If you want to register your company in Delhi, Bengaluru, Mumbai, Chennai or any other Indian city, here is a detailed guide on how you can start a company. Company registration process includes steps from choosing the type of company structure to applying for a certificate of incorporation.
Mandatory provisions to register a company in India have been given under the Companies Act, 2013. Before we move on to the company registration process in India, let’s first understand certain basics.
This article is a comprehensive guide to registering a company in India. It covers the following aspects:
The meaning of a Company in India is any business, established as an artificial person under the law. A group of individuals form a company with the mutual goal of engaging in business for profits or any other such common purposes.
The Indian Companies Act, 2013, defines a company as:
A registered association which is an artificial legal person, having an independent legal entity with perpetual succession, a common seal for its signatures, a common capital comprised of transferable shares and carrying limited liability.
Registration of a Company in India
Company Registration is a process of incorporating a company and give it a legal status under the Indian law. The legal document called the Certification of Incorporation received at the end of the registration process is the legal proof of the existence of the company.
Any association or company of more than 50 members must be compulsorily registered under the Companies Act or any other India Law.
Failure to do so will go against Section 464 of the Act, and the company will be seen as an ‘Illegal Association’.
The Companies Act allows different types of companies to be registered in India. Based on the need and requirement, you can choose any business structure for the registration of a company in India.
Here is a brief note on the different structures available for company registration.
Private Limited Company
This is a type of company that is held by ‘private individuals’, such as the friends, relatives and associates of the founder. They are called members of the company of shareholder.
- This types of company enjoy a separate legal existence, has limited liability and the Board of Directors manages the company.
- This probably the most common business structure in India because it allows funding from investors and venture capitalists.
- Several known companies like Facebook India and Google India are registered as Private Limited entities.
Read More: Advantages of Private Limited Company
Public Limited Company
A public company is almost the same as a private company, except regarding the ownership of the company.
- Here the shares are freely traded by the public through the National Stock Exchanges and can be held by anyone.
- Since the shares can be freely traded, a public company would have to meet more guidelines both under the MCA and SEBI in order to protect investor protection.
- This type of company structure is chosen by large business, which has various subsidiaries and also has a lot of capital holding.
- Popular examples include Tata Group of Companies and Infosys Technologies Limited.
One Person Company (OPC)
This is a fairly new form of business that was introduced in 2013. This structure gives the advantage of running a sole-proprietorship but with the benefits of a corporate framework.
- Here, there is only one owner and promoter of a company.
- A promoter can choose to appoint a director, or can himself act as the director of the company
- Just like a private and public company, this business structure also enjoys a separate legal existence, and the owner’s liability is limited.
More on: Advantages of One Person Company
Limited Liability Partnership (LLP)
LLP also enjoy limited liability but are registered under the Limited Liability Partnership Act, 2008. The partners are the owners and the management of the company.
Section 8 Companies
There are Non-profit companies set up under the Companies Act.
- Such companies usually have charitable objectives such as the promotion of art, science, religion, sports, education, research, etc.
- As opposed to other company forms, the profits are used for the benefits of people and the surplus, if any, is reinvested into the business.
- Apart from this basic difference, Section 8 Companies enjoy all the corporate benefits of any other private or public company.
Other forms of business structures in India include Sole proprietorship, Partnership firms Hindu Undivided Family business. However, it is important to note that, these structures do not fall under the purview of the Companies Act.
Read More: Types of Non-Profit Organization in India
Importance of Choosing the Right Business Structure for Company Registration
Choosing the right business structure will define the way your business functions and would also affect the yearly compliances that the business is to follow.
Here is a look at why you should choose the appropriate business structure before you register your company:
- Income tax calculation and filings differ based on the business structure
- Different structures have different compliance formalities. This also involves the cost of compliances that also varies for each aspect of compliance. For instance, public companies have more compliance formalities than any other business structure.
- Some structures are investor friendly (private companies), while others promote capital growth and business expansion (public companies).
The company registration is process is governed by the provision and guidelines of the Companies Act 2013. The Act specifies certain minimum requirements for incorporating a company in India.
