How to register a company in India
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The prospect of starting your own company sure sounds exhilarating- leading an absolute star-studded dream team, turning your vision into reality, and leading a lifestyle that is truly unparalleled. However, embarking on this journey may be anything but a child’s play, as complying with legal requirements can be cumbersome. Most founders of companies may be well seasoned in their field of expertise but may not be the best when it comes to the legalities.
During the seed funding stage of your company, your project not only receives venture capital based on your project idea and business plan, but other factors such as registration, a well-organized company structure carry weight too. Some entrepreneurs may not be very fully aware of the registration process, hence, this article covers some of the major sections to focus on while registering your company in India.
During the seed funding stage of your company, your project not only receives venture capital based on your project idea and business plan, but other factors such as registration, a well-organized company structure carry weight too. Some entrepreneurs may not be very fully aware of the registration process, hence, this article covers some of the major sections to focus on while registering your company in India.
How to register a company in India-
1. Company name-
Coming up with a company name can be as hard as coming up with a business plan. Your company should be relevant to your business, catchy, and easy to pronounce. Ensure that no other company/brand exists with the same or similar name, and check if the domain name is available. A dot-in extension works in India, and if you’re targeting a global audience, you may have to go for a dot-com extension.
Company name guidelines-
1. The name of the company should be in-line with what the business does.
2. The name needs to resonate with its mission/vision/key objective.
3. Some names need the approval of the Central Government.
4. Some names require the approval of the government regulators like SEBI, RBI, etc.
5. Only after three years you can change the name of your company.
After naming your company, you will have to incorporate the same. Thanks to the Companies Act of 2013, you can complete the incorporation process of your company in just seven days. What’s more- you can complete the registration process completely online, thanks to the digital initiative taken by the Ministry of Corporate Affairs (MCA).
Coming up with a company name can be as hard as coming up with a business plan. Your company should be relevant to your business, catchy, and easy to pronounce. Ensure that no other company/brand exists with the same or similar name, and check if the domain name is available. A dot-in extension works in India, and if you’re targeting a global audience, you may have to go for a dot-com extension.
Company name guidelines-
1. The name of the company should be in-line with what the business does.
2. The name needs to resonate with its mission/vision/key objective.
3. Some names need the approval of the Central Government.
4. Some names require the approval of the government regulators like SEBI, RBI, etc.
5. Only after three years you can change the name of your company.
After naming your company, you will have to incorporate the same. Thanks to the Companies Act of 2013, you can complete the incorporation process of your company in just seven days. What’s more- you can complete the registration process completely online, thanks to the digital initiative taken by the Ministry of Corporate Affairs (MCA).
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2. Company business structure-
Based on your business plan, investment requirements, size of capital, and goals/objectives, you need to choose your business structure. A company is a legal entity under section 3 of the companies act of 1956.
The different types of business structures are-
a. Sole proprietorship - This type of business structure is ideal for you if you’re willing to manage and control the entire business by yourself. Some advantages of sole proprietorship are-
1. No government registration or regulatory paperwork is required.
2. Business doesn’t have to comply with any regulations and norms.
3. Income tax is payable on your income.
4. The profits are completely yours.
The documents required to register a sole proprietorship company are-
1. PAN card.
2. AADHAR card.
3. Bank Account.
4. Proof of office (utility bills or rental agreement).
b. One person company (OPC)- This is a type of company introduced by the Indian Government wherein one member can form a company instead of a minimum of two directors. The incorporated company helps reduce the business owner to reduce liabilities, increase credibility, and avail of tax benefits.
Benefits of OPC-
1. The directors have limited liability.
The OPC has lesser compliance to regulatory requirements and norms.
