan. Think about what you need to start, how much money it will take, where you’ll work from (home or shop), and who your customers will be. Having a small roadmap helps avoid confusion later.
3. Select a Business Structure for Micro Business
Most micro businesses start as a sole proprietorship because it’s simple and cost-effective. But you can also choose a partnership or register as an LLP or Private Limited Company if needed. The structure depends on how big or formal you want your business to be.
| Company Structure | Best for | Legal identity | Registration | Compliance | Taxation |
| Pvt Ltd Company | Micro businesses aiming to scale or attract investors. | Separate legal entity | Mandatory with MCA | High (board meetings, annual returns, auditor, etc.) | 22% (or 15% for new manufacturing companies under special schemes) |
| LLP | Small service-oriented businesses with partners wanting limited liability. | Separate legal entity | Mandatory with MCA (Ministry of Corporate Affairs) | Moderate (Annual filings, income tax returns) | Flat 30% tax |
| Sole Proprietorship | Individuals starting small, low-risk businesses. | Not separate from the owner. | Easy and low-cost. You can use GST registration, Udyam Registration (MSME), or Shops and Establishment license. | Minimal. | Individual income tax rates |
| Partnership Firm | Two or more people running a micro business together. | Not separate from partners | Not mandatory, but advisable to register under the Indian Partnership Act, 1932 | Moderate. | Partnership tax rates (flat 30% + surcharge + cess) |
| OPC | Solo entrepreneurs who want a corporate structure | Separate legal entity | MCA registration required | Moderate to high | Same as private company (22%) |
4. Register Your Micro Enterprise
Registration gives your business legal recognition. For a sole proprietorship, you can start by getting a GST registration, Shop and Establishment License (if needed), and most importantly; Udyam Registration (this certifies you as a micro enterprise and opens up access to government schemes).
5. Get Udyam (MSME) Registration
This step is important. Udyam registration officially recognizes your business as a micro enterprise. It’s free, completely online, and gives benefits like easier bank loans, government subsidies, and lower interest rates.
6. Open a Business Bank Account
Once you’ve registered your business, open a current account in your business name. This helps keep your personal and business finances separate and builds trust with customers and suppliers.
7. Arrange Funds or Capital
Start small with your own savings if possible. If you need more funds, you can apply for government-backed loans like MUDRA, PMEGP, or Stand-Up India; all designed to help micro businesses grow.
8. Get Required Licenses
Depending on your business type, you may need additional licenses. For example, a food business needs FSSAI registration. If you’re selling goods, GST registration might be necessary. Always check your local rules.
9. Start and Promote Your Business
Once everything’s set, go live! Begin selling your product or service and tell people about it. Use WhatsApp, Instagram, Facebook, or even flyers to spread the word. Most micro enterprises grow through referrals and word of mouth.
10. Maintain Records and Stay Compliant
Even if your business is small, keep basic records of your income and expenses. Pay any necessary taxes, and file returns if required. Staying compliant from the beginning builds a strong foundation.
Other Registration with Micro Business in India to Keep in Mind
1. Trademark Registration
A small business’s identity and advertising investment can be protected by trademark registration. Because of the low cost of advertising through channels such as social media, the internet, and other channels, small businesses can now actively compete against larger businesses. As a result, it is critical for all small businesses to obtain a trademark registration and protect their brand from competitors or future litigation.
2. ESIC Registration
Once a small business employs more than 20 people, it must register with the ESIC. ESIC registration could assist a small business in making better hiring decisions and providing greater benefits to its employees.
3. Udyog Aadhar Registration
The government has implemented Udyog Aadhaar in place of MSME registration to make the process of registering small enterprises easier. Small businesses can obtain Udyog Aadhaar registration to take advantage of numerous government-sponsored initiatives focused on small businesses.
Information on Tax Registration for Micro Business
- Businesses that are required to deduct tax at source, often known as TDS, must have a TAN. TAN can be obtained once a small firm is required by law to deduct tax when making a payment.
- PAN is one of the first registrations that any small business should have after registering, as it is essential to open a bank account and conduct other financial operations in India. The Proprietor’s PAN Card is utilized in the case of a Proprietorship Firm. A different PAN is given for various entities such as a Partnership Firm, Limited Liability Partnership, Private Limited Company, One Person Company, and others.
- Any business that offers more than INR 9 lakhs in taxable services in a financial year must register for service tax. Once the yearly taxable services revenue surpasses INR 10 lakhs, the business must collect and remit service tax from customers.
Conclusion
Starting a micro business in India is an empowering way to turn your skills into a sustainable source of income with minimal investment. With the right business idea, proper registration like Udyam, and access to government schemes for micro enterprises, even a small setup can grow into a successful venture. These businesses not only boost self-employment but also contribute to local economic development and job creation. Embracing formalization, compliance, and digital tools ensures long-term growth and government support.
Suggested Read :
Challenges of MSME Registration in India
FAQ
1. What qualifies as a micro business in India?
A micro business is one with an investment in plant and machinery or equipment up to ₹1 crore and an annual turnover not exceeding ₹5 crore, as per the MSME classification.
2. Is Udyam Registration mandatory for micro businesses?
While not legally mandatory, Udyam Registration is highly recommended as it gives official recognition and access to benefits like subsidies, easy loans, and government tenders.
3. What are the best government schemes for micro enterprises?
Popular schemes include MUDRA Loans, PMEGP, Stand-Up India, and CGTMSE, which offer funding, subsidies, and support for business development.
4. Can I start a micro business from home?
Yes, many micro businesses such as baking, tailoring, coaching, freelancing, and online reselling can easily be started and run from home.
5. What licenses are needed for micro businesses?
It depends on your business type. Common licenses include GST registration, Shop and Establishment License, and FSSAI registration for food businesses.
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