While you have a choice of incorporating any type of company, the least requirements for company registration is for a Private Limited or One-Person Company.
Here are the minimum requirements for registering a private limited company or one person company:
1. Unique Name
To incorporate a company, you need to choose a Unique Name. The MCA would not approve any name which already exists or is similar to an existing company or a registered trademark.
What are the Guidelines for Choosing a Company Name?
The primary requirement for choosing a company name for registration is that is it unique.
The application for name approval is made using the MCA authorised RUN (Reserve Unique Name) online web service. After the application has been submitted, the Central Registration Centre (CRC) examines the application and decides of the approval and rejection of the name.
The MCA has given certain guidelines for choosing a company name. They are as follows:
- While it isn’t mandatory that the proposed name of the company should include the object of the company such as ‘Marketing’, ‘informatics’, ‘technologies’, etc., it is recommended to ensure uniqueness of the name. In such a situation, the Act prescribes that when the proposed name indicates the primary objective of the company, it should be reflective of the objects clause of the MOA.
- The MCA advises applicants to conduct a name search to ensure that the proposed does not contain any prohibited words, is similar to the name of existing companies or is similar to any registered trademark.
- If a foreign company is being registered in India, then the same name can be used after including the word ‘India’ along with the name of the company. Example: Google India, Microsoft India, etc.
- The name should be suffixed by the type of business that it follows. Such as Private Company, Public Company, Limited Liability Partnership, etc. The suffix in the name should match the type of business organisation that the company functions as.
- Abbreviated names cannot be registered as the name of a new company, such as SLU Private Limited. However, the exception to use abbreviations is allowed for well-known existing companies who can change their names to acronyms. For instance, Hindustan Unilever Limited can be altered to HU Limited.
- The proposed name of the company cannot be similar to the name of a liquidated company unless two years have eclipsed from the date of such liquidation or dissolution.
- When the name of the company has been struck off from the books of the registrar as a result of action under Section 560 of the Act, then the same name cannot be the proposed name of the new company unless 20 years have passed from the date of such strick-off action.
- The proposed name of the company cannot only be limited to the name of a city, state, country or continent, such as Chennai Pvt. Ltd or Asia Limited.
- The word ‘State’ can only be added to the name of the company when such a company is a government body.
- If the name of the company includes the words like ‘Bank’, ‘Stock Exchange’, ‘Asset Management’, ‘Nidhi’, etc., then, the applicant would have to take the prior approval of the regulators such as RBI, SEBI, IRDA, etc.
2. First Shareholders
The shareholder of the company refers to the owners or the members of the company.
- To incorporate a private limited company, a minimum of 2 shareholders are required. However, a one-person company will only require one member.
- The Companies Act has not specified the minimum percentage of holdings that each member should have. Therefore, any ratio can be chosen.
For instance, one shareholder can hold 99% of the shares, and the other can hold the remaining 1%.
- The first shareholders, also known as the promoters or founders of the company play an important aspect of company incorporation. They would float the MOA and AOA, and would also appoint the directors of the company.
3. Directors of the Company
The directors of any company are responsible for the management of the company. While they are separate for the shareholders of the company, the common practice is that the promoters of the company elect to be the first directors as well.
- The Act specifies that the minimum amount of directors of a Private Limited Company should be 2, and cannot exceed a total of 15 director
- The minimum directors required for a one person company is 1 and cannot exceed 15 directors
- The proposed director of a company must have a DIN (Directors Identification Number). The Act specifies that only two people cannot have a DIN to incorporate a company.
Therefore, if three people what to start a company, a minimum of 2 people should have a DIN to be listed as the proposed director of the company. The other one can be the shareholder of the company. They can apply for a DIN later and be appointed as the director after the company can be incorporated.
- A company can also be incorporated with foreign directors. However, at least one director should be a Resident of India. Even foreign directors should have a DSC and DIN.
Read More: How to Register for a DIN Number?
4. Capital Requirement
Capital is the amount of money that is required for the existence and functioning of the company.
