Are you planning to start a new company and searching for the right source that will provide you with complete information about “How to register a company in India?”. You are at the right place as this article will be talking about the steps and the essentials that are required to get started with a company. Before moving on to the procedures, this article also defines the different types of business structures that you must select before registering a company on the MCA portal.
So, without delaying any further let us start our reading adventure!
Types of Business Structures/Companies
Limited Liability Partnership (LLP)
A Limited Liability Partnership is also known as an LLP. It is basically a service-oriented business that has low investment requirements and limited liabilities. This type of business structure was first established under the Limited Liability Act, 2008 with the ROC (Registrar of Companies). There is benefit on depreciation (reduction in the value of an asset over time) with an LLP. Its legal compliances include both business tax returns (a form containing information about tax payment that needs to be submitted to an authority) and ROC returns to be filed. The difference between LLP and LLC (Limited Liability Company) is that the latter is the combination of partnership and corporation while the former is only about partnership or owners serving as partners.
One Person Company (OPC)
As the name suggests, One Person Company (OPC) belongs to one owner or promoter who is seeking to minimize their legal responsibility or liability. OPC was introduced in 2013. Prior to the period, a minimum of two directors and two members needed to come together to form a company. In OPC, you can have tax holiday (tax reduction or elimination) for 3 years under Startup India which is the largest online portal for start-ups. There are no tax requirements to be paid during dividend distribution. Business returns and ROC returns need to be filed but there is limited compliance in regard to the latter one.
Private Limited Company (PLC)
Businesses that normally have a high turnover or sales is categorized as Private Limited Company. It comprises of shareholders and directors. Each member is regarded as an employee of the company. Similar to One Person Company, Private Limited Company has tax holiday for 3 years under Startup India. It has added benefits on depreciation. Both business and ROC returns need to filed if you are willing to start a Private Limited Company. Also, an audit is mandatory as the shareholders need to know that the financial accounts are true and fair.
Public Limited Company
Public Limited Company are businesses with a high turnover. It is a voluntary association of individuals that are obligated towards the company law. Their legal responsibility is limited to the shares that each member holds. Further, they are liable to tax exemptions. Business tax returns must be filed and audits are absolutely mandatory.
Other business structures that do not hold much government regulation are as follows:
- Sole proprietorship
- Hindu Undivided Family (HUF)
- Partnership firms
Why Choosing Your Business Structure is Essential?
You can choose the right business structure by going with the highlighted purpose, the right legal compliances, and tax advantages. It is important to choose the correct business structure as it is dependent on your income tax returns. Since you will be paying up for auditors, tax filling experts, and accountants, it is essential to decide on the appropriate business structure. An investor will always incline toward a legal and recognized business structure. For example, he may consider preferring LLP, and PLC over a sole proprietorship.
How to Choose Your Business Structure Before Registering a Company?
Number of Owners
If you are one person trying to choose a business structure, you will be going with One Person Company. On the other hand, if you are more than one individual and is also looking for investors, you will either choose a Limited Liability Partnership (LLP) or Private Limited Company (PLC).
Your Investment Choice
If you want to invest less initially, go for either Sole Proprietor, HUF, or Partnership firm. If you feel you can bear other expenses like setup and compliance costs, go for either OPC, LLP or PLC.
The other business structures like HUF, partnership firm and sole proprietorship have unlimited liability. This means if there is an issue with loans, the money can be recovered from the members in profit sharing ratio. There is a greater risk associated with personal assets.
There is reduced liability in case of LLPs and companies. The liability of these business structures is dependent on their individual contribution and the number of shares that each member holds.
Income Tax Rates
If you are a sole proprietor or a HUF, then you need to pay taxes based on your income. On the other hand, if you have a partnership firm or a company, the tax rate applicable to you would be 30%.
When your business structure is registered, it will attract investors. On the other hand, the unregistered ones are not trusted by investors. So, it is always better to choose from a registered business structure.
How To Register a Company in India?
The company registration process is presented below:
Digital Signature Certificate (DSC)
The entire process of registering the company is online and one must be ready with digital signatures. The forms will be available on the Ministry of Corporate Affairs (MCA) portal. For the directors or the subscribers of the Memorandum of Association (MoA) and Articles of Association (AoA), DSC is mandatory.
You can obtain Digital Signature Certificate from government recognised authorities. It can also be procured online. Class 3 category of DSC which delivers the highest level of trust should be obtained by the subscribers and directors of MoA and AoA.
Director Identification Number (DIN)
If you want to become director in a company, then obtaining a Director Identification Number is mandatory for you.
The company registration form must contain the DIN, the name and address proof of the directors.
One can obtain a DIN alongwith the registration form/SPICe+ form for maximum 3 directors.
In case of more directors, the three directors would be incorporated into the company and later on new directors would be appointed.
