Starting a business in India, whether for Indian or foreign companies, requires careful planning and a solid understanding of the legal and financial landscape. Establishing the right financial infrastructure is essential for smooth operations and ensuring compliance with Indian laws. Setting up business accounts in India forms a critical part of this foundation, supporting operations and better decision-making from the outset.

This guide walks you through the step-by-step business accounting setup India entrepreneurs should follow, along with insights into how expert firms like BCL India can help ensure a seamless start.

Choose the Right Business Structure

Before setting up financial systems or opening a business bank account, it’s essential to legally register your business. Whether you are an Indian or Foreign Comapny, your chosen structure—such as Sole Proprietorship, Partnership Firm, Limited Liability Partnership (LLP), Private Limited Company, Joint Venture, Wholly Owned Subsidiary, Branch office or a Liaison office – determines the registration process, accounting obligations, and tax compliance requirements.

For instance:

⦁ Partnership Firms must draft a Partnership Deed and, in many cases, register it with local authorities.
⦁ Private Limited Companies are registered under the Companies Act and must obtain a Certificate of Incorporation along with MoA and AoA.

The business structure determines the accounting and regulatory framework, including compliance with the Companies Act, 2013, and the Foreign Exchange Management Act (FEMA). Legal registration is crucial not only for opening a business bank account but also for ensuring your startup operates within the legal framework from day one.

Obtain Mandatory Licenses and Tax Registrations

Once your business is incorporated, securing key registrations is the next vital step. These include:

• PAN (Permanent Account Number): Mandatory for all financial and tax-related transactions.
• TAN (Tax Deduction and Collection Account Number): Required if your business will deduct TDS.
• GST Registration: Compulsory for businesses crossing the turnover threshold (₹40 lakhs for goods, ₹20 lakhs for services), or involved in inter-state trade.
• Intellectual Property: Safeguard your brand and innovations by registering trademarks, copyrights, or patents as applicable.
• Other Licenses: Depending on your sector and location, you may need additional registrations like Shops and Establishment License, Foreign Direct Investment (FDI) Approval, Import Export Code (IEC), Professional Tax, and Labour law requirements such as ESI and PF Registration.

These registrations form the foundation of your financial and compliance systems, enabling your startup to operate legally and efficiently.

Open a Dedicated Business Bank Account

A separate business bank account is essential for maintaining financial transparency, simplifying tax filing, and ensuring accurate bookkeeping. It also facilitates seamless integration with accounting software and payment gateways.

•  Documents typically required include:
•  Certificate of Incorporation or business registration proof
•  PAN of the business
•  KYC documents of promoters/directors
•  Proof of business address

When choosing a bank, consider factors like digital banking features, minimum balance requirements, transaction fees, customer service, and additional offerings such as payment gateway integration or credit facilities. Leading banks like HDFC, ICICI, and SBI offer tailored business accounts with value-added services specifically designed for startups.

Set Up Accounting Software

Using the right accounting software from the start is critical to managing finances effectively. Depending on your business size, you may choose from:

• Tally
• Zoho Books
• QuickBooks
• Busy Accounting

Custom ERP Systems for large-scale operations

These tools help record transactions, track expenses and income, generate invoices, manage inventory, and prepare financial reports. Establishing digital accounting practices from day one minimizes errors and increases efficiency.

BCL India helps startups select and configure the right tools, ensuring they are scalable and compliant with Indian accounting standards.

Set Up a Book-keeping System

A solid business accounting setup in India begins with an efficient bookkeeping framework. This involves systematically tracking all financial activities—sales, vendor payments, expenses, payroll, and petty cash.

Key components include:

• Bookkeeping: Regularly recording transactions with proper documentation (invoices, receipts).
• Financial Reporting: Preparing trial balances, profit & loss accounts, balance sheets, and cash flow statements.
• Bank Reconciliation: Matching your books with bank statements to ensure accuracy.
• Tax Compliance: Keeping records aligned with laws like the Income Tax Act, GST Act, and Companies Act.
• Management Reporting: Generating internal reports such as KPIs, working capital cycles, and variance analysis to support informed decision-making.

Startups can choose to manage this internally, use cloud-based accounting software, or partner with professionals like BCL India to streamline their accounting processes and stay compliant.

