Company Formation
Choosing the right format of company formation for your business is as important as any other business-related activity. The right business structure will allow your enterprise to operate smoothly and meet your required business aim. In India, every enterprise must register themselves as part of the essential legal compliance.
It is essential to select your business structure attentively as your Income Tax Returns will depend on it. While registering your business, remember that each format of business has distinct levels of compliances that need to be met with. For example, a sole proprietor needs to file only an income tax return. However, a company needs to file an income tax return and annual returns too with the registrar of companies (RoC).
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It is necessary that a company’s books of accounts are to be audited every year. Abiding by these legal compliances requires spending money on auditors, accountants, and tax filing experts. So, it is crucial to choose the right business structure when thinking of company registration. A businessman must have a clear idea of the kind of legal compliances he/she is willing to deal with.
While some business formation is comparably investor-friendly than others, investors will always prefer a recognized & legal business structure. For example, the investors will be more comfortable making an investment, if a good business idea is backed by a recognized legal structure (like LLP, Company, etc) on the other hand an investor may hesitate to give money to a sole proprietor.
Benefits of Company Registration in India
A company formation and registration provide many advantages as follows:
- A licensed and registered company makes it genuine and enhances the business’ credibility.
- Protects against personal obligation & defends against other threats and losses.
- Frame goodwill and supports more customer attraction
- Provides reliable investors bank credits & good investment with comfort.
- Provides cover of the responsibility to protect the company’s assets
- Bigger commitment to wealth and greater stability
- Escalate the ability to develop and grow large
How to Register a Company in India?
Registering a company in India is now an easy process. Here is what you will need to acquire?
A DSC (Digital Signature Certificate)
A DIN (Director Identification Number)
Registration on the Ministry of Commerce Affairs Portal
Certificate of Incorporation
Documents required for Company Registration
In India, registration of the company cannot be done without proper proof of identity and proof of address. Proof of identification and proof of address would be needed for the incorporation of all the company’s directors & shareholders.
The organization needs to have a registered office in India for online business registration in India. A recent scanned copy of an energy/electricity bill or the property tax receipt or water bill must be sent to confirm admission to the registered office. In addition to the tenancy agreement, the maintenance bill or the sale deed or a letter from the landlord with his/her permission to use the office as the company’s registered office is accepted. An identity and address proof of all the directors and the subscribers to the share capital need to be submitted.
CA Mantra helps you in each step of company formation to provide you hassle-free services.
Let us try and understand the types of business structures available in India. You can select what business structure suits your business requirement best and accordingly register your business.
Private Limited Company
A Private Limited Company is a business which are registered under, The Companies Act, 2013. In this form of Company Registration, the business assets are separated from personal assets. According to the provisions of the Companies Act 2013, there can be a minimum of 2 members and a maximum of 200 members in a company. In this kind of company, there are a group of shareholders and the total capital is made up of shares withheld by each member. The name of every private limited company must end with the words PVT. LTD. Shares this kind of company can be sold or transferred to individuals, who in turn become owners of the company.
Limited Liability Company
The concept of LLP was first introduced under the Limited Liability Partnership Act, 2008. LLP is well known type of company registration; and it is termed as a hybrid form of entity which has the characteristics of both, a partnership firm, and a Company. The personal assets of partners are not put at risk as the maximum liability of each partner is defined by his share capital in the entity.
In a Limited Liability Structured Company (LLP) requires a minimum of 2 partners. It is a newly introduced corporate business structure that conjoins two terms named as ‘company’ & ‘Partnership Firm’. It is counted as a separate legal entity from the partnership and personal and business assets are acclaimed.
One Person company
One Person Company is a hybrid form of Sole-Proprietorship and Company form of business which is governed under The Companies Act, 2013. This model is a steppingstone for entrepreneurs who can own and manage the business as a sole member and director of the Company. The model offers separately limited liability protection to its shareholder and gives an advantage of continuity of business.
As the name suggests, there can be only one member which is the biggest advantage unlike a Private Limited Company or a Limited Liability Partnership.
Partnership Firm
Partnership Businesses in India are governed by the Indian Partnership Act, 1932. A partnership firm is a form of business where two or more people share ownership and responsibility of managing and handling the firm. Partnership business can be started with or without firm registration. This is one of the distinct kind of companies where business transactions & operations are handled by partners. The role & responsibilities, the number of shares withheld by the two individuals are clearly defined in the legal partnership agreement, so that there is no chance of dispute between partners. The profits or loss incurred by the business is also divided among the partners as mentioned in the agreement.
Proprietorship Firm
Sole Proprietorship is a type of company registration wherein a single person manages the entire business operation. The business and the owner are treated as one identity and he/she solely bear the profit or loss made thereafter.
This kind of busines is run by a single person or to say a sole trader and there is no legal difference between a sole trader and his/her business. This type of business does not need any kind of Business Registration. He/she manages the entire business and can employ people to work under him/her.
Public Limited Company
Public limited company is registered under, The Companies Act, 2013. This Company should have a minimum of 7 members and 3 directors.
A Public Limited Company shares can be purchased by the general public. In a Public Limited Company, there is no limit on the number of shares and the shares are listed on the stock exchange and can be traded freely. Companies under this category needs a certificate from the Registrar of Companies (ROC) before beginning their business operations.