Registering your company is the first step you take towards establishing a successful business in India. Although it was once considered a tedious process, over time, registering your company and logo has now become significantly easier, considering the substantial improvements in the relevant legal provisions and registration process.
Now, the entire process to register your company has been moved online. However, the changes in the process and relevant provisions are not clear to everyone. We have compiled this article to help you get clarity related to the registration process and understand the various legal compliances that you must know about when registering a company in India.
Different Business Structures in India
Before beginning the registration process, it is vital for you to first and foremost understand the category under which your business will fall. Here are the different business structures in India:
- Limited Liability Partnership (LLP)
In an LLP, the business is considered a separate legal entity that has a partnership arrangement, which limits each partner’s liability to the amount they put into the business.
A Private Limited Company is basically a separate legal entity from its founders, directors and stakeholders (as shareholders) in the eyes of the law. All individuals of the company are deemed ‘employees’ of the company.
The Government aimed to make it easier for anyone to start a company on their own by introducing the option to do so in 2013. If there is only one owner of your company, you may continue to run your business as per the corporate structure as the sole owner of your company.
‘Public Limited Company’ refers to a company that has offered its shares to the public, whose liability shall be determined as per the amount of shares held by them. This means that the public cannot be held accountable for any loss that is more than the overall value of the shares held by them.
What is the need to choose a suitable Business Structure?
Each business structure has its own set of compliances that must be kept in mind when creating a company. Business owners and directors must choose the most suitable business structure for their company, as an incorrect decision is prone to have a huge impact on the finances of the individuals and the business itself.
Legally registering your business will allow you to conduct an accurate audit of the company’s accounts and ledger. Business stakeholders must hire proficient auditors and hire several accountants on payroll to ensure audits are conducted strictly as per the legally defined process.
Tax on the income earned by individuals and the company varies in different business structures, making it crucial for you to choose the right structure. For example, a sole owner will only have to pay their own income tax, whereas a company as an entity must also file income tax along with tax returns.
There are different rules for expansion for different business structures, which makes it vital to keep future expansion plans in mind when choosing a business structure as well.
Documents Required to Register a Company in India
A ‘
Simplified Proforma for Incorporating a Company Electronically’ (SPICe+) was introduced by the Government, which allows for faster registration of companies. This online portal allows you to complete all necessary formalities such as registering your company name, allotment of Director Identification Number (DIN), allotment of Permanent Account Number (PAN) , etc.
Mandatory documents to register a company in India:
- Identification Proof: Permanent Account Number (PAN); and at least one of the following - Aadhar Card, Passport, Driving License, and/or Voter ID Card.
- Address Proof: Telephone or Mobile Bill, Electricity or Water Bill and either copy of Bank Passbook (with latest transaction entry) or Bank Statement (not more than 2 months old).
- 3 Passport-Size Photographs
Note:
- All above-mentioned documents must be self-attested by the involved stakeholders.
- It is also advisable to submit the latest bills and documents, where the electricity bill should not be more than 2 months old.
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How to Register your Company Online?
The four key things that you must be aware of when registering a company in India are:
- Director Identification Number (DIN): It is the identification number issued to anyone that wants to be a director. It is considered one of the most vital documents that needs to be submitted to the authorities when registering a company in India.
- Digital Signature Certificate (DSC): Stakeholders of the company need to have their digital signatures to fill in the different forms on the MCA portal.
- Certificate of Incorporation: After all relevant documents have been submitted, the Registrar of Companies reviews the application. Once approved, they shall issue a ‘Certificate of Incorporation’.
- Registration on the Ministry of Corporate Affairs (MCA) Portal: When registering a company, the submissions you must mandatorily make on the MCA website include the SPICe+ form as well as all relevant documents. The company’s director must first register on the MCA website and acquire access to various services.
Benefits of Registering a Company in India
Registering a company in India brings a wide range of benefits to the business and the company’s stakeholders. Such advantages offer more than financial benefits and play a vital role in not only the company’s future but in its owner’s as well. Some of these benefits are:
- Separate Legal Entity: As per the provisions mentioned under the Companies Act, 2013, registering a company makes it a separate legal entity, which has its own existence from a legal perspective. Incorporated companies have their own assets, debuts and legal proceedings and as such, the liability of individual company members is limited to the creditors and debtors of the company.
- Perpetual Succession: Once registered, the company becomes an everlasting existence, which shall continue to function even if the directors, shareholders and other members are changed. As long as the registration is compliant with the provisions of the Companies Act, the company shall remain active.
- Transferability of Shares: Once registered, transferring the shares of a company amongst promoters and stakeholders becomes relatively easy.
How to choose a Company Name?
It is vital to choose the right name for your company as it shall become the identity of your brand over time in the eyes of the public. Although registering a company is relatively easy, there are a few crucial points to ponder on.
- The name should not resemble the name of any other LLP, company or trademark.
- The structure of the company’s name must be in accordance with the law.
- Generic names, like something related to an area or city, are forbidden.
- The name chosen by you should not include any offensive words or harm any trademarks or emblems.
How to Register a Company Name?
A few necessary steps must be taken by the business owner when planning to register a name for their company. They (or anyone on behalf of the company) must use the SPICe+ Part A service on the MCA portal to reserve the proposed name for the company.
Checking if the Company has been Registered
You must visit the MCA portal -
https://www.mca.gov.in/content/mca/global/en/home.html - to check whether your company has been registered or not. Thereafter, they can click the ‘MCA Services’ tab, followed by clicking on the ‘View Company/LLP Master Data’ option. After filling in the company’s CIN number, the website shall display the exact registration status of the company.
How to Register a Private Company in India?
1. Apply for a Digital Signature Certificate.
2. Review and file an application for name availability.
3. Submit the e-MOA and e-AOA.
4. Apply for PAN and Tax Collection and Deduction Account Number (TAN).
5. Get the Certificate of Incorporation.
6. Open a current bank account in the company’s name.
How to register a Proprietorship Company in India?
Proprietorship is considered the most straightforward company structure to register in India. When registering a proprietorship in India, you must prepare the following documents beforehand – Aadhaar Card, PAN card, bank account, and registered office proof.
- Open a Current Account in any bank in the company’s name.
- GST registration.
- Shop Act License.
- MSME Registration/Udyam/Udyog/SSI Registration.
- Import-Export Code (IEC Code) FSSAI/Trademark.
How to Register a Startup Company in India?
1. Get the Incorporation/Registration Certificate for your company.
2. Prepare the details of the directors.
3. Proof of concept (in case your startup is a validation/early traction/scaling stage startup).
4. Register with ‘Start-up India’.
5. Get DPIIT Recognition.
6. PAN Number.
7. Patent & Trademark details.
Conclusion
There may be severe repercussions for not adhering to the legally defined process to register a company in India. This can result in legal action against the company and its director and stakeholders, lead to cancellation of the company’s license, etc. Therefore, it is strongly advised to adhere to the above-mentioned process and keep the above pointers in mind to avoid any potential harm to you or your company.
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