The most common type of “legal structure” for all companies in India is private limited company registration. A private limited company can have 2 members minimum and 50 members maximum.
Introduction
The registration of a company in India is governed by the Companies Act, 1956. The requirements for incorporation as a company are similar for both start-ups and established corporations. In fact, registered companies have many of the same rights as their unregistered counterparts.
There are, however, certain key differences that should be borne in mind before deciding to incorporate your business in India. If you are an Indian businessperson who wants to set up your own corporation, it will be worth looking into the provisions applicable in your specific case.
However, if you are seeking help with general company information or want to know how to register a private limited company in India, then this article is for you. We take you through everything from scratch so that you know exactly what to expect when registering a private limited company in India.
Private Limited Company Registration
A private limited company’s directors have limited liability to its creditors, and banks/creditors are only allowed to sell the company’s assets (when there is a scenario of default). Creditors do not have the authority to sell directors’ personal assets. When starting a business in India, make sure your company is registered. “Company Registration” is the first and most important step in starting a new business.
The registration of a private limited company is crucial since it validates the legality of your proposed business structure. However, make sure you have all of the necessary Private limited business registration documents. In the long term, registration will provide you with a slew of benefits, including quick and painless registration through easy dissolution. Private limited businesses are preferred by start-ups and emerging companies.
One of the most popular ways to start a business in India is to form a private limited company. This sort of business allows shareholders to have minimal responsibility and ownership restrictions. The business is owned and managed by partners in an LLP. Directors and shareholders can be different in private limited company registration.
Benefits of Company Registration
There are numerous advantages to having your company incorporated in India. Most importantly, it is a free and easy way for a company to incorporate. If your company is incorporated in a country other than India, you can apply for a similar incorporation in the country where you want to conduct business. After issuing a charter for your company, the Registrar of Companies issues a certificate of incorporation which you can then issue to your customers or clients to start their business relationship with you. This is a perfect option for companies that are based in India and want to set up a business in another country.
There are numerous advantages to forming a business. A registered business gives credibility to your business. Following are the benefits of company registration:
- Protects you from personal liability as well as other risks and losses.
- Increases your customer base.
- With ease, obtain bank credits and good investments from reputable investors.
- Protects your company’s assets by providing liability protection.
- Increased capital contribution and stability
- Increases the ability to develop and grow large.
When your company is registered in India, it will have access to all the benefits that India has to offer. These include personalized support from the Registrar of Companies, discounts on business certification, and business tax holidays. India is also home to some of the best employment laws in the world, making it a great place to start a career. These are just some of the benefits that a registered company in India will have access to.
There are many more advantages, but we’ve only scratched the surface on the benefits of registered companies in India. To get a full list of the many benefits of a registered company, check out the Registrar of Companies website.
Checklist for Registering a Company in India
As defined by the Companies Act 2013, we must guarantee that the checklist requirements are met.
Minimum 2 Directors
A private limited company must have a minimum of 2 directors and a maximum of 15. At least one of the company’s directors must be an Indian citizen.
Unique Name
Your company’s name must be distinct. Any existing companies or trademarks in India should not be confused with the suggested name.
Minimal Capital Contribution
Minimal Capital Contribution A company’s authorised capital should be at least one lakh rupees.
Registered Office
The registered office of a company does not have to be a commercial space. Even a rented home can be the registered office, so long as a NOC is obtained from the landlord.
Documents Required for Online Company Registration
Private limited business registration in India is impossible without sufficient identification and proof of address. The MCA requires the following documents for the online company registration process:
- Proof of Identity and Address
- PAN card or passport scanned copy (foreign nationals & NRIs)
- Scanned copy of voter identification, passport, or driver’s licence
- Scanned copy of the most recent bank statement/telephone or mobile bill/electricity or gas bill specimen signature Scanned passport-sized photograph (blank document with signature [directors only]).
Proof of Registered Office
- Scanned copy of the most recent bank statement/telephone or mobile bill/electricity or gas bill
- Scanned copy of the notarised rental agreement in English
- Scanned copy of the property owner’s no-objection certificate
- Scanned copy of the sale deed/property deed in English (in case of owned property)
- It should be noted that your registered office does not have to be a commercial location; it can even be your home.
Basic Requirements for Registering a Private Limited Company in India
The basic requirements for registration of a company are:
- Registered address – The registered address of a company is its office. It must be the location where the company’s activities are taking place. However, if the company is a venture, it can be located anywhere within the limits of that particular state or union territory
- Registered company name – The registered company name is the name that the company will be known under. The illegality of certain names has been recognized by the Registrar of Companies, i.e. names that are pornographic, racially or religiously offensive or that are likely to cause offence, confusion or alarm. All such names will have to be submitted to the Registrar of Companies for approval
- Registered account number or registration number – The registered account number or registration number is the number that the company will be required to keep on file with the Registrar of Companies. This number will also appear on all the company documents such as the balance sheet, income statement, and the auditor’s report.
Registration of a Private Limited Company in India
When deciding how to incorporate your company, you will have to take into account a number of things such as your business needs, the type of entity you want to incorporate your business as, and the advantages of incorporating your business and the disadvantages of not incorporating your business. Once you have chosen the correct mode of incorporation, the next thing to do is to get yourself registered with the government. This can be done through the limited company office in your city or your state. The following is a list of the steps involved in the registration of a limited company.
