New business owners in India will eventually ask themselves this question – how to register a company in India?
Registering the company is an important legal requirement without which everything else they do will be deemed illegal.
This article is meant to be a guide for new entrepreneurs to register their companies in India. The registration process varies depending on the type of company. But let’s first address the big question –
How much does it cost to register a company in India?
The following are the approximate costs of registering a company in India in terms of official fees:
- Sole proprietorship – ₹ 2500
- Partnership Firm – 5000
- Limited Liability Partnership / Limited Liability Company – ₹ 7000
- Private Limited Company – ₹ 6000 to ₹ 30,000
- One Person Company – If the share capital is ₹ 10 Lakhs, the fee will be ₹ 2000. If the nominal share capital ranges between ₹ 10 lakhs and ₹ 50 Lakhs, it will be ₹ 2000 plus ₹ 200 for every ₹ 10000 or part thereof the nominal share capital.
Types of Companies in India and How to Register Rhem
There is not just one type of company in India. The following are the different types of company structures that can be established and all that needs to be known on how to register a startup company in India.
Private Limited Company
This structure is best suited for entrepreneurs who would like to establish their companies as private entities. In the interest of protecting their assets, shareholders distribute liability among themselves.
There is a clear separation of personal and company assets. The shares of a private company cannot be traded publicly. A private limited company can be limited by shares or limited by a guarantee.
Criteria to form a private limited company
Under the Companies Act, the following criteria must be met for a private limited company to be registered.
- A minimum of two and a maximum of 15 directors
- At least one of the directors must be an Indian resident
- Minimum of two and a maximum of 200 shareholders
- The authorized capital of at least ₹ 1 Lakh
- Must have a registered office in India
- ID Proof: PAN card for Indian and passport for foreign directors
- Address Proof: Aadhar card or driver’s license or voter’s ID
- Proof of Residence: Bank statement or electricity bill of the premises
- Rental agreement (notarized)
- No Objection Certificate (NOC) from the property owner
- A copy of the property deed in case of an owned property or a copy of the sale deed
How to register a private limited company in India
After the name of the company is finalized, the following steps have to be taken to register the company.
- Apply for a Digital Signature Certificate (DSC)
- Apply for Director Identification Number (DIN)
- Apply for name availability
- File the Electronic Memorandum of Association and Electronic Articles of Association
- Apply for PAN and TAN
- A Certificate of Incorporation will be issued by the ROC with PAN and TAN
- Open a bank account for the company
A partnership is managed by partners who will share responsibilities and profits. Partnerships fall under the Indian Partnerships Act, and the duties, powers, functions, etc., of partners, are clearly defined in a contract called the partnership deed.
These companies can operate with or without a license as long as there is a valid and registered partnership deed. However, it is advised to register as it gives better rights and benefits.
Criteria to form a partnership
The following are the criteria to set up a partnership business:
- A minimum of two and a maximum of ten partners
- Must have a registered office in India
- Must have a registered partnership deed duly signed by all partners
Here are the steps to be taken to register a partnership company:
Step 1: Registration application
A formal application that is signed and verified by all partners should be submitted to the registrar of companies in the state in which the company is operating.
The application must include details like principal place of business, location of other places of business, date of joining of partners, duration of the company, etc.
Step 2: Choose a name for the company
A partnership business can be given any name subject to the following conditions:
- Should not be similar or identical to that of an existing company doing the same kind of business.
- The name should not contain the words crown, empress, empire, king, queen, etc. which shows the approval or sanction of the government.
Step 3: Certificate of registration
If the ROC is satisfied with the application and the submitted documents, the company will be registered in the Register of Firms and issued the Registration Certificate.
Limited Liability Partnership (LLP)
LLP is a recent addition to the list of types of companies in India and enjoys a separate legal status.
It helps distinguish between personal and business assets and gives partners limited liability protection, i.e., a partner’s liability is limited to their share of capital.
Criteria to form an LLP
The following conditions must be met to set up an LLP:
- A minimum authorized capital of ₹ 1 Lakh
- At least one partner must be an Indian citizen
- Minimum of two partners with no limit on the maximum number of partners
- At least one individual partner if the remaining are corporate entities
- Since all partners have an agreed contribution, there is no requirement for shared capital
The registration process
Here are the steps to register an LLP:
Step 1: Obtain a Digital Signature Certificate
Because all documents will be filed online, the first thing to do is apply for a digital signature of the designated partners. Such signatures can be obtained from government-recognized certifying agencies.
Step 2: Apply for Director Identification Number (DIN)
DIN for all designated partners and for those who intend to be designated partners has to be applied via form DIR-3.
This form has to be signed by the Company Secretary or by the MD, director, CEO, and CFO of the existing company in which the applicant will be a director.
Step 3: Approval of Name
LLP-RUN (Limited Liability Partnership – Reserve Unique Name) is filed for reserving the proposed name of an LLP.
This will be processed by the Central Registration Centre. The application can be rejected or approved by the registrar.
