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Importance of Company Registration

Company Registration is a good step towards business if you do it properly planned registration. We have made an effort to find out the best options before coming into company formation. To decide which is better, Proprietorship or Partnership or Private Limited or OPC company?  What kind of license need like FSSAI? ISO? Start-up? What is the cost?  Come let’s talk about it.

The Benefits under Company Registration

Legal Entity Recognition:  The registered company’s status enables you to taken more seriously than other unorganized business like firms. Operations of Registered Company gives more confidence to the suppliers, registered companies are preferable by banks. Easy to attract to talented workforce and achieve strategic goals via employees by designating wide range of positions like Executive directors, operation directors etc.

Company Remains Forever:  One of the popular sentence is that Directors or promoters may come and go, but the Company remains forever. Once company registered it remains alive, until it’s closed down according to the Companies Act, 2013. The death of the promoters, directors doesn’t affect the continuity of the company.

Big Project Cost & Risk factors: For businesses which requires high capital outflow, usage of hi-tech systems, wherein financial stake is high, Banks and financial institutes prefer the Registered Company.

SmoothTransferability: Directors, management of the company can easily transfer their stake from one to another, this will saves time, money of the business owners, and saves big amount of stamp duty. Dual Relationship: In the company form of business, separate share-holders agreement can be executed between company and with its Directors, promoters etc. It is also possible, the promoter become company’s employee and draw salary.

The person at the same time become:

  1. As a director, he/she can draw salary from company as a shareholder, he/she can draw dividend from company
  2. As a landlord/lesser, he/she receives a rent from company
  3. As a creditor, he/she can lend and receive interest from Company
  4. As a supplier, he/she supply the goods or services from his/her family business to company.

Borrowing Capacity: As a company, it has better ways for borrowing funds to business. It can issue Debenture certificates, private placement, issuance of preference share capital, accept deposits from public, borrow money from banks, as they prefer.

Taxation Benefits: Tax payment is only on the net-profit, the taxable net-profit arrived after offsetting all kinds of expenses, salary to directors, reimbursement etc., which detract the net taxable income drastically and result is lower tax on the company’s Net profit.

Raising money from Public: Limited companies can raise large amount of capital from public through issuing shares and deposits. Private companies raise capital from issuing debentures, private placement etc.

Maintenance Cost: For the amount of money you spend to manage the company compliance is based on the company’s Turnover & invested capital, license you required, but keeping company with good compliance, surely get good will out of market.

These are the Types of Companies:

Private Ltd. Company Registration- This is the most preferred Company form in the industry which enables business to start quick with minimal process, minimum 2 people can start this as promoters cum Directors. It enjoys all those company benefits with smooth business across the industry. The maximum no. of promoters /shareholders allowed under PVT. LTD. is 200 only.

One person company registration- OPC is one person Shareholder Company, where the business control is with one person only, all the benefits exists from Company can be utilized under OPC. The minimum director criteria is 3 directors and 7 promoters to make the public company, which has wider capital access.

LLP Registration- LLP Firm is an advancement of traditional Firm. The type of business is ideal, where the business purely on service oriented and risk sharing is quite high. We recommend LLP for small service providers, consultants, freelancers, professional service providers who intend to avail the several benefits.

Nidhi companies or NBFC– To run the financial institution within the group of members then Nidhi business is ideal. Members of this group, make deposit, borrow money for their mutual benefits. According to the section 406 of the companies Act, 2013, NIDHI Company doesn’t need to comply on the RBI.

NGO or Registered NGO- It is mainly for social welfare, education, healthcare, you can start with the main objective of public service, social reforms according to the deed signed between the settlors & management. If you have a Registered NGO, with 80G and 12A registration, then you can list for the CSR fund pooling eligibility from the corporate world.

Unincorporated Entity

Sole proprietorship business does not require any license, as this is linked to person’s individual PAN no. for all his business transactions. It’s suitable for business where exposure is very less like income is below INR 50, 000/Month. The immediate advantages of this are easy formation, minimum compliance; you start it and then take GST if required.

What are the Types of License Required?

FSSAI License- The FSSAI registration is must, where the business is about hotel/ food industry, retail of food items, selling in online market like Zomato, Swiggy. The FSSAI License cost is based on the business turnover, the basic cost for License cost starts from INR 2500 for the business turnover up-to INR 11 Lacs.

DIPP Registration or Start-up India Certificate– The Government, to promote the business and industry, the start-up India scheme has been rolled out. This gives host of benefits under start-up like tax benefits for 3 years, easier compliance, IPR benefits, bank loan subsidy, etc.

Trade license registration- In Karnataka, if you have any business which has been listed under X of Karnataka Municipal Corporation Act, are essentially required to obtain Trade License from BBMP. Business which come under Trade license are: Food processing units, Hotels, Marriage halls, nursing homes etc., this license cost is based on the location, total measurement area of the business.

ESI PF Registration- If you have 20 or more than 20 employees, then PF and ESI registration is mandatory. The PF can register voluntary basis even the employee count is less than 5 nos. for the profit of retirement benefits. There is no Government fee for registration of PF and ESI.

Professional Tax Registration– It is levied by State Government, Professional Tax is must be registered the person who is engaged in the business or services. The yearly Professional Tax renewal cost is INR 2500, and the employee’s salary if exceeds INR 15,000/month, has to pay INR 200 as Professional Tax.  

ISO 9001 certification or ISO certification- It is a certificate about the quality management system followed by a Company. It brings customer’s attention about the quality management, continual improvement, process approach.

Documents and Procedure:

After choosing best business form below documents required.

  1. Collecting the Director’s PAN, Aadhar card, Photo, Email, Mobile number.
  2. Validating the documents, and apply for Name reservation
  3. Apply for DSC and DIN number
  4. Apply for name reservation
  5. Registration of a Company

Time for Registration

  1. Registration online.
  2. Need to file with MCA and get the registration done online within a 5 working days.
  3. Ministry of Corporate Affairs registered company.
  4. MCA is the custodian and issues the Certificate of Registration within three working days from submission of complete records