3. Legal recognition.
4. Easy to control and manage.
How to register an OPC-
1. Digital Signature Certificate (DSC)
2. Director Identification Number (DIN)
3. Apply for Name Approval
4. FIle all Ministry of Corporate Affairs forms.
5. Collect your incorporation certificate.
Documents required for registration-
1. Memorandum of Association (MoA).
2. Articles of Association (AoA).
3. Proof of registered office.
4. Affidavit and consent of director.
5. A declaration the business follows all regulations.
c. Partnership firm- This is a type of business structure wherein two or more partners sign a partnership deed or agreement that contains details about allocation of responsibilities, duties, and profit-sharing.
A partnership deed contains-
1. Name and address of the partners as well as the firm.
2. The date of commencement.
3. How much capital each person has invested in the firm.
4. Profit-sharing ratio as well as how much salary each partner will receive.
5. Rights, duties, and responsibilities of the partners.
Benefits of partnership firm-
1. Easy to form and liquidate.
2. Adequate risk sharing
3. The partners do not necessarily have to submit the returns to the MCA.
4. Flexibility.
d. Limited Liability Company- This type of company separates personal and business liabilities, which in turn limits the liabilities of an owner or owners. The tax liabilities are shared too. Key advantages of a Limited Liability Company are-
1. LLCs have comparatively lesser paperwork than other business structures.
2. LLCs are easy to form and are flexible.
3. LLCs have flexible profit sharing.
How to register an LLC-
1. Fill the form and apply for a DPIN (Designated Partner Identification Number) online.
2. Obtain your Digital Signature Certificate (DSC) and register the same with the MCA.
3. Get your LLC name approved by the MCA, fill the incorporation form, and acquire the LLC agreement.
e. Private Limited Company- A type of company that consists of a minimum of two and a maximum of two-hundred members. A private limited company cannot list shares on the stock market and raise capital from the public.
Benefits of Private Limited Company-
1. Each owner’s liability is limited to the extent of his/her stake in the company.
2. Transfer of shares is easy.
3. Each Private Limited Company has more tax benefits and lesser applied tax compared to other structures.
4. The company can raise funds by issuing debentures through public platforms.
How to register a Private Limited Company-
1. Acquire a Director’s Identification Number. A DIN requires you to have PAN, Aadhar card, bank statements, utility bills, etc.
2. File a name registration application, draft an AoA and MoA, and file the applications through the SPICE E-form on the MCA’s website.
3. Acquire the PAN and TAN applications.
The different types of business structures are-
a. Sole proprietorship - This type of business structure is ideal for you if you’re willing to manage and control the entire business by yourself. Some advantages of sole proprietorship are-
1. No government registration or regulatory paperwork is required.
2. Business doesn’t have to comply with any regulations and norms.
3. Income tax is payable on your income.
4. The profits are completely yours.
The documents required to register a sole proprietorship company are-
1. PAN card.
2. AADHAR card.
3. Bank Account.
4. Proof of office (utility bills or rental agreement).
b. One person company (OPC)- This is a type of company introduced by the Indian Government wherein one member can form a company instead of a minimum of two directors. The incorporated company helps reduce the business owner to reduce liabilities, increase credibility, and avail of tax benefits.
Benefits of OPC-
1. The directors have limited liability.
The OPC has lesser compliance to regulatory requirements and norms.
3. Legal recognition.
4. Easy to control and manage.
How to register an OPC-
1. Digital Signature Certificate (DSC)
2. Director Identification Number (DIN)
3. Apply for Name Approval
4. FIle all Ministry of Corporate Affairs forms.
5. Collect your incorporation certificate.
Documents required for registration-
1. Memorandum of Association (MoA).
2. Articles of Association (AoA).
3. Proof of registered office.
4. Affidavit and consent of director.
5. A declaration the business follows all regulations.
c. Partnership firm- This is a type of business structure wherein two or more partners sign a partnership deed or agreement that contains details about allocation of responsibilities, duties, and profit-sharing.
