Indian economy is developing at a rapid pace, thanks to the evolving government schemes and growing numbers of start-ups. At present, the Indian marketplace adheres to a sheer growth potential that enables existing and new companies to reap ample profit. And it’s needless to mention that registered entities are more exposed to such benefits. If you have recently founded a company and planning to carry on operation without a proper registration then you need to think again. After reading this blog you will come to know why the scope of growth is limited for unregistered entities and also learn about the core benefits of registering a company.
Commonly Known Company Registrations in India
These are the common legal structure available for registering a company in India
- Private Limited Company
- Public Limited Company
- One Person Company
And let’s move to the next section that briefs out the potential benefits of registering a company in India
A company registration can;
Ensure access to a slew of financing options
“Most financial institutions are unwilling to render any sort of fiscal help to unregistered companies because they lack credibility and are prone to wreak havoc”.
The thriving economy is now helping newer companies to set up promptly and embark on the journey of success. The Indian government has set up various legit channels for financing these entities. Apart from government-driven platforms, our financial landscape is served by innumerable private institutions such as NBFCs, Angel investors, and venture capitalists that are ready to support promising entrants. However, the majority of them only favor registered entities because of their stabilized legal structure. Simply put, the registered entities have better access to a wide portfolio of credit rendered by these institutions.
Renders better clarity on Roles and responsibilities
“Registered organization has a better organizational hierarchy and a clear chain of command”
This is a sort of inter-organizational benefit. Better clarity on the roles and obligations of the members is one of the driving forces behind a successful company. Registered companies in India are entrusted with an obligation to set up a reliable organizational hierarchy that embraces a seamless chain of command. This indeed is a tedious mandate to follow, but it offers a two-fold benefit.
First, it allows members to coordinatewith each other without any vagueness. And second, it improves the decision-making ability of the company since everybody knows what obligations they need to address.
Ensures complete legal protection
“Registered entities have better legal coverage and high-risk tolerance against illicit acts that endanger company’s future”
Where unregistered entities are more susceptible to legal conflicts, the registered counterparts are safer in this regard. Company registration bestows some exclusive rights to the key member when it comes to administrative and operational control and safeguards them against an illicit or hostile takeover.
Triggers Perpetual Succession
“Entities under company registration are less likely to encounter unexpected dissolution”
The registered companies are stable than their unregistered counterparts in terms of sustainability. Where unregistered entities are highly prone to unexpected closures, particularly in case of the owner’s demise, the registered firms are more stable on such a front and continue to exist as long as members intend to continue.
Speed-up decision-making process
“Since registered entities embrace clear chain of command, the likelihood of making prompt decision increases many folds”
Unregistered organizations can not usually make precise and prompt decisions due to a rigid organizational structure. A registered company, on the other hand, adheres to a reliable organizational structure that embraces a subtle flow of information and renders more clarity to every member involved in the decision-making.
Create a scope for expansion
“The increased government probing and ever-evolving compliances is making difficult for unregistered establishments to avail funding for expansion”
Every business, once in a while, thinks about improving its existing capabilities by venturing into different domains. If you are projecting something similar then it pertinent for you to steak around with underlying legalities. Companies that lack fundamental registration witness the very little scope of expansion and growth. Conversely, companies that embrace legalities are more likely to reap success on this front.
Attracts domestic and overseas investor
“Unlike previous days, FDI is now finding its way to stable and legalized establishment. Therefore, it’s not wise to put company registration out of the equation”.
Legality always remains one of the major concerns for investors willing to invest in a promising venture in the hope of better ROI. Furthermore, such investors consider company registration as a fundamental parameter of credibility.
What are the possible cons of not registering a company in India?
- The company would struggle to instill transparency within its operation
- It might be difficult for a company to manage its undertakings owing to a lack of proper structure.
- Triggers conflict of interest between departments due to a rigid and unclear organizational hierarchy.
- Triggers sense of distrust among the vendors, suppliers, and potential customers.
- Inhibit companies to expand their existing capabilities due to the lack of credibility.
- Deters investors to provide any sort of financial assistance.
- The paradigm of “perpetual existence” does not apply to unregistered firms.
It is in the best interest of any entity to have a proper registration in place as it allows them to reap countless benefits. Apart from that, registration also allows the company to excel seamlessly on the legal front. All in all, having a registration offers a win-win proposition for any entity. A company without registration is just like an ordinary enterprise whose existence is always at the stake. Through registering a company is indeed a legal compulsion, but it also boasts countless benefits for the business owners.
In case if you are not sure which registration to avail of, then it’s probably better for you to opt for expertise services.