Company Registration

Why is Company Registration Mandatory?

calendar04 Mar, 2024
timeReading Time: 4 Minutes
Company Registration

Company registrations have grown comparatively very fast in recent times, and individuals are getting them registered to reap the benefits involved by registering their company under the Companies Act, 2013. If the company is not registered, it will not be able to reap the rewards of the policies that the government sets from time to time. Company registration is of great importance since the company becomes a separate legal entity, and the liability of the company’s losses and debts is not on the owner of the business. The government, through various laws, has introduced different types of companies as per the requirement of individuals to make more and more company registrations. Though it is not mandatory to register every business as a company or corporation, it is advisable to register them depending on the size, capital, and requirements of the business.   

What is a Company Registration?

Company Registration is a process through which the company or incorporation gets registered under the laws set by the government to get legal status. The importance of company registration is such that if the company becomes bankrupt or has sustained substantial losses in the market, then the liability will not be yours. Company registration can be done under the Companies Act 2013. Company registration should be done depending on the need, capital, liability, etc, a person wants to have in the company. If a person wants to do a partnership business, then they can register an LLP under the Limited Liability Partnership Act 2008 as it has features of both a company and a partnership. Moreover, if an individual wants to open the company on his own, then he can register for a one person company.

The Advantages of Company Registration

The advantages of Company Registration in India are many. These are –

Legal Identity

The main importance of company registration is that after registration, the company gets legal status in the country, and the person is not individually or personally liable for the company’s acts. If the company goes into loss or debt, then in that case, your assets are safe, and it is only the company’s liability to pay off the debts and cover the losses, which won’t happen if the company isn’t registered under the law.

Even if a lawsuit is filed against the company, the owner, directors, or any other person is not liable for that suit, and the person would not face the legal charges. This wouldn’t have happened in the case of the unregistered company.

Credibility

The company registration provides the business a form of credibility in the market to sustain. If the company is registered under the laws, it shows that the business is legitimate and the company and the management are serious about operating a full-fledged business in the country. While dealing with customers, it will be beneficial. The customers will look at the registration number or the GST number of the company to be sure before availing the services of such a company, and these assure the customers. Even an investor will look into the registration details of the company before investing any money in the business.

Protection of Brand

With the registration of the business and its logo, there can be no brand piracy in the market. It is advisable to get the Trademark for the brand so that no one can hamper your business by using your brand name or logo. If the business is unregistered, then there can be no brand protection under any law. Now, imagine you have built a profitable business and didn’t get it registered, and someone is using your brand image to run a business of his own, then you would lose the clients as well, and there will be a decrease in the net profit. If the service quality of that business is bad, then ultimately, your name will not have a good reputation in the market.

If the company is registered and the same thing happens, then it can be looked at legally, and compensation can be sought from that entity, including fines or even imprisonment.  

Investment

Investment through investors, venture capitalists, angel investors, or any other sources would increase if you register your company under the prescribed laws. The investors would look into the authenticity of the business, and the company registration would establish that. Investors are inclined to invest in a registered business that assures them of business activities. They do not have to worry about any fraudulent activity and can invest securely in the said business. 

Benefits of Taxation and Government Policies

The registered companies get tax benefits like lower rates of taxes and tax exemptions under the Income Tax Act of 1961. The government has formulated some policies that can benefit companies, like reducing tax rates and providing investment schemes, business platforms, funding, etc. The government does this to increase entrepreneurship and company registrations so that the economy of the country can improve.

These are certain points that establish that it is very important to register your company under the Companies Act, 2013. Without company registration, one cannot reap these rewards in the course of their business.

Conclusion

There are a good number of benefits when you register your company under the laws. Many businesses are opening every day in the country, and to protect your business from any obligations against any of these or previously established businesses, you should get your company registered. Many fraudulent activities are also happening in the country, and if they happen against your unregistered business, then the whole liability will be yours, and the investors, customers, or the legal system of the country would make you liable, while it would not happen in the case of a registered company.

Corpbiz can provide businesses with the necessary help to get their company registered. We have a talented and experienced pool of individuals who can help in figuring out the composition and the kind of company that would be beneficial for the applicant and get done with the process in a shorter time frame.

Frequently Asked Questions

  1. Why was the Companies Act of 1956 replaced by the Companies Act of 2013?

    The Companies Act of 1956 was replaced because it was an outdated act that was not in terms of the growing needs of the country and wasn't able to match the global standards. It was replaced with the new Companies Act of 2013, with a new transformation in alliance with global needs.

  2. What is the role of ROC in a company?

    The role of the Registrar of Companies (ROC) is to register the companies under the act and determine if the incorporation company is abiding by the rules of registration or not. It looks into statutory and legal compliance and checks the documentation process. Section 609 of the Companies Act, 2013 deals with the appointment of ROC.

  3. How many types of companies can be registered in India?

    Seven types of companies can be registered in India:
    · One-Person Company
    · Public Limited company
    · Private Limited Company
    · Section 8 Company

  4. What does Table F in Company Law signify?

    Table F in Company Law signifies the Articles of Association, which are limited by shares.

  5. Which type of company was not included in the Companies Act of 1956?

    The concept of a oneperson company was not present in the Companies Act of 1956, but it was introduced in the Companies Act of 2013 because of the growing need for it to meet global standards.

  6. What are the number of directors allowed in the Public Company?

    The minimum number of directors allowed in the Public Company as per the act is three, and the maximum number could extend up to 15.

  7. Do I need any legal compliance to start a business?

    Yes, if the business requires any licenses, depending on the nature of the business, then you have to get those licenses. However, you don't need to get your company registered.

  8. Can an already registered company be transferred to any other Company type?

    Yes, Section 18 of the act talks about the transfer of a company of one form to the other. However, you need to change the memorandum of association and articles of association as mentioned in the act.

  9. What are Section 8 Companies?

    Section 8 companies include companies whose objective is to promote sports, arts, education, research, science, commerce, environmental protection, societal welfare, religion, or other objective of the same nature.

  10. What are the types of Private Limited Companies?

    Private Limited Companies can be of three types –
    · The company which is limited by shares
    · The company which is limited by a guarantee
    · An unlimited company

Read Our Article: SPICE+ Form: Fast-Track Company Registration

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