A partnership deed contains-
1. Name and address of the partners as well as the firm.
2. The date of commencement.
3. How much capital each person has invested in the firm.
4. Profit-sharing ratio as well as how much salary each partner will receive.
5. Rights, duties, and responsibilities of the partners.
Benefits of partnership firm-
1. Easy to form and liquidate.
2. Adequate risk sharing
3. The partners do not necessarily have to submit the returns to the MCA.
4. Flexibility.
d. Limited Liability Company- This type of company separates personal and business liabilities, which in turn limits the liabilities of an owner or owners. The tax liabilities are shared too. Key advantages of a Limited Liability Company are-
1. LLCs have comparatively lesser paperwork than other business structures.
2. LLCs are easy to form and are flexible.
3. LLCs have flexible profit sharing.
How to register an LLC-
1. Fill the form and apply for a DPIN (Designated Partner Identification Number) online.
2. Obtain your Digital Signature Certificate (DSC) and register the same with the MCA.
3. Get your LLC name approved by the MCA, fill the incorporation form, and acquire the LLC agreement.
e. Private Limited Company- A type of company that consists of a minimum of two and a maximum of two-hundred members. A private limited company cannot list shares on the stock market and raise capital from the public.
Benefits of Private Limited Company-
1. Each owner’s liability is limited to the extent of his/her stake in the company.
2. Transfer of shares is easy.
3. Each Private Limited Company has more tax benefits and lesser applied tax compared to other structures.
4. The company can raise funds by issuing debentures through public platforms.
How to register a Private Limited Company-
1. Acquire a Director’s Identification Number. A DIN requires you to have PAN, Aadhar card, bank statements, utility bills, etc.
2. File a name registration application, draft an AoA and MoA, and file the applications through the SPICE E-form on the MCA’s website.
3. Acquire the PAN and TAN applications.
IRDAI registered company and MCA registered company-
An IRDAI registered company in India is any company that has a national presence and provides insurance policies to the general public. All insurance companies need to comply with the regulations laid out by the Insurance Regulatory and Development Authority of India.
MCA or the Ministry of Corporate Affairs, on the other hand, is responsible for laying out regulations in the corporate sector. An MCA registered company means that a company has been registered in accordance with all laws and regulations of the Ministry of Corporate Affairs of India.
MCA or the Ministry of Corporate Affairs, on the other hand, is responsible for laying out regulations in the corporate sector. An MCA registered company means that a company has been registered in accordance with all laws and regulations of the Ministry of Corporate Affairs of India.
Why should you choose the right business structure for your company?
The structure of a company can greatly alter the cash flows, profitability, income tax returns, etc. Each business will have its own set of compliances to follow that differs from structure to structure. Some legal regulations are easy to comply with, while the rest may not be as easy, hence an entrepreneur needs to think this through properly and make a decision.
Some questions you need to ask yourself before commencing business-
1. Is the business structure chosen solely based on the initial investment? If yes, then you should choose a partnership or sole proprietorship in case the initial investment is less. Else you should choose a private limited company or LLP.
2. How do income tax rates differ across business structures? The income tax returns of a proprietor are the same as that of an individual. Income up to Rs. 2.5 Lakhs attracts no tax, between 2.5-5 Lakhs attracts 5%, between 5-10 Lakhs attracts 20% and above 10 Lakhs attracts 30%. Income tax returns are filed under ITR-5 in the case of Limited Liability Company.
3. Are you comfortable with managing and controlling the entire company by yourself? If yes, then go for a one-person company. If not, choose either a partnership, limited liability, or private limited company.
4. Are you in a position to bear the entire liability of your company? Partnership firms and sole proprietorships have unlimited liability. Whereas, on the other hand, LLPs and private limited companies have limited liabilities, and liabilities are borne to the extent of how much stake each owner or member has in the company.
5. How do you plan on receiving investments from VCs and other investors? Your company may be lucrative for investments only when it is registered and has a proper structure.
Some questions you need to ask yourself before commencing business-
1. Is the business structure chosen solely based on the initial investment? If yes, then you should choose a partnership or sole proprietorship in case the initial investment is less. Else you should choose a private limited company or LLP.
