This article on ‘How to Register a Company in India: All You Need to Know‘ was written by an intern at Legal Upanishad.
Introduction
The first step to a prosperous business existence is to formally establish a company in India. The legal requirements and simplicity of registering a company in India have considerably improved over time. The Indian government has consistently worked to make sure that the procedure is uniform and easy. Now, anyone looking for intricate information on how to register a company in India can easily find it!
This article will tell you everything you need to know about how to establish a company in India, the procedure for doing so, and other legal conditions that must be satisfied when starting a business there.
What is a Company Registration?
The “Companies Act of 2013” categorizes businesses into various categories according to their size, number of employees, liability, access to funding, and other characteristics. A “company” is any legal entity created and managed in accordance with the Companies Act of 2013. As a result, company formation refers to the legal process of creating a commercial entity that can start and run a business.
Different types of companies in India
The first and most important thing a business owner should know before beginning the company registration process is what business category your firm fits under.
1- Sole proprietorship
One of the earliest types of company organisations in India is the sole proprietorship. Because a single guy owns and controls this kind of building, it is often referred to as a “one-man army.” Generally speaking, it is best suited for small or low-investment firms. The sole proprietor’s liability is capped at the amount of capital he provided. Because there is only one owner, that person bears the full burden of both profits and losses. The business’s owner is the sole owner of all its assets and property.
2- Partnership
A partnership is a contract between two or more people who join together with the intention of making money. Partners are the names given to the owners of a partnership business. It is a relationship where different partners split profits and losses according to the predetermined ratio. When two or more people decide to start a business together, they create a partnership deed, which is a written contract outlining the partners’ names, addresses, amounts of capital they each contributed, and profit-sharing arrangements.
3- Limited Liability Partnership (LLP)
In essence, this type of corporate structure was created to offer its owners limited liability. It is a corporate entity with a legal life of its own. The act of 2008 grants LLP the authority to conduct its own business. There isn’t a really drawn-out, difficult process to go through to become a partner in LLP. It is simple to form and simple to join a partnership. Every partner in it is only liable for the amount of capital they provided. They don’t need to endure hardships on behalf of the other partners.
4- Private Limited Company
A private limited company is a business that is privately held by people. Since many of the restrictions of the Companies Act 2013 do not apply to this, it is more adaptable and simpler to incorporate than a Public company. Just two members and two directors are required to form it. However, there is a cap on the number of partners it can have, which is set at 200. There can only be 50 stockholders in total.
No public may be invited to apply for shares of a private corporation. Investors favor this type of organisation more because it makes it simple for them to buy and sell holdings.
5- Public Limited Company
A public limited company, often known as a public company, is a business that the general public owns or may subscribe to. Through the issuance of shares, they can directly raise capital from the general public. Three directors and seven shareholders are required as a minimum. The maximum number of stockholders is unlimited. The shareholders’ liability is capped at the sum of the respective face value of their shares and premium.
6- One Person Company
OPC is another way to represent it. There is only one member who will serve in both the capacities of shareholder and director. OPC cannot be incorporated by anyone from outside of India. A One Person Company may only be incorporated by an Indian resident. In India, it was essentially developed so that a single person may launch their own business. It is a Private Company as defined by the Companies Act. It can be simply incorporated with only one person and a few requirements. The minimum and maximum paid-up capitals for OPC are one lakh rupees and fifty lakhs, respectively.
How to Register a Company in India?
In India, forming a business is now simpler than ever. You will easily understand all the specifics whether you’re looking for information on how to create a private limited company or any other business structure if you stick to these key principles. The company registration process has moved online, making it easier to use and perfect.
What Documentation Is Necessary for India to Register a Company?
The following papers must be filed in order to form a corporation in India.
A. Identification documentation
- Permanent Account Number
- Voter identity card, passport, driving license, and Aadhaar card (at least one from the list)
B. Address Verification Records
- A telephone or mobile phone bill
- The water and electricity bills
- A copy of the most recent bank statement or passbook with transaction entries (not more than 2 months old)
C. Passport size Photographs (3 each)
Important information: All parties engaged in the documents must self-attest to them. Additionally, it is recommended that you include your most recent paperwork as well as your phone bill; your electricity bill should be no older than two months.