These new directors must procure DIN through the DIR-3 form as they won’t be eligible for DIN through SPICe+ form.
Registration on the MCA Portal
- To register into the Ministry of Corporate Affairs (MCA) Portal, you must fill out the SPICe+ form and submit necessary documents (discussed below). Once you are registered, you can login to the MCA Portal with your ID and password and avail its services like filing e-forms or viewing public documents.
- The name of the company needs to be reserved through the SPICe+ form. The applicant must make a submission of two proposed names in the Part-A of the form. The names must be presented in the order of preference.
- The maximum number of names that can be submitted are six. If the names match to an already existing or registered company, LLP, trademark or it violates the provisions of emblems and names (Prevention of Improper Use Act 1950), the form will be rejected.
- So, you must check the availability of names in the MCA portal. A fee of INR 500 is to be paid and a digital signature must be attached to the form. You can apply for a new name in the same application if the proposed names are already in use.
- If the SPICe+ form gets rejected, the applicant should request another form and propose other names and pay the prescribed fee.
- Once the name is approved for Part-A of the SPICe+ form, within 20 days time, the applicant must fill the part B of the form and submit it online. The part-B includes the details of the company and directors. The forms that need to be filled are Form 1, Form 18 and Form 32.
- These forms must be filled within 60 days (2 months) of the approval of the names.
- The MoA and AoA must be drafted and stamped with the right stamp duty. Moreover, these also needs to be signed by minimum two subscribers mentioning their father’s name, occupation, address and number of subscribed shares. A witness is required while carrying out the process.
- Before clicking that submit button, double check if you have attached necessary documents and DSC.
Certificate of Incorporation
- After the SPICe+ form is submitted, it will be examined by the Registrar of Companies (ROC). Once verified, ROC will issue the Certificate of Incorporation of the Company.
- After the Certificate of Incorporation of the Company is issued, the Income Tax Department will issue PAN and TAN. An e-mail consisting of the Certificate of the Incorporation of the Company, attached PAN and TAN will be sent to the registrant.
- For a Public Limited Company, more steps are necessary.
- In order to possess the Commencement of Business Certificate after incorporation, the public company needs to do the following:
- Filing a declaration in eForm and attaching the statement in lieu of the prospectus. Alternatively, you may file a declaration in eForm 19 with an attachment of the prospectus (Schedule II)
- The final step of this process is to procure the Certificate of Business.
Additional steps for the Registration of a Part IX company
- Filling eForms 37 and 39.
- The first form to be filled is eForm 1. The rest of the forms like Form 18, 32, 37 etc maybe filled out together or separately.
Important Documents for Registering a Company in India
- Form 1 – Declaration of Compliance
- Form 18 – Notice of situation of registered office of the company
- Form 32- Particulars of the Director’s, Manager or Secretary
Identification proof of the directors, shareholders, and partners
- Pan card
- Aadhar card
- Driving Licence
Address proof of the directors, shareholders, and partners
- Latest telephone bill (not older than two months)
- Latest electricity bill (not older than two months)
- Bank account statement with address
- DIN/DPIN DSC of all directors/partners
Documents required for the company/LLP
Proof of registered office of the company. Documents with address proof include:
- Tenancy between landlord and company/LLP
- Letter/NOC from the landlord permitting to use the space as the registered office.
- Sale deed (legal document displaying sale of property) of the company/LLP premises in the company or LLP’s name.
- The Memorandum of Association (MoA)
- The Articles of the Association (AoA)
Now that you know “how to register a company in India” it will be easier for you to carry out the process in a step-by-step manner with minimum hassle. Once you identify your business structure, all you need to do is register online. Nothing is better than a licensed company as it is a proof of the business’s credibility, security and also attracts investors. Ensure that you have all the necessary documents in place so that you avoid last-minute rush of any kind. Once you have fulfilled all the obligations, it is time to give wings to your vision.
Frequently Asked Questions (FAQs)
How much does it Cost to register a company in India?
The cost is between INR 6000 to INR 30,000 depending on the type of company, number of directors, members, partners, authorized shared capital and fees.
Can I Register the company myself in India?
Yes, you can register a company by applying through the Ministry of Corporate Affairs (MCA) Portal. You also require a Digital Signature Certificate (DSC) and Director Identification Number (DIN).
How can I register my company for free in India?
A company registration will be free up to a capital of Rs 10 lakhs in case of a shared capital with 20 members in case of a non-shared capital. However, both Memorandum of Association (MoA) and Articles of Association (AoA) requires to be paid.
What is the minimum amount to start a company in India?
The minimum amount to start a public limited company is Rs 5 lakh or more. For private limited company and OPC, the amount is Rs 1 lakh.
Can you start a company with no money?
Yes, you can start a company with 0 capital. You can start with a drop shipping business or affiliate marketing. Make sure you have the grit, stamina, courage, and motivation.