Define Financial Policies and Controls

For growing startups, internal financial policies ensure accountability and fraud prevention. Some basic financial controls include:

• Segregation of duties for approval and payment
• Expense approval thresholds
• Periodic bank reconciliations
• Cash handling procedures

Even in small teams, clearly defined roles and responsibilities go a long way in maintaining financial discipline.

Implement Payroll and Tax Systems

If you’re hiring employees, you need a compliant payroll process in place. This includes:

• Salary structure and deductions
• Provident Fund (PF) and Employee State Insurance (ESI) registrations
• Professional Tax (PT)
• Timely payment of TDS (Tax Deducted at Source)
• Monthly payroll compliance filings

Many startups choose to outsource payroll to avoid errors and non-compliance risks. Firms like BCL India offer expert payroll processing and tax filing services tailored to startups and SMEs.

Maintain Statutory Records

Depending on your business structure, you must maintain statutory books and records:

• For Companies: Board meeting minutes, shareholder registers, register of charges, etc.
• For LLPs: LLP Agreement and accounting records

All businesses must retain supporting documents like purchase invoices, sales bills, payment vouchers, and bank statements for at least 8 years for audit and tax scrutiny purposes.

Prepare for Tax Filing and Compliance

Startups must file various returns throughout the year:

• GST Returns: Monthly or quarterly
• TDS Returns: Quarterly
• Income Tax Returns: Annually
• ROC Filings: For companies and LLPs
• Transfer Pricing Regulations: If a foreign company has related parties in India, transfer pricing rules apply. The company must submit a transfer pricing study to ensure transactions are conducted at arm’s length.

Missing deadlines can attract penalties and interest. It’s advisable to work with a compliance advisor like BCL India who can keep track of due dates, file returns, and handle notices if any.

Plan for Fundraising and Financial Reporting

Whether bootstrapped or VC-backed, a startup must maintain clean and transparent finances to attract investors or secure loans. A well-organized accounting setup not only ensures compliance but also enhances your chances of securing funding. Here’s how to keep your finances investor-ready:

⦁ Maintain Audited Financials: Ensure accuracy and transparency with regular audits.
⦁ Prepare Investor Reports: Keep investors informed with clear and concise financial updates.
⦁ Monitor KPIs and Ratios: Track key metrics like:
a. Gross and net profit margins
b. Burn rate and runway (for funded startups)
c. Working capital cycle
d. Revenue growth trends

Regular financial reporting allows startups to spot red flags early, adjust strategies, and demonstrate financial discipline to investors. BCL India supports startups with investor pitch decks, financial projections, and due diligence documentation, ensuring you’re well-prepared for the next funding round.

Regular Financial Audits and Reporting

Once your accounting systems are in place, it is important to conduct regular audits and maintain compliance with Indian accounting standards and tax laws.
Statutory Audits: Private Limited Companies and other entities are required to undergo annual audits by a Chartered Accountant in India.
Internal Audits: Regular internal audits ensure that the business remains financially sound, with proper internal controls.
BCL India offers audit services that ensure foreign companies meet these requirements and maintain transparency in financial reporting.

Financial Planning for Startups in India: Building a Strong Foundation

Effective financial planning is crucial for startup success—it ensures stability, supports smart decision-making, and prepares the business for growth. Here are the core elements:

Set a Realistic Budget: Outline expected income and categorize expenses like salaries, rent, marketing, and software. This helps prioritize spending and avoid overruns.
Track and Manage Cash Flow: Keep a close eye on inflows and outflows. Ensure timely invoicing and manage vendor payments to maintain healthy liquidity.
Allocate Capital Strategically: Invest in high-impact areas such as product development, skilled talent, or digital marketing to fuel business expansion.
Plan for Tax Liabilities: Understand your tax obligations under GST and income tax laws. Regular provisioning prevents last-minute financial stress.
Monitor KPIs and Financial Reports: Use tools to review profit margins, burn rates, and revenue trends. Regular analysis supports agile business decisions.
Build a Contingency Reserve: Keep a buffer for unforeseen expenses or market slowdowns. This provides financial resilience in uncertain times.

Final Thoughts

Starting a business in India is a rewarding venture, but one that demands meticulous financial planning and execution. By taking a proactive approach to setting up business accounts in India, choosing the right tools, and partnering with the right advisors, you can build a future-ready financial foundation.

With a track record of helping number of startups across industries, BCL India is your trusted partner for everything from entity setup, accounting, and compliance, to strategic financial advisory.