Company IncorporationPrivate Limited

How to Register a Business in India?

There are several options open to entrepreneurs in India when it comes to registering their businesses. The business can be registered as a private limited company, one-person company, public limited company, as a sole proprietorship, partnership firm, or an LLP. 

Register a company in India online poses its own set of challenges to any entrepreneur. A business owner has to make informed decisions at every stage pertaining to the business. One of the key decisions that have to be made at the earliest stages of the business is the type of corporate entity the business should evolve into. 

Also, this decision would most definitely have the greatest impact on the business. While there are various kinds of corporate structures available, an entrepreneur has to choose one which is the best suited for the business. The choice of the business structure depends on the business goals, the number of members in the company, the jurisdiction where the business is being set up, and a number of other factors.

Business Structures Prevalent in India

The following are the most common types of business entities in India:

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Why Should a Business be Registered

While the process of registering a business is quite complicated and cumbersome it does offer a host of undeniable advantages to the business as pointed out below:

  • Limited Liability to the members in the case of LLP (Limited Liability Partnership) or OPC (One Person Company)
  • Enabling the transferability of shares is feasible in a registered business
  • Opening a bank account in the company’s name is easier in the case of a registered business. An unregistered business is forced to prove its legal existence by means of tax registration to get this done
  • Banks and financial companies lend loans to registered business entities as they are structured and also carry more credibility
  • In the case of B2B (Business-to-Business) transactions, most businesses prefer to shake hands with registered business entities.

Although registration of a business has its own significance, it has to be noted that it is not mandatory that every business should be registered. An unregistered business, for instance, sole proprietorship and partnership which do not require to be registered, can still be carried out as long as the business is legal.

The certificate of incorporation is issued by the registrar after verifying the application and the necessary documents of the applicants.

Documents Required for Registration of a Company

In order to get a company registered, the following documents have to be presented for authentication purposes.   

  •   Passport size photograph of all the directors or partners
  •   Proof of identity of the members/directors/partners/sole proprietors like Aadhar Card or PAN card
  •    Further, proof of address like that of the recent bank statements, electricity bills, telephone bills
  •   Proof of address of the registered office which includes water bill, electricity bills, or telephone bills
  •   If the registered office is situated in a rented space, the rental agreement and a NOC (No Objection Certificate) is to be enclosed.
  •   If the property is owned, the sale deed or the property deed is to be furnished.

Registration of Procedure for Private Companies

A private limited company can have a minimum of 2 members (except in the case of OPC) and a maximum of 200 members only. In the case of directors, there can be a minimum of 2 to a maximum of 15 directors in a private limited company (except in the case of OPC). The private limited company is incorporated under the Companies Act, 2013 under the Ministry of Corporate Affairs (MCA) and can be registered through the following steps:

  • Procuring the DIN (Director Identification Number) and the Digital signature Certificate Online (DSC)
  • Selecting a unique name for the company and making an application for the same after having checked the availability of the name in the RUN (Reserve Unique Name) web service provided by the MCA
  • Filing of Memorandum of Association (MoA) and Articles of Association (AoA) using the form SPICe (Simplified Proforma for Incorporating a Company Electronically) INC 32
  • The Certificate of Incorporation is issued by the RoC (Registrar of Companies), along with the TAN and PAN, after verifying the MoA, AoA, and other documents.

Registration of Public Limited Companies

The Companies Act, 2013 states that there should be a minimum of 7 members and 3 directors in a public limited. However, there is no limitation on the maximum number of members or directors a public company can accommodate. A public limited company should have a minimum paid-up capital of 5 lakhs. This is one of the major differences between a private and public limited company, wherein no such stipulations are prescribed in the former.  The Incorporation of a public limited company follows the same procedure as that of a private company otherwise.

Registration of One Person Company (OPC)

As the name suggests, the company is incorporated by a single person. It was introduced as a new concept in the Companies Act, 2013, as earlier a single person was not allowed to incorporate a company. A private company requires a minimum of 2 members and 2 directors, but in the case of OPC a single member can act both as member and director.

The registration procedure is the same as that of other corporate entities, except that a nominee is required to be assigned on behalf of a single member of the OPC. In cases of sudden death or any other incapacity to the member which does not allow the member to perform the duties towards the company, the nominee would take the member’s place and would carry out the duties.

Registration of Partnership Firms

As per the Partnership Act, 1932, the registration of a partnership firm is not mandatory, but it is still preferable as it has its own perks in getting registered. The rights to sue the other partners or a third party and the right to claim set-off would be available only to registered firms.

The partnership deed and application for registration are to be submitted to the Registrar of Firms (RoF) with the details of the partners and the firm. The RoF issues the certificate if there are no discrepancies in the application and the documents submitted.

Registration of Limited Liability Partnership (LLP) Firm

LLP firms offer dual advantages of both partnership firms and private companies. LLP firms are governed by the Limited Liability Partnership Act, 2008 wherein it mandates an LLP to have a minimum of two partners. However, it doesn’t mandate a stipulated maximum number of partners. The LLP agreement and FiLLiP (Form for Incorporation of LLP Firm) must be filed during the registration of the firm. The procedure for registration is otherwise like that of a private company.

Registration of a Sole Proprietorship

Setting up a business as a sole proprietorship is the easiest of all, as getting it registered is not mandatory, although it is preferable to do so if the sole proprietor intends to open a bank account in the name of the business. The sole proprietor is the single owner of the business and will be accountable for all the debts and liabilities of the business.

The registration of a sole proprietorship can be carried out in the following ways:

Thus, the registration of a business in India depends on the type of corporate entity the business chooses. Although entities like that of a sole proprietorship and partnership do not mandate registration: https://www.mca.gov.in/MinistryV2/incorporation_company.html as such, it has to be accepted that a registered business has its own advantages. If not anything, such businesses carry remarkable credibility among the clients.  Therefore, it is of pivotal importance that an entrepreneur decides the type of business entity that would suit the business and register the same without any undue delay. 

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