Starting a Security Guard Service Business

The security guard service industry or private security industry is estimated to be worth INR 22,000 crore and is projected to cross INR 40,000 crores by 2015. As early as in 2006, the Security Guard Service industry paid over Rs.10,000 crores to the Government by way of service tax, provident fund, ESI, etc., and the industry has further developed since then at a Compounded Average Growth Rate of over 25% per year. Some of the key drivers for the booming security guard service business are urbanization, development of malls/townships/apartments/office complexes and the growing feeling of insecurity amongst people. Over 5 million security guards are estimated to be in India controlled by over 1500 security guard service providers and the industry is projected to grow in the future at nearly 40% per year owing to increasing urbanization and development of infrastructure projects. The security guard service industry is inherently profitable and generates huge employment opportunities. Therefore, there is tremendous interest amongst Entrepreneurs to start a security guard service business and in this article, we visit the licenses, registrations and other requirements for starting a security guard service business.

Choice of Business Entity

The security guard service business model inherently involves a few risks like employing numerous employees covered under ESI & PF, obtaining licenses and registrations for operation and exposure to liability due to the sensitive nature of the service being provided. Therefore, it is best for the promoters of a Security Guard Service Business to opt for a Private Limited Company or a Limited Liability Partnership while incorporating a business entity. Both Private Limited Company and Limited Liability Partnership offer the promoters limited liability protection, transferability of the business and continuos existence benefits.

Tax Registration

The services provided by a security guard service are taxable under the Service Tax Act and hence, security guard services that cross an annual turnover of over Rs.9 lakhs must obtain service tax registration. The security guard service provider must add an additional 12.36% of service tax to the end client while billing for security services provided after crossing an annual turnover of Rs.10 lakhs. Based on the choice of entity, the Service Tax payment must either be deposited with the government on a quarterly basis or monthly basis.

ESI & PF Registration

Most times the security guards are kept on the role of the Security Guard Agency and hence security guard agencies must be registered with ESI & PF authorities. ESI registration is a must for an organization employing over 10 people and PF registration is a must for an organization employing over 20 people.

Security Agency License

After the introduction of the Private Security Agencies Act, 2005, security service providers are required to obtain a license under the act from the Controlling Authority. The controlling authority in most states is the Police Department or the authority rests with the Home Department of that state. New security agencies must obtain the security agency license prior to commencing business and agencies that were in operation before the introduction of the Private Security Agencies Act, 2005 were allowed to function for a period of one year without the license from the time of introduction of the Act.

The Security Agency License is provided under three categories namely: License to operate Security Agency in 1 District, License to operate Security Agency in 2-5 District and License to operate Security Agency throughout the State. Once, the application is submitted to the Controlling Authority, the application is processed and if found fit, a license to operate a security agency is provided for a period of 5 years. The license is renewable at the end of its expiry.