Under the provisions of the Companies Act, there is no minimum capital requirement for registering a company.
There is no fixed cost for company registration, and it might vary based on several factors.
Here is a look at the factors that affect the total cost of registration
- RUN Name Approval form
- Government Fees based on the capital contribution
- Stamp Duty which would vary from state to state
- Notarization Cost
- Additional charges for applying for DSCs, DIN, TAN and PAN.
- Professional fees and GST if assistance is taken for a professional for company registration.
The Ministry of Corporate Affairs is taking steps to simplify the registration process for a new company. This is being done in an endeavour to promote the ease of doing business in India and encourage an entrepreneurial culture.
The Ministry promotes a very fast-track registration process, which is easily done through an online process. The process involves an online registration form, supported by scanned copies of the relevant documents and validated by the digital signature (DSC) of the applicant.
Obtaining DSC (Digital Signature Certificate)
The members of the company who will be involved in the incorporation of the company would need to have a DSC. The DSC of the first shareholders would be required to sign the e-MOA and e-AOA of the company to upload the same with the Registrar of Companies (Roc). This makes DSCs for the first subscribers or promoters mandatory. Additionally, the proposed director would have to obtain a DIN, for which the DSC is compulsory.
Documents for DSC:
- Passport photograph
- Address proof (Self-attested)
- Copy of PAN card (Self-attested)
Obtaining DIN (Director Identification Number)
The DIN numbers of the proposed directors are required to be intimated to the Ministry in the incorporation forms. Therefore, DIN is mandatory for the proposed directors of the company.
Documents for DIN registration:
- Passport photograph
- Address proof (Self-attested)
- Copy of PAN card (Self-attested)
- DSC of the director
Company name via RUN Webservice
Before incorporating a company, the name of the company is to be reserved. To reserve the name of a new company or change the name of an existing company, a simple online service called RUN (Reserve Unique Name) is used.
The application for the company name is processed by the Central Registration Centre(CRC) under Non- Straight-through Processing mode. The CRC will conduct a comprehensive check and give its approval or rejection of the name. Each name submission is to be accompanied by fees of INR 1000.
Once the name is approved, it is valid for:
- 20 days: For a new company
- 60 days: For an existing company
Drafting of the e-MOA and e-AOA
The Memorandum of Association and Article of Association are essential documents for the incorporation of any company. Both of these documents define the internal and external relations of the company with its stakeholders.
- MOA defines the objectives, capital, registered office, etc.
- AOA defines the rules and regulation for running and managing the company.
Both these documents are drafted by professionals and must be submitted along with subscribers’ sheet, which contains the DSCs of all the founding members.
Application for Incorporation
Once the necessary documents have been prepared, the following form will have to be filed to incorporate the company.
SPICe-32: Application for company incorporation
The following supporting documents would also have to be attached to these forms
- e-MOA and e-AOA along with the signed subscribers' sheet
- INC - 9 Affidavit and declaration by the first subscribers and directors of the company
- Proof of office address: Lease deed / Conveyance / Rent agreement along with rent receipts
- Utility bills of the registered office (not older than two months)
- Form DIR – 2 (Consent of directors)
Note that, Form INC-22: Details of registered office address (might be required later if proof of address is not filed with the SPICe form)
Once all the procedures for company registration are complete, the Certificate of Incorporation will be issued to the company.
What is the time taken for company registration?
The Ministry has ensured that not only the incorporation process is simple, but has also expedited the time of company registration in India.
Usually, a company is registered within a period of 15-20 working days - Subject to the fact that all the documents are in order.
There are multiple reasons to register your company as opposed to running your business as a sole proprietorship or partnership entity.
Registration gives the company a positive public image. It creates a professional persona and builds credibility. Banks, financial institutions and investors also prefer a corporate set up for giving loans and investment, rather than a single-person run business structure.
Limited Liability of the Members
In a sole-proprietorship and partnership models, the liability of the proprietor or partners is unlimited. In a company, however, the liability of the members is limited to their investment. This protects their personal assets in the event of loss or debit of the company.
