Registration of a company is a must-to-do process in doing a business seriously. Queries solved in this article include: How to register a company in India, Types of company, Company registration Process, Company Registration Documents, Registration of A Company in India Procedure.
What is Registration?
Registration is a process or method to register the existence of a particular thing to claim ownership, more rights, power, etc. It gives proof of ownership in the eye of the government. It can be said that, in other words, it is legally necessary for the fulfillment of the above-mentioned benefits.
Company Registration is the process by which a business becomes a legal entity and is incorporated. There are several types of companies in India made for different requirements. At the end of this article, you would be able to make a rational decision either for your startup or small business.
Why register a company?
Registration of a company comes with several attached benefits that make it a necessary thing to be done. Here are some of the benefits that you get if the registered as a legal entity
- Get a business bank account: After the registration, your company becomes a legal entity, your company can now get an account opened for it to keep all funds and balance in it.
- Transfer of ownership is smooth: Having a legal form of your business means the government has the record of ownership and other details about the company too. This makes it easy for the transfer of ownership from the current original owner.
- Limited liability protection: Since the whole life of a startup and businesses come with a sense of risk and unknown path. In case of some unseen events where your company becomes a defaulter of its loan, you and your assets can remain secure with the help of this benefit a company gets that is called Limited Liability Protection.
- Get Funding: A trust arises in the mind of your investors when they see the proper legal structure of your startup or business. Also, in the case of a Private Limited Company, shares of the company are there. Altogether, they make it easy to get funded.
- Brand recognition: Your brand gets recognized in the books of the government and this gives a level of trust in the mind of your customer.
- Fulfilling Criteria: In many instances, having a legal entity helps. In the case of doing export-import activities, there may be criteria from the party to do business with a legal entity only. Participating in government tender also seeks a proper registration of your company.
- Loan Approved: Since you have got your bank account, this gives the bank a window to see your transactions for the verification process. Also, the chances of sanctioning loans increase from the bank side due to an increased level of trust and check.
- Hiring Staff and employees: A registered business gets a right to hire a full-time employee and give them a salary and other benefits in accordance with the local laws. They get a special identification number for the record from the government side.
Different Types of Companies
In India, according to different needs, there are various types of legal entities that can be formed. Choose the type of entity wisely after having thorough research of your need.
| Company Type | Liability | Member | Incorporation of Legal Entity | Fund Raising |
| One Person Company | No | 1 | Yes | Yes |
| Limited Liability Company | No | >=2 | Yes | No (Only from partners) |
| Private Limited Company | No | 2 to 200 | Yes | Yes |
| Public Limited Company | No | >=7 | Yes | Yes |
Sole Properietorship:
It is the most basic type of company where the business owner is generally the only owner of the company and pays personal tax over the profit earned from his/her business. In this, no incorporation of the company takes place. It is a straightforward way for an individual to start with a new business. No registration is required and management is easy. It is just like being self-employed!
Partnership:
This Company has two partners come together to start a business. Both the members are exposed to the unlimited risk of the company. The default from a partner makes other partners liable to pay for the default. This company should be chosen when there is no issue of separate individuals. Partners are liable to business liabilities.
Limited Liability Partnership:
This is an extension of the partnership but with the benefit of having a legal entity incorporated,. This makes the company a limited liability, where the owners and the company are two separate legal entities. The owner is not liable for the defaults by the company or any other partner. There is no limit to the number of partners that can be in the Limited liability Partnership. One of the partners at least must be Indian for a valid LLP incorporation.
Private Limited Company:
According to Wikipedia, almost 93 percent of the companies incorporated in India are registered as Private Limited Companies. The company gets limited liability since it is also formed after incorporation. The members have limited liability and the maximum number of members in a private limited company is limited to 200. There are two types of a private limited company
Types of Private Limited Company
- Limited By Shares: It means the maximum liability the members can have is upto the capital they have agreed to pay for their shares.