Step 4: Incorporation of LLP
The Form of incorporation of Limited Liability Partnership (FiLLiP) shall be filed with the Registrar.
Any secondary applications will also have to be made through FiLLiP. If the name applied for is approved, the same shall be filed as the proposed name of the LLP.
Step 5: File the LLP agreement
The LLP agreement governs the duties and rights amongst partners and also between the company and its partners.
The agreement has to be filed online using Form 3 on the MCA Portal and filed within 30 days of the date of incorporation.
One Person Company (OPC)
This is a very recent addition to the list of different types of companies in India. This type is best suited for small businesses and for entrepreneurs who would like to run a business by themselves.
OPCs have a separate legal status, i.e., business owners get liability protection without having another business partner.
This kind of business is easy to incorporate and regulate since it involves just one person. It is a combination of sole proprietorship and a private limited company.
Conditions to be met
The following conditions have to be satisfied to register an OPC:
- Minimum authorized capital of at least ₹1 Lakh
- The individual must be a natural Indian citizen and a resident
- It is not a financial business
- A nominee must be appointed by the promoter while incorporating the company
The registration process
The step-by-step process to register an OPC is laid out below:
Step 1: Apply for DSC
The very first step is to get a Digital Signature Certificate (DSC) from the proposed director. Address proof, Aadhar card, PAN card, Photograph, Email ID, and Phone Number are required to apply for a DSC.
Step 2: Apply for DIN
Applying for a Director Identification Number (DIN) of the proposed director is the next step after obtaining a DSC. This has to be applied in the SPICe Form along with the name and address proof of the director.
Step 3: Name Approval Application
The next step is to decide the name of the OPC. It will be in the form of “XYZ Private Limited.” The name can be approved in the application Form SPICe+ 32.
Only one name accompanied by the significance of keeping the same can be given in the application. If the name is rejected, another name can be submitted using the same application.
Step 4: Required documents
The following documents have to be submitted to the registrar of companies.
- Memorandum of Association
- Articles of Association
- A nominee on behalf of the director who will be responsible for carrying on the duties of the director in case such director becomes incapacitated. It can be submitted in Form INC-3 along with the proposed nominee’s PAN and Aadhar card.
- Proof of Registered office of the proposed company accompanied by proof of ownership and a NOC from the owner.
- Declaration and Consent of the proposed Director
- A declaration by a professional stating that all compliances have been met
Step 5: Filing form with MCA
All of the above-mentioned documents should be attached to the SPICe Form, SPICe-MOA, and SPICe-AOA and uploaded to the MCA site for approval. The PAN and TAN will be automatically generated at the time of incorporation of the company.
Step 6: Issue of Certificate of Incorporation
Once all the above are duly verified, the Registrar will issue a certificate of incorporation, and business can be commenced.
This is a type of business where a single person carries out the operations of the business. The owners and the company are considered a single entity, solely responsible for all profits and losses.
This is the simplest form of business to set up and operate since the registration process is simple and doesn’t require a large investment.
The documents required to register a sole proprietorship are:
- Aadhar card
- PAN card
- Registered Office Proof
- Bank account
How to register a proprietorship company in India
Here is the procedure for incorporating a sole proprietorship in India.
Step 1: Apply for a PAN card
Step 2: Decide the name of the business
Step 3: Open a bank account in the name of the business
Step 4: No specific registration is needed for a sole proprietorship. You just have to take care of the following –
- Registration to obtain the Registration Certificate under the Shops and Establishments Act of the state from which the business operates.
- The business owners should apply for GST if the turnover for a year exceeds ₹ 20 Lakhs
- The business can also be registered as an SME (Small and Medium Enterprise) under the MSME Act.
Section 8 Company
Also called non-profit organizations, these companies work for charitable purposes. The core purpose of this type of business is to promote arts, science, education, literature, providing care for the underprivileged, etc. All profits generated by these companies go towards achieving these objectives.
Conditions to be met
The following conditions must be met to register a Section 8 company in India –
- A minimum of two shareholders
- A minimum of two directors who can be shareholders as well
- At least one director must be an Indian citizen
- Must have a registered office in India.
There is no minimum capital requirement
The registration process
Follow these steps to register a Section 8 company in India:
Step 1: Obtain a DSC of the proposed directors.
Step 2: Once a DSC is received, A DIN has to be applied using Form DIR-3. If the Registrar of Companies is satisfied, a DIN will be allotted to the proposed directors.
Step 3: Form INC-12 has to be filed with the Registrar of Companies to apply for the license along with the required documents.
Step 4: Once the above form is approved, a license will be issued in Form INC-16
Step 5: SPICe+ Form has to be filed with the Registrar of Companies for incorporation. If the ROC is satisfied, a Certificate of Incorporation will be issued along with a unique Company Identification Number (CIN).
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Getting a company registered is not an easy task. As discussed in this blog, each kind of company has a different process that has to be followed.
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