What Does It Cost To Start & Operate a Private Limited Company in India?

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Entrepreneurs are always skeptical about starting a private limited company because of the high costs said to be associated with it. This may have been true even five years ago, but given transparent pricing the internet has brought about, a lot more new businesses can start a private limited company earlier than before. So, what are the costs attached to starting and then running a private limited company. Let’s find out.

Starting Up
The cost of company registration in India has reduced in India, as has the complexity of the procedure, with the new INC-32 procedure. Currently, it will set you back Rs. 7000 in government fees if you incorporate with the minimum authorised capital of Rs. 1 lakh (what most start-ups go with), but you’ll also need legal help from a lawyer or chartered accountant. Their charges depend on level of expertise and experience. This is if you get it done offline. You can, however, also do this online, where incorporation fees are lower, starting at around Rs. 7000. This is all it will cost to incorporate, now that there is no minimum paid-up capital requirement.

Cost: One-time cost of around Rs. 14,000 for authorised capital of Rs. 1 lakh.

Business Registrations
This isn’t a requirement for private limited companies, per se, but all businesses in India. Each one of them requires some government registrations, based on the offering. If you offer a service, then you must charge customers service tax (for which a service tax registration is necessary) once your turnover crosses Rs. 9 lakh. Those selling goods must get VAT registration. You also need a license under Shops & Establishments Act to open a current account, Professional Tax registration if you have employees and much else.

Cost: Expect to spend Rs. 2,000 to Rs. 15,000 per registration, though most of these are state-based taxes and can vary greatly across India.

Mandatory Compliances
Every company must make declarations to the Ministry of Corporate Affairs from the very beginning, to communicate the hiring of an auditor, the minutes of board meetings, the annuals filings of directors and the company and much else. They don’t involve much effort individually, but can be quite time-consuming seen as a whole.

Cost: Online legal companies will do this for around Rs. 15,000 per year (inclusive of government fees), but will usually be double this at a local CS.

Accounting & Auditing
Again, it’s not just private limited companies that need to maintain their books, but let’s consider it anyway. Depending on how many entries there will be, charges will vary, but expect to pay at least Rs. 2500 a month. Auditing is not mandatory for proprietorships and partnerships, but it is for private limited companies. This annual requirement will cost at least Rs. 15,000.

Cost: Minimum of Rs. 2500 a month for accounting and at least Rs. 15,000 for auditing.

Miscellaneous Compliances
The MCA keeps track of certain aspects of your business. When you make changes to any of these aspects, it needs to be informed. This includes adding or replacing of directors, moving of office, etc. These have a cost, too, of course. There will be a government and professional fee here. As a small company, you will be hiring a CS on a per-job basis, rather than full- or even part-time. It’s unlikely for you to have need for a CS more than a few times a year, though.

Cost: Professional fees of Rs. 1500 onwards, depending on the complexity of the job.

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Vakilsearch's resident expert on starting up, compliance and accounting, he holds a Masters in Accounting and an LLB.

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