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Company Registration in India

Overview of Company Registration

If you wish to start a business in India, the first step is to register a company that meets the objective of your business. You must select the perfect business structure that can fulfill your needs. In India, the companies are registered under the Companies Act, 2013 and the application for registration has to be filed with the Registrar of Companies.

Many businesses are operating in India, but your startup's success will depend on the decisions you make during company incorporation. This will be based on the type of business structure you select, the process of registration you'll follow, and whether the regulatory compliances are properly followed. 

Let's look at how the process of Company registration works and the requirements pertaining to the same. 

Types of Business Structures in India

Let us start by understanding the types of different business structures in India:

Private Limited Company

This type of business structure is perfect for small and medium-sized businesses. The operations of such companies are managed by the directors. Moreover, a private limited company can have a minimum of 2 and a maximum of 200 members. These companies are registered under the Companies Act, 2013, and there are certain restrictions on the transfer of shares in a private company. 

Public Limited Company

According to the Companies Act of 2013, a public company must have a minimum of seven members and there is no limit on the maximum number of members. These companies are perfect for medium to large enterprises and the liability of members is generally limited to the extent of their unpaid amount. 

One Person Company (OPC)

The concept of OPC was developed in 2013. This is the only business structure that is registered under the Companies Act, 2013, and only requires one member. This business structure is ideal for companies that wish to raise money. 

Limited Liability Partnership

An LLP is a distinct legal entity in which a partner's liability is restricted to the amount they have mutually agreed upon. LLP is also registered with the ROC but it is registered as per the provisions of Limited Liability Partnership Act, 2008. It is an ideal business structure for those who want a structure that incorporates features of both a partnership and a company. 

Partnership Firm

A partnership firm is established with two or more people. The profit and loss of the firm will be divided among the partners in the said proportion as agreed between them. The Partnership Act of 1932 governs the partnership firm. It is perfect for small firms who have low investment and is managed by two or more people.

Sole Proprietorship

A single person is required to operate a sole proprietorship business. This is perfect for small business owners with less capital. The sole owner will have total control over the company and will be responsible for all profits and losses of his business. 

Section 8 Companies 

These are the non-profit organizations registered for charitable purposes. Their aim is not to make profits but to do charity and serve a particular section of society. 

How to select the best Structure for your Business?

There are certain factors listed below that you need to consider and understand while selecting an ideal business structure for your business:

Nature of Business

When selecting a business structure, look at the nature of your business. If your business is service-based, then you select a private limited, OPC, LLP, or sole proprietorship. But, if you are a startup and you wish to scale your business, then you can either select private limited or public limited based on scalability and where you wish to see your business in the coming years. Moreover, go for OPC or Sole proprietorship if your business is on a very small scale and you are a single member and director. 

Then, if you provide professional services, go for LLP or partnership, and for charitable purposes, you can select the Section 8 companies. 

Scalability 

You also need to think about the future growth of your company. Selecting a structure that allows for future growth is a good idea if you plan to allow outside investors in your company or raise money from the public. If you wish to raise money from the public in the future, then consider a public company, otherwise, you can also consider a private company if you want limited shareholders. 

Compliance Cost

It will be a wise decision to choose a Sole Proprietor, HUF, or Partnership business if your beginning budget is less. On the other hand, you can choose a One Person Company, LLP, or Private Limited Company if you are certain that you can bear the startup and compliance expenditures.

Liability of Member 

Businesses like a partnership, sole proprietorship, and HUF have unlimited liability, which means in case of default, you will be personally liable for paying the debts. So, be very mindful while selecting these structures. Whereas, LLP, Private company, and OPC have limited liabilities, where the members are only liable to the extent of their amount of shares. 

Benefits of Company Registration

There are many benefits of registering a company in India. A few of them are listed below:

  • Registration protects you and your business from any legalities or liabilities. 
  • It increases your business goodwill and attracts customers.
  • No minimum capital is required to register a company. 
  • After registration, a company becomes a separate legal entity different from its members.
  • Liability of members is limited and they are not personally liable for the acts of the company.
  • People start trusting your company and this facilitates investment. 
  • Assets of the business are also protected.

It helps the business in growing and expanding in different regions.

Documents required for registration of a Company

Any business organization is required to submit the following documents for company registration:

  • Address Proof and identity proof of the proposed directors of the company.
  • Contact details of the directors.
  • Passport-sized photographs of the directors are also required.
  • Office Address Proof 
  • Lease deed or owner?s NOC if the office premises are rented. 
  • Companies Email Id.
  • Important documents such as Memorandum of Association and Articles of Association. 
  • Statement of the company's expected income and expenditure for the preceding three years.

Procedure of Company Incorporation in India

The process of registering a company in India is very important to understand and needs to be done with utmost care while keeping all the regulations in mind. Let's understand the process of registering a company in India:

Step 1: Filing application for Digital Signature Certificate (DSC)

Applying for DSC is the very first step in the company registration process as it is required to sign and verify all the company documents while guaranteeing security. 

Step 2: Obtaining the Director's Identification Number (DIN)

Getting a DIN is mandatory for all the directors of the company. There are two ways through which a person can obtain DIN. The people who are proposed to be the directors of the company, but not yet appointed, can apply for DIN by using the SPICE+ incorporation form. On the other hand, the appointed directors can simply apply through DIR-3.

Step 3: File for Name Approval

Next, you will have to file an application for name approval of the company to the Ministry of Corporate Affairs. Once the name has been approved, you can initiate the registration process. 

Step 4: Submission of registration application

While submitting the registration application, you will include all the company details and attach the required documents. Based on the type of business structure you select, you will have to fill different for company incorporation. 

Step 5: Issue of Certificate of Incorporation

After the relevant documents and application have been filed, the authorities will check and verify the application and if everything is found correct, you will be issued a certificate of incorporation. 

How PSR Compliance can help in Company Registration?

The experts at PSR Compliance are experts in the field of company registration. The major advantage is that we offer online company registration services. You do not have to rush to different places to get the registration done one time. We adhere to regulatory compliances and ensure the registration is completed on time. Our team assists you from name approval till the issue of certification. We also offer post-registration services to make sure that your company complies with the required regulations.

Frequently Asked Questions

1. How to register a Company in India?

Company registration involves certain steps, such as obtaining DSC and DIN. Then, submitting the required documents and application to the MCA, and after that the certification of company incorporation is issued. 

2. What is the cost of registering a company in India?

The cost of company registration varies depending on different factors, such as types of business structure, number of members and directors, capital contribution, etc. To know the exact cost, you can connect with the team of PSR Compliance.

3. Is it possible for one person to register a company in India?

Yes, even a single person can register a one-person company under the Companies Act, 2013. A sole proprietorship firm is also an option for anyone who wishes to be a single member of the company, but this business structure is not governed under the Companies Act, 2013. 

4. How long does the company registration process take?

The company registration process typically takes 10 to 15 days depending upon the time taken by MCA for checking the application and granting the certification.

5. Is it necessary to take GST while company registration?

GST registration will be required if your turnover exceeds 40 Lakhs in the case of goods and 20 Lakhs if you offer services to others. 

6. Can I convert a business structure after registration?

Yes, you can convert a business structure into another if the law allows. For Example ? you can convert a private limited company into a public company, but you cannot convert a sole proprietorship into a private company.