Manpower Requirements for a Private Limited Company
In order to incorporate a company in India, you will require the services of some hired hands. Typically, this will include the person who will manage the day-to-day operations of the incorporated business. It is recommended that you choose this route as opposed to forming a limited partnership as the latter only gives you the opportunity to invite outside partners on a contractual basis. While this is a good thing in some cases, choosing the limited company route gives you the flexibility to invite all the personnel that you need on a contractual basis.
Companies Act, 1956 – All You Need to Know
The Registrars of Companies are an independent body that regulates the business operations of companies incorporated in India. Companies can only become Registered if they have obtained a minimum of seven (7) years’ experience in the same business or have been operating for at least two (2) years under a company structure. Registered companies also enjoy a variety of benefits, including First right of refusal on all the fixed assets of the company.
A limited company is a type of business entity that is recognized by the Indian government. It is a non-propagating entity and does not enjoy any of the benefits that a traditional legal entity does. In order to incorporate a company, you will have to form a “legal entity” through which you can capture some of the “personality” of a business. The way in which you incorporate your company is determined by the type of business you plan to launch. There are a number of ways to go about this. The first option is to incorporate as a limited company.
This is the least expensive way to go and will offer you the least amount of protection if something were to happen to the company. The main disadvantage of this is that you will have to pay a considerable amount of taxes on the income that comes from the company. Another option is to form a limited partnership. This is the most commonly used form of incorporation for startups in India.
The main advantage of this form of incorporation is that it is just a contractual agreement between you and your partner. You will not have to go through the formalities of incorporation.
Company Registration Procedure in India
You can start the process of getting your company registered in India as soon as your business is incorporated. You can do this online or by contacting the Registrar of Companies. The steps include the following:
- Apply for a company number at the Registrar of Companies
- Filing the articles of association, details of the business and any other documents you need
- Filing the company tax return for the previous year and any other information you’re required to file
- Filing your business plan
- Paying any taxes due
- Issuing a share or deed of association and any other documents required
- Issuing a memorandum of association and any other documents required
- Providing information on your financials and operations
- Allowing a company to use your name and address
- Getting a company’s registration in the Companies Registry.
Step 1: Obtaining a Director Identification Number (DIN) and a Digital Signature.
- Obtaining a director identification number (DIN) for each of the company’s proposed directors.
- Obtaining a digital signature for one of the company’s directors.
After that, you must file an application for a private limited company name.
Step 2: Applying for the Name
The promoters should provide one or more suitable options for the company’s name, as this provides the Registrar with the freedom and choice to choose the name in the event that certain names are the same or similar to registered business entities or trademarks.
- Any name that is similar to or identical to a registered company or brand should be avoided.
- The name should not be one that is prohibited by the 1950 Emblems and Names Act.
- The suffix “Private Limited Company” must be added to the company’s name.
The registrar will review and approve one of the names after it has been submitted. The approval of the company name and registration procedure normally takes 3 to 5 working days.
Step 3: Filing for Incorporation of Private Limited Company
After the name has been approved, the promoters must submit the application, fees, and the following documents to the registrar:
- Articles of Association
- Memorandum of Association
- Declaration from Directors
- Affidavits of the Directors.
A declaration stating that the Act’s requirements and the rules enacted under it have been met. This declaration must be signed by an advocate of the Supreme Court, an attorney or a pleader with the right to appear before a High Court, a Chartered Accountant in India who is engaged in the formation of a company, or a person named in the Articles as a Director, Manager, or Secretary of the Company.
In addition to the documents listed above, the company must supply appropriate information about its registered office within 15 days of registration or during the filing of incorporation documents.
Step 4: Subscribing to the Private Limited Company
A subscriber must sign their names and be subscribed to the shares of the incorporated company, according to the Companies Act of 2013. It means that each subscriber must own at least one company share. Each subscriber must sign the memorandum in the presence of at least one witness and must include the following information:
Both the Article and the Memorandum of Association must also be properly signed and stamped.
Step 5: Certificate of Incorporation
The Registrar of Companies will provide a certificate of Company Registration after filing the above-mentioned documents and paying the required fees. When a company is incorporated, it becomes a legal entity apart from its members.
The procedure of registering a private limited company is complicated and time-consuming. Our experts at Vakilsearch can assist startups and entrepreneurs in registering a private limited company.
Why Is It Important to Choose the Right Business Structure?
It’s important to choose the business structure wisely because it will affect your income tax returns. Remember that each business structure has distinct degrees of compliance that must be followed when registering your company. A sole owner, for example, is simply required to file an income tax return. The Registrar of Companies, on the other hand, requires a company to file an income tax return as well as annual returns.
Every year, a company’s books of accounts are required to be audited. Following these regulatory requirements necessitates the hiring of auditors, accountants, and tax filing experts. As a result, while considering company formation, it is critical to choose the appropriate corporate structure. An entrepreneur must have a comprehensive understanding of the types of legal issues that may arise.
Summing Up
Marketing is king in this industry and we can’t stress enough how important it is to have a great marketing strategy when you are planning to launch a new business in India. India is a huge country with a huge number of people and you need a great marketing strategy to get your product or service distributed to as many people as possible as soon as possible.
You can’t rely on word of mouth alone when getting your product or service distributed in a country like India. You need to have a great marketing strategy to get your product or service in front of as many people as possible.
The articles above provide a detailed explanation of the basics of operating a Limited Company in India. We hope that this guide has answered all your questions about the registration of a company and helped you understand the process better after having got the basics down. For more information on how to incorporate a company, check out our article on how to incorporate a limited company.