- Limited by Guarantee: This is generally preferred by charitable organizations where there are no shareholders but only guarantors. The company is liable to pay only the amount guaranteed by its guarantors.
One Person Company:
To smoothen the process of doing startups and business in India, the government has introduced a new concept called OPC. In simple words, it has been formed to give more flexibility and easiness for a company registration without having much worry about board meetings and audits, and many more formalities. This is formed after a deliberate mixture of features of a sole proprietorship with a Private Limited Company.
Public Limited Company:
A public limited is a type of company where the shareholders and the board members can be different. The board members run the operation of the business with the shareholders as the owner of the company. They are more open and transparent and this type includes all the companies listed in stock markets. The shareholders have limited liability for the company losses and defaults.
Section 8 Company:
This type of company needs to be registered when the whole purpose of the business is charity. This type is to be preferred by charitable organizations who involve themselves in work like promotion of art, culture, education, environment, research, sports, etc. It gives exemption from income tax to be paid. In India, NGOs can be registered as Section 8 Company, Trust, or Society. The section 8 company can earn a profit, there is no restriction on that, but they can not distribute it among the shareholders as dividends. This type can be a preferred option for doing CSR work for a corporation.
How to Incorporate (Register) a Company
Step 1: Get the Digital Signature Certificate (DSC)
Needed to authorize while filling the forms on the MCA (Ministry of Corporate Affairs) while filling the forms online. So, it’s necessary to get it for every proposed director and subscriber of the memorandum of articles and association.
Step 2: Get the Director Identification Number (DIN)
It is needed by everyone who wants to be the director of the company. This is required in the registration form to be filled while the filing process.
Step 3: Create an account on the MCA portal:
To apply for the same the SPICe+ form (SPICe+ stands for Simplified Proforma for Incorporating Company electronically Plus) needed to be filled which can be accessed by the director after logging in to the MCA portal services which include filing e-forms and viewing public documents.
Step 4: Incorporate or Apply for the company to be registered
Once the filing process is done, the application is checked by the registrar of companies. After verification is successful, the incorporation certificate is provided.
These above-mentioned steps show the basic steps to be followed for the company Incorporation
Documents Required for Company Registration
Keep the documents ready and handy before the beginning of the process. Documents can be required from five areas. Get a one-look idea with the help of this table.
| Director (Indian National) | Director (Indian National) | Registered Office Proof | Shareholder (Indian or Foreign) | Shareholder (Corporate Entity or Artificial Judicial Person |
| PAN CardAddress Proof (Passport, Aadhar card, Mobile bill, etc; Residential Proof (Bank Statement, Electricity Bill, etc) | PassportAddress Proof (Driving Licence, Bank Statement, etc)Residential Proof | The registered document of the office address in the name of the company or the rent agreement or the lease agreement. The NOC for office address from the landlord in case of leased or rented property. | The identity and address proof must be submitted for all the shareholders of the Company ( subscribers of MOA and AOA). | Certificate of Incorporation of the Body Corporate along with the resolution passed by the Body Corporate to subscribe to the shares of the company. |
In addition to the above proofs and documents, a number of documents like INC-9, MOA, AOA would be drafted by a Professional. These documents need to be signed and notarized by the promoter or owner of the company.
Hope you find this guide for the registration of the company useful and it helped. Thank you so much for reading so far and let’s meet in the next good article, till then a happy journey to you!
FAQ:
What does getting incorporated means?
Incorporation means getting your company formally recognized in the record book of your state. After incorporation, a company becomes a legal entity of its own apart from its founders or owners. It becomes a bit like an individual inside a state.
What is SPICe+ and its Two steps?
SPICe+ stands for Simplified Proforma for Incorporating Company electronically Plus and is divided into two parts as follows:
Part A: Name reservation for the company:
Part B: It includes DIN allotment, issue of PAN, TAN, EPFO Registration, Bank Account for Company, ESIC Registration, and GSTIN Allotment if applied for
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