Knowing How to register a company in India is very important before starting any type of business. As there are multiple types of company structures in India. All these types of company structures have their own pros and cons depending upon the requirement. Furthermore, to achieve the business goals as a startup, it is essential to register a company through proper procedure.Thus, In this guide, we will explore How to register a Company in India.
Understand the Different Structures of Companies in India
In India, there are many different types of company structures. As an entrepreneur, choosing a legal entity is one of the most essential decisions you will make. It is not enough to have a fantastic concept and invest in it for a business to be a success.
It is also important to choose the right business structure at the right time to make the business a success. The sort of structure that a firm uses is also critical to its success. Therefore, let us now discuss the most important company structures in India.
Private Limited Company Registration
Companies controlled by non-governmental organisations or a very limited number of shareholders or members of a firm are considered to be private companies. In other words, Private Limited Company doesn’t issue or sell their shares on the stock markets but instead trade their private stock.
Private Limited Companies are the first priority of startups as it is possible to split the management and the stockholders.
Furthermore, Investing in profitable ventures is possible without the involvement of management for startups using Private Limited Company. Thus, management may do its business without being constantly interrupted by investors.
To know more about Private Limited Company Registration
Download Guide Private Limited Company.
Public Limited Company Registration
A company that is publicly held or to which the public can subscribe is called a “public limited company” or “public company”. By issuing shares, they may raise money from the public immediately and easily. The company is listed on either NSE/BSE or both.
For registering a public limited company at least three directors and at least seven shareholders must be on the board.
However, there is no upper restriction on the number of shareholders that can be in a company.Lastly, The responsibility of the shareholders is limited to the face value of its shares and the premium only.
To know more about Public Limited Company Registration
One-Person Company Registration
Comparable to private corporations, a one-person company has only one stakeholder. One-Person Company also gets several benefits in addition to having access to bank loans, limited liability protection, and other perks of a private limited company.
Furthermore, OPC requires fewer compliances as compared to private & public limited. Thus, For those who believe in rapid business decisions without interruption, or who want to show their solitary enterprise in a professional manner to their clients, OPC is a great option for them.
To know more about One Person Company Registration
Partnership Firm Registration
The Partnership Firm Registration is mandatory when two or more parties enter into a legal agreement to manage a venture, administer it, and share earnings and losses equally.
Registration as a Partnership is the best option for small businesses, as the creation process is simple and there are minimum legal requirements to fulfil before registration.
Partners in a Partnership Firm have full influence over the firm’s actions because every partner is an owner. However, In a Partnership company, partners may have different responsibilities, but they are all working toward the same goal.Thus, Involvement in the business fosters a greater sense of responsibility and belonging, which helps to develop an efficient staff.
To know more about Partnership Firm Registration
Limited Liability Partnership or LLP Registration
As an alternative corporate business form, the Limited Liability Partnership (LLP) offers limited liability and Partnership Firm’s flexibility. LLP can continue to exist even if one or more partners leave. As a result, it is allowed to engage in contracts and possess property in its own name. In addition, no partner is accountable for the autonomous or unauthorised activities of another partner.
Know more in detail about LLP Registration
Sole Proprietorship Registration
A sole proprietorship is a business that can be owned and controlled by an individual, a company or a limited liability partnership. There are no partners in the business. The business owner has unlimited liability (i.e. the business owner is personally liable for all the debts and losses of the sole proprietorship
Therefore, both the business and its owner are identical, and the business does not have a distinct legal existence. The major benefit in a Sole Proprietorship business is that the trader is given concession in taxes. He is liable to pay tax at the individual tax rate, which is 10% and exempted from the corporate tax, i.e. 25%.
To know more about Sole Proprietorship Registration
Importance of Choosing the Right Structure of Company in India
Choosing the company structure is critical to business success. When choosing the proper business structure, a variety of aspects must be examined, including liability, control, capital contribution, number of members, the convenience of creation, and compliance.
Furthermore, The pros and drawbacks of each business structure also vary. Thus, it is important and the most primary thing to do before registering a company in India.
How to choose the best structure of the company for your business
Let us understand some important aspects to consider before you register a company in India.
