Do you want to register a company in India? If you are thinking to start a business and looking for information on the steps of the registration procedure, we believe this article will give all the answers.
Here in this article, we walk you through the different steps of registering a company along with the different company formations that you are allowed to form in India. Without much ado, let us dive into the steps.
Types of Formation to Register a Company in India
The first thing you must know while registering a company in India is the types of formations that are allowed. There are many forms of business entities that can be seen at present, however, since we are dealing with small businesses, we will explore broadly five types of formations. The five company formations which are popular for small businesses in India are the following:
- Sole Proprietorship
- General Partnership
- One Person Company
- Limited Liability Partnership or popularly called LLP
- Private Limited Company
Let us now explain a little about the different entities and who should opt for them.
a) Sole Proprietorship
Under a sole proprietorship business entity, you as an owner single-handedly operate the entire business organization. You will be responsible for all the profit or loss of the organization. This formation is most popular in India, especially for beginners as it is not governed by Company laws.
If you are starting new with very low capital investment, and not looking for any benefits, opt for proprietorship formation.
b) General Partnership
As per company law definition, a partnership is “the relation between persons who have agreed to share the profits of the business carried on by all or any one of them acting for all”. The partnership firms are governed by the Indian Partnership Act of 1932. You need a minimum of two individuals to form a partnership firm.
Moreover, If you are starting a new venture with low capital investment, you can go for a partnership entity as it is easy to set up and requires minimal compliance.
c) One Person Company
One Person Company in India is a recently launched business entity that can be opted by new entrepreneurs. It was introduced through the Companies Act, of 2013. This business entity support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. However, if your business crosses an annual turnover of Rs. 2 Cr, it is mandatory to convert an OPC to a private limited company.
This type of company formation is for individuals who want to start a venture of their own and enjoy certain benefits of a corporate entity.
d) Limited Liability Company
Limited liability company entity is becoming popular in India It is governed by the Limited Liability Partnership Act of 2008. In this formation, any one member of the entity will have to accept unlimited liability while other members will have limited liability proportionate to their magnitude of investment.
Above all freedom-seeking entrepreneurs who want to operate a business with limited liability and want to enjoy certain benefits of a corporate body, the entity can opt for this formation.
e) Private Limited Company
A private limited company is the most popular type of establishment. These legal ventures bring a lot of benefits to business owners. The Ministry of Corporate Affairs, Companies Act, 2013, and the Companies Incorporation Rules, 2014 governs the registration process of private limited company registrations.
However, you need a minimum of two or a maximum of 50 directors to form a private limited company. The benefits of raising equity, protection of shareholders with limited liability, and unique legal entity status are some of the reasons for the popularity of this type of company formation among small and medium enterprises in India.
5 Steps to Follow to Register a Company in India
Nowadays it is easier to register a company business in India due to the introduction of the INC-29 Form by the Ministry of Corporate Affairs.
The INC-29 form works as a single window for various steps like approval of company name, Director’s Identification Number (DIN), and Company Incorporation Application process.
Follow the steps below to register a company in India:
1. Apply for Digital Signatur Certificate (DSC)
Firstly it is advised to apply for a digital signature certificate. All individuals aiming for a director must apply for a digital signature or popularly called DSC. In addition to this, it also works as an electronic signature which will be frequently required during the online company registration process.
Generally, the time taken to issue a DSC is around 2 – 5 days depending upon the submission of documents. Besides, the Information Technology Act, 2000 has provisions for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically.
2. Preparing INC-29
While you submit the documents for DSC, it is advised to secure your name of the company. The authorities are particularly choosy while approving the name of the company. Ensure the company name is unique and is not registered before. Another aspect that startups often do not take note of is a relevant domain name available or not, Though this aspect is in no way related to company registration, we found it worthwhile to mention here.
In addition to name approval, while preparing INC-29 Form, the other documents you need are DIN, Memorandum of Association( MOA), Articles of Association( AOA) drafted by a CS or a lawyer, verified documents of registered office, self-attested appointment letters and declaration authenticated by a company secretary.
3. Filing of INC-29
When all documents are ready, it is time to file the INC-29 form. By all means, one must be very careful while submitting online as you will find only one chance for correction. However, If the form is rejected, you will have to fill out the fees again. While filing INC-29, you need to pay the authorized capital mentioned, stamp duty charges along with the filing fees. It generally takes 1 day to file the form.
4. Verification of Documents by ROC/ Issue of Certification
The Registrar of Companies will now verify the documents that have been submitted. Not to mention, if the authority is satisfied and no correction is required, you will receive your certificate of incorporation within 7 to 10 working days. Nowadays, MCA issues digital certificates only and will be mailed to your email mentioned in the form.
5. Obtain PAN/TAN
As per the Income Tax Act of 1961, you need to have a permanent account number (PAN) and a Tax Account Number for your company. You can get this thing done directly from the official site of NSDL or hire a professional to do it for you. After receiving the PIN and TAN, you can open a business bank account for your company submitting the documents.
So, these are the steps one will have to follow while registering a company in India. It is advised that based on your scale of business, select the business structure that suits you best.