How to register a company in India?
You have decided to become an Entrepreneur and want to be a business owner. You want to fulfill the dream that’s making you to loose your sleep and made you restless for many months. You identified few niche areas to provide the services to customers or sell items on ecommerce portal or do a sector wise service where you see an opportunity to win. Now you have few friends who want to be part of your dream to fulfill.
Is it time to start selling? Yes, you can do that, provided you have lot of cash or you have credibility as an individual. However this is not so easy.
Why you should register a company?
Registering a company helps you to follow the rules of Taxes, rules of the land. It helps to get operating cash loans or helps to attract the right employees. This helps to build a confidence in Customers, vendors, employees and other stakeholders.
Also it is important that you need to be legally and ethically sell the products to your customers or import anything only when you are a registered company and has an ability to participate in country’s growth too.
Please note that company is like a living person and it has its own problems, solution etc. As a Business owner you are the first inventor in the company. So treat your business as a friend.
Few reasons why you should register a company
- It helps to separate the Inventors from the company that uses the invested money to grow. This helps to separate the company properties from personal properties of the Directors. For example, in case the company has a problem then it helps to separate the properties of owners from the problems of the company.
- Gives a legal authenticity for the company to open Bank accounts, Tax rules, Employability to recruit people etc.
- It helps to take Bank Loans, raise money from Investors or from Public through IPO
- Buyers will trust the company more than an individual.
- Build the brand and trust in the customers mind.
- Attract investors to invest in the company based on the Equity sales by improving the company valuations.
How many types of companies can be formed?
There are several types of companies can be formed. Each type of company formation has its own advantages and disadvantages. So choosing a type of business setup is important as each has different rules and regulation to fulfill.
There are several business structures in India, like Sole proprietor, Limited Liability Company (LLP), Private limited company, Public limited company. As I said, each one has its own advantages and disadvantages.
Sole proprietorship (Single Owner)
Single Proprietorship is one of the oldest forms of business structure in India. As the name says, the Business Owner is the single Owner and this has a simple taxation and other structures. It is easy to operate and doesn’t have to follow many rules and regulations that’s essential for Private limited or Public Limited companies.
The basic rule here is the Individual person’s business and his own properties are considered as One and if any loss happens in the business has to be compensated by his personal assets. Due to this reason profit and loss of the business is added to individual persons income and all the assets of company is owned by him only.
Limited Liability Company (LLP)
This helps 2 or more people to become partners in a venture and this model provides Limited Liability to its partners. It is a corporate entity with its own rules and responsibility. This model was started recently and many business have adapted this model as it is easy to set up a LLP Company and doesn’t need a huge process or structure to manage. Every partner has a limited liability in LLP to the extent of capital contributed by him to the company formation.
It is above Proprietorship and below the Private Limited Company. Many firms like Consultants, Legal Entities, Financial Entities are formed in this way.
Private Limited Company:
Here the company is owned by the individuals, who have invested money and have the Equity in the company. In the business having a Private Limited Company has more weightage and acceptance then the Proprietorship one.
A Private Limited company can be formed with just 2 members and 2 directors. But there is a restriction in the maximum number of its partners, which is restricted to 200. A Private Limited company cannot invite public or general people to apply for its shares. One of the important factors that attract investors is to invest in the Private Limited company and make a windfall when it goes Public.
Public Limited Company
As the name says, Public Limited Company is owned by General Public, Provident Fund companies, Investors etc. One of the dream of many startups to launch their company into Initial Public Offerings (IPO) and see the growth.
Being Public and listed in one of stock trading exchanges helps the company shares to buy and sell in the open market. Many people buy the shares with a premium paid to each shares face value.
What are the Documents required to register for the company?
How to Register a Company in India? – It’s a simple process and many CA / Auditors can help you to register a company. Following are the data you need
- A Director Identification Number (DIN) for each Partners / Directors of the company.
- Registration with MCA (in India)
- Digital Signature
- Certificate of Company Incorporation with Name.
- GST Tax registration
Ok, now this is not done. You need the following documents based on the nationality of the company directors etc.
- PAN Card – PAN or Permanent Account number of all the directors to be submitted. This document is issued by Indian Tax authorities.
- In case, your director is a Foreign national then you also need to submit your passport details with other proofs.
- Address Proof – Every directors address proof to be submitted. Following documents are considered as proof for the submission.
- Valid Passport
- Voter Identity Card
- Ration Card with your name that’s written properly.
- Driving License
- Aadhaar Card
- Telephone or electricity bill –But the bill should be in your name else its of no use.
- Residential proof – along with PAN and Address proof, you are also required to submit your Company residential proof. Again the name of the person and document proof should bear the details clearly. Following documents are accepted
- BSNL Telephone Bill
- Bank statement / Passbook
- Electricity Bill
- Aadhaar Card
- Driving License.
- Registered Office Proof
In addition to providing identity, address and residential address for each Directors, proof must also be provided to validate the Company Registered Address. Following documents are accepted as proof.
- The registered document of the title of the premises of the registered office in the name of the company (Building owned by the company)
- The 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;