Registration Process of a Private Limited Company in India
Step-by-Step Guide on how to register a Private Limited Company:
- Directors should first apply for the DPIN and digital signature (Director PIN assigned by the MCA).
- Give the MCA any three names you like for your business. MCA then decides on one of them.
- Post your MOC and AOA.
- Obtain a company establishment certificate, which includes a CIN number, to serve as legal documentation of your company’s existence.
- Finally, submit the required paperwork, including MOA, AOA, and PAN, to apply for PAN, TAN, and bank accounts.
Registration Process of a Public Limited Company in India
Step-by-step Guide on how to register Public Limited Company:
- Make sure the firm has a minimum of seven shareholders, three directors, and capital of at least 5,00,000 before submitting an application for the company registration process.
- Additionally, a DSC (Digital Signal Certificate) is needed when submitting documentation for identification and residence.
- Apply for a DPIN and include the name of your business in the application. Ensure that the application contains the business’s aim clauses. This section typically outlines the precise rationale behind the company’s founding, along with the time it was established and the numerous tasks it carried out.
- In order to apply for ROC, you must include important documents including MOA, AOA, Form INC-7, Form INC-22, and Form DIR-12.
- After paying the registration cost and receiving the ROC’s permission, the business must submit an application for a “Certificate of Business Commencement.”
Registration process for Partnership Company
According to the contract, the partners also split the earnings. On the other hand, the partners are likewise accountable for bearing losses comparable to those of profits. If these enterprises have a registered Partnership Deed, they can operate legally even without a license. The Indian Partnership Act of 1932 regulates partnership companies. Partnership companies are exempt from the requirement to register their business. But by doing so, you can gain in a few ways.
Registration Process for Limited Liability Partnership
Step-by-step guide on how to register a limited liability Partnership:
- Get your LLP partners’ DSCs and DINs. Most of the time, registering for a DIN or DPIN may be done instantly. Every partner must have one DIN, by law.
- Apply for MCA, which will then be processed by ROC, to get your business name approved.
- The partners receive an application once the senior officials approve the firm name.
- Finally, the partner has 60 days from the date of receipt of this letter to send the documents. Within 30 days of receiving the registration certificate, you must submit an application for the partnership agreement.
Registration Process for One Person Company
Step-by-step guide on how to register one person company:
- Get DSC first, then apply for DIN.
- submit a request to MCA for approval of the business name.
- The government will issue you an incorporation certificate after you submit the necessary paperwork to MCA.
Registration Process for Sole Proprietorship
Step-by-step guide on how to register a sole proprietorship:
- Apply for a PAN card if you don’t already have one, then let your employer know.
- Open a business account and register under the MSME Act as an SME. Registration is typically not required, although it is possible to register in order to get any government benefits or awards.
- Make sure to choose GST registration if your annual revenue exceeds 20,00,000.
Conclusion
One must register their business entity in order to start a business legally in India. The ability to choose a business’s owners, taxation, compliances, benefits, etc., is made possible through business entity registration. Therefore, choosing company formation is one of the key decisions that must be made before establishing any firm. The proprietor in India has a choice of several registration kinds when registering the business. Making the best choice for the company will be aided by knowledge of the many types of company registration in India.
The organizational structure that is chosen will have an impact on every aspect of the firm, from the taxes that are paid to the compliance procedures that must be followed to the eligibility requirements that must be met. The sort of company formation in India is therefore one of the most crucial choices a business owner must make.
References
- E-Startup ”7 Types of Company Registration in India” https://www.e-startupindia.com/learn/explore-the-7-types-of-company-registration-in-india/
- msmex ”Types of Company Registration in India” https://www.msmex.in/learn/types-of-company-registration-in-india/
- Legal Raasta ”Business Structure in India” https://www.legalraasta.com/business-structures/
- NoBroker Times ”Everything you need to know about registration of a company in India” https://www.nobroker.in/blog/how-to-register-a-company-in-india/