Consider the Safety of Personal Assets
Starting a business is a venture that involves a lot of risks. There have been several cases where the business owners lost even their personal assets such as home, land etc. to cover the losses incurred.
Thus, one must be aware of their risk-taking capacity and find the right company structure to face the losses that might occur in the business.
In the event of business debt or a lawsuit against their firm, sole owners and partners are personally liable for all the amount.
Creditors can seize personal assets such as houses, vehicles, money, and other valuables.
Thus, Your personal and corporate identities can be separated by incorporating or creating a Limited Liability Corporation. However, in this business structure shareholders in a corporation or LLC are also at risk of losing the money they invested in the business.
Understand the importance of Decision- Making Authorities
The death or retirement of a sole proprietor or partner may cause the business to dissolve or get legally entangled. The legal business forms of corporations such as Private Limited Companies and limited liability companies (LLCs) have been around for decades. Irrespective of individual directors/managers/shareholders, they may continue to exist. Moreover, shareholders might appoint new managing directors as per their wish.
On the other hand, if you are a solopreneur, OPC(One Person Company) or Sole Proprietorship Registration allows you to take all decisions on your own without any interruptions. Furthermore, in OPC registration or Sole Proprietorship formation, you have all the access to the capital.
Know about Taxation
The earnings and losses of a sole proprietorship, OPC or partnership gets taxation directly on the owner’s personal tax returns. Thus allowing you to earn more and pay fewer taxes.
On the other hand, the profits of companies are taxed, and then dividends given to shareholders are taxed again at the individual level. However, paying taxes as a corporate helps in getting bank loans and avail several other benefits.
To know more about Corporate tax, you can visit – Corporate Tax in India
There are several other aspects to consider. To know more about the ideal structure that may suit your needs and boost your profits in the long run, it’s best to consult experts.
What are the steps to register a company in India?
There are several steps to register a company in India. Though, the most significant ones are as follows.
Select a Unique Company Name
What sort of business structure will you have? That’s a good place to start when searching for the right business name. Due to the fact that name registration regulations differ based on the structure of your organisation, this is crucial information to know.
For example, For Private Limited Company Registration, it is important to mention private limited in the name of the company. Similarly for an LLP. Lastly, The obvious thing to do is to verify if the name you are considering is already in use.
A company name must be registered with the Ministry of Corporate Affairs (MCA), therefore you’ll need to check its directory and see whether yours is already on file. Consequently, you will have to pick a different name if it appears in the business registration directory.
Download guide how to opt for the right company name.
Decide Directors and Shareholder of the company
Investing in a firm is very different from acting as a director. In other words, The company shareholders own the company, who own its shares, and directors manage it. When it comes to public corporations, individual and institutional shareholders such as mutual fund companies, pension funds, and hedge funds shareholders may number in the thousands.
On the other hand, Key responsibilities of the board of directors include ensuring the company’s success while also satisfying the needs of the shareholders in the business. Thus, before you start a business, it is important who plays the role of directors and shareholders.
Apply for DSC
While submitting an application to MCA(Minister of Corporate Affairs) for registering a company, it is mandatory to sign the application through DSC. The DSC stands for digital signature certificate and gets validation through a type of electronic signature ( Digital Signature) where a mathematical algorithm is routinely used to validate the authenticity and integrity of a message.
To know more about DSC or Digital Signature Certificate
Arrange Documents to register a Company in India
Arranging Documents for company registration is one of the most important steps in the whole process. The documents should be in the correct format. The documents for each company structure may slightly vary. However, The mandatory documents may include-
- Address Proof of Directors ( Passport, Voter ID, Driving License, Aadhar Card etc.)
- Residential Proof of Directors (Bank Statement, Electricity Bill, Telephone Bill, Mobile Bill, etc.)
- Registered Office Proof ( Registered document of the title of the premises of the registered office in the name of the company or notarized copy of lease/rent agreement in the name of the company along with a copy of rent paid receipt not older than one month).
Difference Between OPC and Private Limited Company
In conclusion, The steps to register a company in India are complex and may require external assistance from professionals.
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