register business

Register business in India

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Dear friends,

Today, we will discuss about how to register your business in India. So far, we talked about some low cost business ideas. Even if the business ideas are low cost, then also we can’t skip process of registering business in India forever. In fact, in order to get benefit from Indian Government’s start up India initiative, it is a prerequisite to officially register your business. So, we must familiarize ourselves with the business registration process! What are you waiting for then? Let’s get started with it!

Register as a Company?

If you wish to register as a company, you can do so under Companies Act. In this case, there are three options available with you and they are as follows:

Private Limited Company

For this, you should have a minimum capital of Rs 1 lac. The registration fee and stamp duty depends on the capital of the company and the state in which the company is registered.The company name should reflect the business objects of the company. This means, the name should be such that it does not resemble the name of any existing companies. If the proposed names resemble any existing business entity, the Registrar of companies may reject the name application. Minimum of 2 Shareholder and 2 Director are required for a Pvt. Ltd. Company registration, where director and shareholder can be same. Maximum limit on number of shareholder prescribed in Pvt. Ltd Company is 200. Maximum number of Director in a private limited structure can be raised to 15 without any special resolution. Unsecured Loan is allowed from Director and its relatives only.

Private Limited Company Registration is fast (10-25 days varying state to state). It’s easy to fetch funding in a private limited company by transferring of shares. A private limited company is easy to convert in a Public Limited company at any stage subject to fulfillment of eligibility criteria. Maintenance of Basic Compliances after registration of private limited company are comparatively simple. There exists no Bar on Turnover and Capital in a private limited company structure unlike in One Person Company (OPC). To apply for on-line private company registration, you need to acquire Digital Signature Certificate (DSC) first. Afterwords, obtain Director Identification Number. Fill up Integrated Incorporation Form INC 29 which can be downloaded from here. This form makes your life easy by including Name reservation, various declaration, Memorandum of Association (MOA)/Article of Association (AOA) Registration etc. in single form. At last, just wait for approval from Registrar of Companies (ROC).

One Person Company (OPC):

The revolutionary new concept of one person company has been introduced in the Companies Act 2013. Often we see many Sole Proprietorship concern working in its individual name as a proprietorship concern. Sole means single and proprietorship means ownership. Sole Proprietor is the business which is owned and controlled by a single owner and have unlimited liability. This means, if a proprietor is failed to meet his debts or obligation, his personal property can be used to dispose off or to satisfy the liability. However, OPC creates a separate legal entity and allows for the limitation of liability.

The biggest reason to start an OPC would be that it could be converted in to private limited company in future. OPC requires only one person as a shareholder. Apart from shareholder, appointment of one nominee is requisite in OPC. Maximum number of Director in an OPC can be raised to 15 only by passing special resolution. Maximum Paid Capital in an OPC can be Rs. 50 Lac and Average turnover limit is Rs. 2 Crores. Mandatory Conversion to Private limited Company is necessary in case an OPC exceeds the limit of Rs 2 crores turnover. The procedure for registration of OPC is similar to private limited company.

Public Limited Company:

Public Limited Companies are those types of companies whose shares are traded on stock market or issues fixed deposits. For Public Limited Company Registration, the company must have minimum 3 Directors, 7 Shareholders and Maximum 50 Directors and need Rs 5 Lakhs of Paid up Capital. A Public limited company have all the advantages of Private Limited Companies and the ability to have any number of members, ease in transfer of shareholding and more transparency. In a public limited company, Members Personal assets are safe, Liability of company is limited to the assets of same. The company also has perpetual existence and remains unaffected by death of any of its members or change in membership. You can refer this government website for registration process.

Considering some other options?

There are some other options governed by Indian Partnership Act, Societies Act and Indian Trusts Act. We shall consider them here.

Sole-proprietorship

It is suitable for small business ideas because it has the most simplified legal structure. Therefore, you can start your sole proprietorship firm without any hassle by just registering your company in income tax department and obtaining license for the product you are carrying your business. The profits earned are all yours but this form of business involves much risk. This is because, all the liability is on you and you have to pay the debt from your personal assets too. There is no way of raising funds in this kind of business form. That being said, The profits earned are all yours. In order to know step by step procedure to register your sole-proprietorship, you can refer to this article.

Limited Liability Partnership

You are planning to start your business and you have 3 or more people who are interested to work with you. Then the most suitable form which seems will be partnership. Partnership is further of two kinds i.e. Limited liability Partnership ( LLP) or Registered Partnership firm. Registered partnership firm is often chosen because it carries with it various liabilities and risks. Nowadays startups are choosing LLP over the other form of business because it has various benefits.

LLP offers you blend of partnership and company therefore it is considered best choice. LLP offers limited liability, offers tax advantages, can accommodate an unlimited number of partners, and is credible in that it is registered with the Ministry of Corporate Affairs (MCA). It is suitable for low budget. Normally startups don’t have much funding so this can be beneficial for such startups. LLP Act, 2008 is also more flexible with legal compliance. You don’t need to comply for so many requirements as in case of companies. LLP cannot raise funds by issuing share or stock certificates in future. This can be a disadvantage for a growing startup. To read about how can you register your LLP, Click here.

The other options

If you are running a business which is not for profit, you can register it in the form of Society, Trust or section 8 of Companies Act. Consider reading this article in case you wish to register a trust.

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