India with its large customer base, huge workforce, plenty of natural resources, and great technical expertise is a budding ground for new entrepreneurs who can reap immense profits if they correctly and aptly establish their business in India. To avoid operational hiccups, it is essential to legally incorporate your business to be on the right side of the law. Most of the business founders are not aware of the basic legalities as far as starting and registering a business is concerned. No founder will like to get penalized over a law that they are not even aware of. While embarking on their entrepreneur journey, the first thing that founders should do is register their company.
Founders should prevent themselves from making registration blunders and hence they should know each and every process of company registration in India. The first and foremost step is to choose the name of your company.
Coming out with the name of the company is as difficult as establishing and starting a company. It is vital for founders to come out with a relevant name for their business as giving an apt name of the business is just like laying the base of a building. The business owner should give their company a strong and well-aligned name that matches with their products or services offered. Some of the key consideration that should be kept in mind before registering the company name includes:
Once the name of the company is decided, the owner needs to incorporate the company. The new company registration process has been simplified by the Ministry of Corporate Affairs, under the Companies Act 2013, that now a company can be registered within seven days. Today, the process of business registration is so simple and efficient that a company can be registered just within seven days and even without going to the government offices. Today government has also given startups the option of online registration for which they can file every document electronically without visiting the place of business registration in India.
What are the main types of companies that a founder can register in India?
Start-ups or business owners can register their companies in India in the following types:
Private Limited Company
Limited Liability Company
Until 2013 a single owner could not start a company, as a minimum of two directors were required to establish a firm. However Indian government in 2013 introduced a new type of business structure called One-owner Company that allowed an individual to incorporate a company and be the sole director while retaining 100% of the company. An individual can form this type of company with one single member and one director, which can be the same person. The One-Person Company has a separate legal entity that gives protection to the single individual who has incorporated it. This type of company is easy to incorporate as only one member and one nominee are required to incorporate and the minimum authorized capital for incorporating OPC is Re. 1 lakh and there is no minimum paid-up capital requirement.
For One-Person Company Registration, the owner first needs to approach a CA who will brief about the entire registration process. However, owners of such companies need to carry out the following process:
Step 1 – First the owner needs to obtain the Digital Signature Certificate (DSC) of the proposed Director by providing documents like an aadhar card. address proof, PAN card, Email-id, phone number, and photo.
Step 2 – The next step is to apply for the Director Identification Number (DIN) of the proposed director in SPICe Form along with the name and the address proof of the director.
Step 3 – Next the name of the company needs to be decided. The name of the company is approved in the Form SPICe+ 32 application by the Ministry of Corporate Affairs. The owner can mention only one name along with the significance of keeping that name in the form and if the name gets rejected, another name can be submitted by applying it in another form.
Step 4 - Some documents such as the Memorandum of Association, the Article of Association, proof of registered office, affidavit and director consent, and a declaration that all compliances have been made, are required to be submitted to the Registrar of Companies.
Step 5 – All the documents are attached with the SPICe Form and uploaded on the Ministry of Corporate Affairs website for approval. The PAN and TAN numbers are automatically generated at the time of incorporation and no separate application is required to be filed.
Step 6 – The Registrar of Companies after verifying the documents will issue a Certificate of Incorporation.
A Sole Proprietorship is a type of business that is managed by a single person and any individual who wishes to start a business with less investment. The control of the business is completely in the hands of the owner and the investment is solely done by the proprietor and he enjoys all the profits and bears all the losses of the business.
For registration of Sole Proprietorship firm, one needs to have documents like PAN card, Aadhar Card, Registered Office Address Proof, and bank account. Individuals starting a sole proprietor firm if do not have a PAN card then need to obtain a PAN card. After this they need to carry out the following procedures:
Step 1 – Choose a name for the sole proprietorship business.
Step 2 – Next open a bank account in the name of the business through which all transactions of the business will be carried out.
Step 3 – For starting a sole proprietorship firm no specific registration is required however certain basic registrations are required like a registration certificate under the Shops and Establishment Act of the state in which the business is located. If the business turnover exceeds Rs. 20 lakh then the business needs to register for GST. The sole proprietorship firm can also register as an SME under MSME Act.
Private Limited Company is a privately held business by private stakeholders. A Private Limited Company is a company that has a minimum of two and a maximum of 200 members. The liability arrangement is of a limited partnership where every shareholder has the liability only up to the number of shares held by them. This type of company cannot raise the funds from the public and hence they publicly cannot issue the shares.
Every type of business has its own set of registration requirements and to register a Private Limited Company following steps need to be fulfilled:
Step 1 – Each director should obtain a Directors Identification Number(DIN), which is a unique code given by the Ministry of Corporate Affairs for which the director should have a PAN card, Aadhaar card, bank statement, phone, and electricity bill;
Step 2 – Choose the name of the company by filing a name registration application.
Step 3 – The Company needs to draft a Memorandum of Association, the Article of Association where MOA contains the objects of the company while AOA specifies the rules and regulations of the company.
Step 4 – The Company needs to file the application through the SPICe form on the Ministry of Corporate Affairs’s website and obtain PAN and TAN applications.
A Partnership firm is a company where two or more persons come together to form a company and share the profits in an agreed ratio. It is easy to form a partnership firm, as there are fewer compliances to be fulfilled by this type of company compared to other companies. This type of firm is established under a contract between the partners known as a partnership deed that regulates the relationship between partners and between the partners and the partnership firm.
Step 1 - A partnership firm needs to file an application form to the Registrar of Firms of the State in which the company is based along with prescribed fees. The application should be signed and verified by all the partners that contain details like the name of the firm, the main place of business, the location of other places where the firm is carrying business, joining date of each partner, name, and address of all the partners, duration of the firm. The application is sent to the Registrar of Firms through post or physical delivery.
Step 2 – Choose the name of the partnership firm.
Step 3 - The documents that are required to be submitted to Registrar for registration of Partnership firm are Application for registration, certified original copy of Partnership Deed, a specimen of an affidavit certifying details mentioned in the partnership deed and documents are correct, PAN Card and address proof of all the partners, proof of principal place of business of the firm.
Step 4 – The firm will be registered in the Register of Firms and a registration certificate will be issued to the firm if the Registrar is satisfied with all the documents and the registration application.
A Limited Liability Company is a legal form of a company that provides limited liability to its owners in many jurisdictions and provides great flexibility to business owners. The investor in the Limited Liability Company is held accountable for the company’s debt only to the extent to which they have contributed to the company’s capital.
The Limited Liability Company in India is registered under the rules and regulations of the Limited Liability Partnership Act 2008, taking support if required from the Companies Act. 1956. All correspondence regarding formation is made with the Ministry of Corporate Affairs of the Government of India.
Step 1 – The owner of the company first needs to obtain the Digital Signature Certificate and to obtain this the owner has to apply for a Designated Partner Identification Number by filling the form DIR-3 that is also used for the issuance of the Director Identification Number.
Step 2 – After receiving Digital Signature Certificate, the representatives of the company need to register it on the MCA portal.
Step 3 – The investor needs to register the company’s name by filling a specific form.
Step 4 - After approval, the investors draft the company’s statutory documents that should be registered with MCA within a period of 30 days since the documents were signed.
Step 5 – The owner needs to fill the incorporation form to register the Limited Liability Company and obtain the LLC agreement.
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