While it is possible if you have an online setup, it’s crucial that you make all the checks in place before making the move
When you are building a startup or if you incorporate a Company, everything can seem like a race. A race to create a minimum viable product, identify a good business model, and find a good co-founder. Consequently, even what needn’t be done too early looks like a priority.
Entrepreneurs often make rushed and rash decisions to incorporate without thinking of all the implications of such an action. Incorporating or registering your company too fast is one such hasty decision made by business owners. So, how should entrepreneurs approach the legal aspect of running a business? Here’s a look at everything you need to know about when to incorporate your start-up for maximum flexibility.
Before you do that, do know that you can register your company in a single day. That’s right. A single day! The Ministry of Corporate Affairs (MCA) is making a big move toward shortening the company registration process. Instead of processing applications at Registrar of Companies (RoCs) spread across India, it has tightened the process and is centralising it at a new centre in Manesar, near Gurgaon. By adding automation, the MCA has reduced the number of steps to 26 from 39, according to a report in The Times of India.
At least four companies have been incorporated as per the above method when the pilot was launched. The effort involved re-engineering the process and moving to an automated system, which is far less time consuming than doing it manually.
Once rolled out comprehensively, information on the status of the application will be delivered the very same day. The rollout is currently scheduled for June. The ministry has signed a contract with Infosys which stipulates clear timelines and a penalty for delays.
Obviously, you need to do your research before getting a company registered so quickly.
Need for Planning and Research
Company registration is an integral part of building your business. However, it also brings with it several responsibilities and compliance requirements. As a result, when done too early, it could unnecessarily land founders in trouble due to excessive compliance norms.
Hence, entrepreneurs should ensure they do the required research and planning before making any decision. In many cases, waiting for a few months or years can provide them with benefits that quick incorporation would deny.
Keep It Simple at the Beginning
Before registering your company: https://www.mca.gov.in/MinistryV2/incorporation_company.html, you need to know why you’re doing it and how it can help you. When it comes to startups, the primary reason for company registration is raising funds or capital. However, if you feel pressured to incorporate because you have promised early employees equity, there are separate agreements that can help you with that. So, until you’ve created a product good enough to show and market to investors, there’s no need to formalize your business as a company.
All you really need this early in your business journey is a basic agreement. Such agreements can outline the roles and responsibilities of the founders. Additionally, it may also contain clauses regarding the ownership of intellectual property created by them. At early stages, having such details on paper is more integral than formal registration.
However, to create such agreements, founders and employees will have to have some difficult conversations. They will have to go over various scenarios and highlight all the possible outcomes to prevent legal issues and repercussions moving forward. Having such discussions will help clear the road for the future and will help improve overall communication.
Companies such as Housing and Redbus, which had founders leave the business, could have greatly benefitted from having such an agreement. Hence, entrepreneurs need to ensure such agreements and discussions are happening. These can go on to help the business much more than a mere incorporation certificate.
Register When You Need To
Company registration seems necessary when you’ve started to earn revenues or require sales tax registration in your business’s name. In other cases, you might find it useful when you start planning fundraisers or seeding rounds. Most investors and angels will invest in your company only after going through your incorporation certificate. Hence, companies will need to registedr themselves formally when they start looking for external investment.
When you’re in this position, the benefits of registering as a company will always outweigh the disadvantages. You may have to spend time and money on compliances, but you will find it beneficial to do so to utilise the credibility that a private limited structure brings. Additionally, incorporation will enable businesses to hire with greater ease as highly qualified individuals might check your legal status before joining your venture.
Similarly, you can also open a current account in your business’s name to avail credit, if necessary, using your registration certificate. Incorporation will also improve your trustworthiness among vendors, customers, and other stakeholders. If that isn’t convincing enough, private limited companies also enjoy tax advantages and their members have limited liability. As a result, registering your company can help protect your personal assets and wealth from business debts.
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