Over the years, we see that new startups are plunging in our country, varying in almost every field. Ditching your nine to the five-day job and becoming a business owner is the common thing that one can hear these days. But most of us are unaware of the legal steps involved in the company incorporation in India. Company filing and the Regulations are not the easy part of any business venture. Furthermore, it digs a big hole in the personal finances of an individual.
Government’s Role in the Process of Company Incorporation in India
The Ministry of Corporate Affairs (MCA) in India has simplified the process of the incorporation of a company. The tech-savvy world demands everything to be online, and so is the process of starting a new business. The MCA has introduced a five in one form called SPICe INC-32 (Simplified Performa for Incorporating Company Electronically) to make the process of registration easier. We all know that we need to interact with authorities at several levels. This is now easy for an individual as one can register for a new company by sitting at their home, however in case you find any difficulty in filing application for company incorporation then we at Corpbiz can assist you with the incorporation procedure;
Before starting the business, you must decide the right type of Business Structure. The selection of the right business structure helps in accelerating the business growth and keeps you away from the web of debt.
As the name depicts sole proprietorship firm means firm carried by one person on their name using their expertise. It requires only one person which makes it easy to start. Setting up a Sole Proprietorship firm requires less costing and fewer compliances.
The Companies Act, 2013 introduced the concept of OPC (One Person Company) in the year 2013. It requires only one shareholder who must be a citizen of India.
Private Limited Company is a kind of business legal entity. It has shareholders and directors, and the shareholders do not participate in the management of the business.
LLP is a separate legal entity that gives the benefits of limited liability of a company to its partners. It is a hybrid between a company and a partnership. It contains elements of both corporate structure and partnership firm structure.
A partnership firm is not considered a legal entity. Group of people known as partners come together o start a firm. Here the partners share all the profits and losses amongst each other.
Since it is a partnership firm, you cannot blindly trust even on your partner who might be your friend or any relative. So it’s better to legalize the contract.
Make the Contract Legal
In the case of a partnership company, the partner can be a friend or any other relative. Therefore it’s better to discuss, prepare, and have a signed agreement regarding the investment and the distribution of profits.
Now, let’s see a comparison among these Business structures. This chart will give you an idea of the type of Business entity to choose from –
|Sole Proprietorship Company||Sole Proprietor||Requires less money to create and profit or loss to the company is reported by the owner on his/her personal tax return.||The owner is alone to clear off the debts in case there is a loss to the company.|
|Limited Liability Partnership||Partners||Limited personal liability for business debts.||Partners are only liable up to the contribution made by them in LLP. It is more expensive to create LLP than a general partnership.|
|One Person Company||Single promoter looking to limit their liability||Higher Benefits on depreciation and no tax on dividend distribution.||Low Credibility and difficulty in raising the capital.|
|Private Limited Company||Shareholders||Credibility is high and easy for raising capital||Require a range of compliances after the incorporation of the company.|
As the Company incorporation procedure is the most preferable & suggested choice, we will discuss the about company incorporation in detail;
In the case of Directors from India
If the applicant is from other countries
In case of shareholders – Indian National
The following documents must be submitted for the registered office during the company registration –
Companies in India incorporates through filing SPICe –INC-32 form [Simplified Proforma for Incorporating Company electronically] with e-MOA (INC-33), e-AOA (INC-34) with the Registrar of Companies.
Now let’s discuss the company incorporation procedure in detail;
The first step is to obtain the Digital Signature Certificate of the Directors involved in the company. DSC is a secure and authentic way to sign a document electronically. The Applicants can directly approach Certifying Authorities (CAs) with original supporting documents and self-attested copies. The process usually takes 1-3 working days.
The DIN number is mandatory for the company’s incorporation. At the start, you can apply for a maximum 3 DIN. One can apply for DIN directly through eForm SPICE. You need to attach the proof of identity and address along with the application form. DIN is allocated to the applicant only after the approval of the form.
You need to provide at most three different options for your company’s name to MCA (Ministry Of Corporate Affairs). As per the Companies Act, 2013, the name of the company must be unique and suggestive of the service; the company is providing. You must ensure that the name does not resemble the name of any other already registered company. You can also cross-check the name availability on the MCA portal for the safer side.
For name reservation, you need to file RUN (Reserve Unique Name) form with the Ministry Of Corporate Affairs). MCA will verify your application on the basis of which it will either approve the name of the company or reject the name of the company. Once you receive approval from the MCA you need to file company incorporation form within 20 days of getting approval. The fee for filing the RUN form is Rs1000. An applicant can also apply for the name reservation through SPICe form while filing RUN form is a preferable option.
After the name approval from the MCA, you need to file SPICe form with the registrar of companies along with the KYC and other documents of Directors and shareholders. After submitting the SPICe form to MCA, you will get the Certificate of Registration along with PAN (Permanent Account Number) for income tax and TAN (Tax Deduction Account Number).
A new form has been introduced named AGILE (INC-35) accompanied by the SPICe form.
After submission of the form, you will be provided with EPFO (Employee Provident Fund Organization), ESIC (Employee State Insurance Corporation) and GSTN of the company.
Once your company is registered, you also need to adhere other requirements which are as follows:
Along with the registration of a business entity, a business entity requires various registrations and licenses to operate in India.
Some of them are as follows:
The Accounting system helps in scaling the operations and finances the growth. It keeps track of the various transactions conducted by the business. Corpbiz also provides CFO services which can assist you in managing the accounting and taxation system.
Legal Steps for the incorporation of a company in our country is a very tedious task and time-consuming. It’s a better idea to think wisely the kind of business venture you choose and put things in the right place in order to avoid pitfalls in the future.
For anything related to how to incorporate a company, reach us at Corpbiz.
Also, Read: FAQ on Private Limited Company Registration in India.