2. How do income tax rates differ across business structures? The income tax returns of a proprietor are the same as that of an individual. Income up to Rs. 2.5 Lakhs attracts no tax, between 2.5-5 Lakhs attracts 5%, between 5-10 Lakhs attracts 20% and above 10 Lakhs attracts 30%. Income tax returns are filed under ITR-5 in the case of Limited Liability Company.
3. Are you comfortable with managing and controlling the entire company by yourself? If yes, then go for a one-person company. If not, choose either a partnership, limited liability, or private limited company.
4. Are you in a position to bear the entire liability of your company? Partnership firms and sole proprietorships have unlimited liability. Whereas, on the other hand, LLPs and private limited companies have limited liabilities, and liabilities are borne to the extent of how much stake each owner or member has in the company.
5. How do you plan on receiving investments from VCs and other investors? Your company may be lucrative for investments only when it is registered and has a proper structure.
Cost of registering a company in India-
The cost of registering a company in India is as follows-
- Sole Proprietorship- Rs. 2500
- Partnership firm- Rs. 5000
- Private LLP or LLC company- Rs. 7500 on a minimum authorized capital of Rs. 100,000.
How to register a company in India online?
As per the Companies Act of 2013, you need to follow these steps to register your company -
1. Acquire a Digital Signature Certificate (DSC).
2. Acquire a Director Identification Number (DIN). You can obtain this on the Ministry of Corporate Affairs website by filing a DIN e-form.
3. Register yourself as a new user while filing relevant forms on the MCA portal.
4. Incorporation of the company.
1. Acquire a Digital Signature Certificate (DSC).
2. Acquire a Director Identification Number (DIN). You can obtain this on the Ministry of Corporate Affairs website by filing a DIN e-form.
3. Register yourself as a new user while filing relevant forms on the MCA portal.
4. Incorporation of the company.
How to check if a company is registered or not?
You can check the registration status of a company as well as whether a company is registered or not on the Ministry of Corporate Affairs website.
Incorporation of a company-
In order to get the certificate of incorporation, you will need to furnish the following documents and follow the following formalities-
Documents required for company incorporation-
1. Digital Signature Certificate (DSC)
2. Form-1- Incorporation of company in India
3. Director Identification Number (DIN)
4. Formal letter published by the ROC about the name availability of the company.
5. Form -18 and Form-32
6. Acquire a TAN and PAN card.
7. STPI registration documents if necessary
8. Act of shop and establishment related documents if needed.
9. Authorized agencies’ digital signature certificates
10. IEC registration documents if required
Procedure of incorporation of company-
1. Find out if the name of your company is available or not on the MCA portal.
2. After your company’s name gets approved, file the forms 1, 18, and 32.
3. Prepare Memorandum of Association and Articles of Association.
4. Printing, signing, stamping, and vetting of MOA and AOA.
5. Power of Attorney and Payment of fees.
6. Get your company incorporation certificate issued after the completion of the above procedures.
Documents required for company incorporation-
1. Digital Signature Certificate (DSC)
2. Form-1- Incorporation of company in India
3. Director Identification Number (DIN)
4. Formal letter published by the ROC about the name availability of the company.
5. Form -18 and Form-32
6. Acquire a TAN and PAN card.
7. STPI registration documents if necessary
8. Act of shop and establishment related documents if needed.
9. Authorized agencies’ digital signature certificates
10. IEC registration documents if required
Procedure of incorporation of company-
1. Find out if the name of your company is available or not on the MCA portal.
2. After your company’s name gets approved, file the forms 1, 18, and 32.
3. Prepare Memorandum of Association and Articles of Association.
4. Printing, signing, stamping, and vetting of MOA and AOA.
5. Power of Attorney and Payment of fees.
6. Get your company incorporation certificate issued after the completion of the above procedures.
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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.