Separate Legal Entity
An incorporated company is a separate legal person in the eyes of the law. This means that the company would be responsible for its own actions and the owners cannot be held liable unless a criminal action is found.
Since the company is established as a separate legal entity, it also means that it doesn’t rely on its stakeholders for its survival. For instance, the company started by Dhirubhai Ambani is continuing as Reliance Industries today, year after his death.
Separation of Management
In a sole-proprietorship and partnership models, the owner and the management of the company are one and the same. However, a unique feature of a company is that the ownership is held by the shareholders and the management is done by the Board of Directors. This distinction allows the owners to hire competent people to run the affairs of the company.
Since the liability and gain of the business are not directly tied to the owners, it makes investors keener on investing in the company. Also, since the capital of the company of the company is entitled in shares, the ease of accumulating and distributing capital holdings to the members also becomes easier.
Dissolution of Company
As easy as it is to incorporate the company, it is also easy to dissolve the company and liquidate it. Unless and otherwise there are debts or judicial proceedings, a company can be would-up by making a request to the Registrar of Companies. In such a situation, the assets and the surplus capital will be distributed amongst the shareholder in accordance with their ratio of holdings.
In this article, we have covered all the aspects to register a company. If you need help registering a company in India our team of experts are just a call away.
At QuickComapny.in, we have extensive experience with company registration and related compliance. When you choose to register a company with us, we take care of almost all the compliance formalities, guiding you through each step.
Let’s take a quick look at the company registration process that we follow and also a look at the basic documents that we need from you.
1. Understanding your Requirement
Once you book a company registration package with us, our representative will get in touch with you to understand your requirement, such as the type of company you wish to register, the number or first members and directors, the amount of paid-up capital, etc.
2. Obtain DSC, PAN and other documents
We would also help you apply for your various documents such as DSC and DIN for the proposed directors, PAN and TAN of the company. However, note that depending on the package cost, the cost of applying for these additional documents would vary.
3. Name approval
To ensure that you are able to register your company with the name of your liking, our representative will conduct a search to ascertain name availability. Six names would be submitted to the MCA for the process of name approval.
4. Preparing and Submission Application Form
Once the name has been approved, we will proceed to arrange the necessary documents such as e-MoA, e-AoA, SPICe form, etc. Upon your approval, the application is submitted by our representative on your behalf.
Once the company is incorporated, we will send all the documents. We will also help you with any other post incorporation compliance if required.
We will require the following documents for registering your private limited, one-person company or limited liability partnership.
It is to be noted that, additional documents might be required, in case you would want to incorporate a Nidhi company, or register your business using Udyog Aadhar or as an MSME.
For incorporating a company in India, one scanned copies of the documents are required. This includes but is not limited to:
- PAN Card of all directors
- Identity proof of the directors such as Aadhar card, Voter ID, Passport (mandatory in the case of a foreign director) or Driving License.
- Address Proof of all the directors such as Bank Statements, Electricity bills (or any other utility bill such as a mobile bill). These bills should not be older than two years and must be in the name of the director
- Address proof of the registered office of the company:
- Electricity bills (or any other utility bill such as a mobile bill). These bills should not be older than two years and must be in the name of the owner of the property.
- The parent documents of the property registered office of the company (registration deed or property tax document), along with the No Objection Certificate (NOC) from the owner should be submitted. In such a case it would be assumed that any one of the first shareholders owns the property.
- If the property is rented from a third-party, then, along with the NOC from the owner, the rent agreement would also be submitted. While the Ministry doesn’t always insist on this, it’s always best to submit it to avoid resubmission or the incorporation form.
- The digital signatures (DSC) of all the parties involved in the registration process are also required. The DSC of the promoters, the first shareholders and directors, are also required. Based on the company incorporation package you have selected, the application for DSC of two directors would be undertaken; the rest would have to be applied for separately before commencing the incorporation process.
Although the company registration process set by the MCA is simple, it’s always best to seek professional help while registering your company. There are various decisions to be made while incorporating a company, and in certain areas, experience goes a long way in simplifying the nitty-gritty of the process.
Click Here: Company Registration Online
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