How to Register your Company in India
To do business in a country like India, one must first understand the market and create a product or service that caters to a need. Or one that modifies an existing product in a unique way to meet demand, and can satisfy consumer needs in a way they did not know was possible.
When starting up your company, questions as how to do it legally and correctly would naturally abound. This guide aims to clear these questions, irrespective of the mode and type of company you may be thinking of.
What is a company?
A company is a business organization that creates or sells a product or service in exchange for money. A company can be an entity or a legal entity, depending on its mode of registration. Companies that are registered as an OPC (One Person Company), or as a Limited Liability Partnership (LLP) or a NGO, are considered legal entities and enjoy special privileges under the law.
What is company registration?
Company registration in India means getting the legal right to do business in the country. Company registration in India is also known as incorporation or formation of a company. We will now get into the various reasons as to why you need to register your company, apart from the obvious legal reason.
Why company registration?
- Company registration makes you look more professional and gives you better potential to attract clients and investors
- Registering your company makes it easier to get loans and credit from the bank
- Having your company registered creates a better brand image for your company in the market
- In case things go south it becomes easier to sell your company and have an exit strategy
- Additionally a registered company means that you have fewer risks and you are protected from personal liability
Different options for company registration in India
There are various options when it comes to company registration in India, what you choose ultimately depends on the nature and size of your business. We shall discuss the various options for company registration, along with certain essential criteria that you must look at while choosing what is the most appropriate for you.
1.Private Limited Company
A private limited company is a type of privately held small business entity. This type of business restricts the number of shares held by the owner to 50 and the number of shareholders to 50 as well. Additionally shareholders cannot trade their shares publically. Private Limited Companies are suitable for startups and growth companies, as they have high statutory compliances and they tend to attract investments far easier than the other modes of company registration. Additionally they have high tax benefits, and the business can easily continue beyond the owners. The cost for registering a startup is Rs. 6,299/- and it takes around 15 days to receive the confirmation of registration.
2.Limited Liability Partnership (LLP)
A Limited Liability Partnership provides for a business model that enables professionalism and entrepreneurship to combine seamlessly. A LLP is suitable for consulting and professional firms, it also provides for Limited Liability Protection and is recognized as a corporate entity as such. The benefit of limited liability is that the liability of owners and shareholders is reduced in case of legal claims. The company is liable to legal action as opposed to the owners or shareholders. One is only liable for dues on unpaid shares. Limited Liability Partnerships provide for decent tax benefits and the company can survive beyond the founders. However the ease of funding and statutory compliance is far lower when compared to Private Limited Companies. The cost of registering a LLP is Rs. 3,999/- and takes around 20 days to be registered.
3.One Person Company (OPC)
In India there is a provision to register your company as the sole owner, whereas LLPs and Private Limited Companies require a minimum of two owners. OPCs are obviously recommended for sole owners who want to run a business. The legal status is that of a Single Corporate Entity and it has minimal compliance with statutory regulations. OPCs provide high tax benefits but limit the chance of receiving funding to a minimal degree. Additionally the business can continue beyond the owner. The cost of registering an OPC is Rs. 4,799 /- and it takes around 15 days to be processed.
A partnership firm is suitable for a business that is instituted for a limited amount of time. The entity status is Partner based and the business does not continue if the owner leaves. Seeing as how the business is short lived the tax benefits are minimal and the possibility of funding is low. There is no limited liability protection for the company as such. It costs around Rs. 6999/- to register a partnership firm and it take between 15-20 days to complete the process.
Sole proprietorship is suitable for small traders and shop owners, and it confers an individual based entity status. Sole proprietorship does not provide limited liability protection and it has minimal statutory compliance and tax benefits, additionally it is impossible to get outside funding. The cost for registering your sole proprietorship varies according to the state depending on GST.
Documents required to register your company
Director and shareholders documents
- Passport size photograph
- PAN card copy (compulsory)
- Proof of identity (any one of the below)
- Driving license
- Voter ID
- Aadhar card
- Registered Office Address Proof Documents
- Address Proof of Registered Office Premises
- Office Space Ownership/Rental documents
How to register your business
- Arrange the basic documents of your directors
- Prepare MOA (Memorandum of Association), AOA (Articles of Association)and other legal documents
- Get your company incorporation certificate
- File INC 29 or incorporation documents with ROC (Registrar of Companies)
- Apply for DSC (Digital Signature) of Directors
How to register for Startup India program?
Startups are small businesses that show the potential for rapid scalability and growth with limited resources. India is a startup friendly country and the government recognizes this through the Startup India initiative, which was started on 16th January, 2016. This initiative has various benefits including tax exemptions and easier funding for startups.
What are the requirements to register your company under Startup India?
- You must incorporate your business, either as a Private Limited Company, a Partnership Firm, or a Limited Liability Partnership Firm
- You must register your startup online with Startup India and upload the relevant documents
- A letter of recommendation from an incubator recognized by the government or a letter of funding provided by the government
- Your turnover should be less than 25 crore per year
- Your startup should not be older than 5 years
- Your business should not be result of the split of an older company
- Innovation is a necessary condition
- You must submit a description of your business in brief
These are the main requirements to be able to avail the benefits of the Startup India program. More details are available on the Startup India site.
We hope this guide has been of some use to you and we wish you all the best with your journey.
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