A complete guide to company registration in India
Starting a business in India requires a thorough understanding of the legal requirements, and one of the crucial steps in this process is company registration. In this blog, we will delve into the concept of company registration and explore the four different types of companies that exist in India.
What does company registration entails in India?
Company registration is the process of legally establishing a business entity in India. It is governed by the Companies Act, 2013, and administered by the Ministry of Corporate Affairs (MCA). Registering a company is essential as it grants your business a separate legal identity and offers several advantages, such as limited liability protection, easy access to funding, and enhanced credibility.
The 4 Different Types of Companies in India
There are four main types of companies in India, each with its own distinct features and purposes. Let's take a closer look at each of them:
1. Private Limited Company
A Private Limited Company is the most common and popular type of company among startups and small to medium-sized businesses. It requires a minimum of two directors and two shareholders. This type of company restricts the transfer of shares to the public and prohibits inviting the general public to subscribe to its shares or debentures. The liability of shareholders is limited to the amount unpaid on their shares.
2. Public Limited Company
A Public Limited Company is suitable for larger businesses seeking significant public investment and wider shareholder participation. It requires a minimum of three directors and seven shareholders. Unlike a Private Limited Company, a Public Limited Company can issue its shares to the public through a stock exchange. The liability of shareholders is also limited to the amount unpaid on their shares.
3. One Person Company (OPC)
The One Person Company (OPC) is a recent addition to the types of companies in India. It is designed for solo entrepreneurs who wish to start a company with limited liability protection. Only one person is required to incorporate an OPC, and that individual becomes the sole shareholder and director. OPCs are ideal for single-owner businesses and provide limited liability to the proprietor.
4. Limited Liability Partnership (LLP)
The Limited Liability Partnership (LLP) is a unique form of business that combines the advantages of both a company and a partnership. It provides limited liability protection to its partners, which means their personal assets are separate from the business liabilities. LLPs are suitable for professionals and service-oriented businesses. Unlike companies, they do not issue shares and are managed based on the terms of the LLP Agreement.
Eligibility Criteria for Company Registration in India
Before proceeding with the company registration process, it's essential to meet specific eligibility criteria laid out by the Indian government. Here are the key eligibility requirements:
1. Director Identification Number (DIN): All proposed directors of the company must obtain a unique Director Identification Number (DIN). This can be obtained by filing Form DIR-3 with the Ministry of Corporate Affairs (MCA).
2. Digital Signature Certificate (DSC): At least one director must have a valid Digital Signature Certificate (DSC). The DSC is used to electronically sign the documents during the registration process. It can be obtained from a licensed Certifying Authority in India.
3. Resident Director: For certain types of companies, such as Private Limited Company and Public Limited Company, there is a mandatory requirement to have at least one director who is a resident of India. A person is considered a resident if they have stayed in India for at least 182 days in the previous calendar year.
4. Shareholder Details: The company must have a minimum number of shareholders as per the company type. For instance, a Private Limited Company must have a minimum of two shareholders, while a Public Limited Company must have at least seven shareholders.
5. Registered Office: The company must have a registered office in India. It serves as the official address for all communications and notices. The proof of ownership or lease agreement of the registered office must be submitted during the registration process.
6. Unique Name: The proposed company name should be unique and not similar to any existing company or trademark. The availability of the company name can be checked on the MCA portal.
7. Authorized Capital: The company's authorized capital should be decided upon during the registration process. This is the maximum amount of capital that the company can raise by issuing shares.
Documents Required for Company Registration Process
To initiate the company registration process in India, several documents need to be prepared and submitted. Below is a list of essential documents along with their sources:
1. Identity and Address Proof of Directors and Shareholders:
- Obtain identity proof such as Aadhar card, passport, or voter ID.
- Obtain address proof such as bank statement, utility bill, or rental agreement.
2. Passport-size Photographs: Recent passport-sized photographs of all directors and shareholders are required.
3. Proof of Registered Office:
- Obtain a No-Objection Certificate (NOC) from the property owner for using the premises as the registered office.
- Submit a utility bill (electricity, water, or gas bill) or rent agreement as address proof of the registered office.
- MOA and AOA:
- Draft the Memorandum of Association (MOA) and Articles of Association (AOA), which define the company's objectives, rules, and regulations.
- These documents must be filed with the Registrar of Companies (RoC) during the registration process.
5. INC-9 Affidavit: Each subscriber to the memorandum must submit an affidavit declaring that all the requirements of the Companies Act, 2013, have been complied with.
6. Director Consent Letters: Obtain consent letters from all directors, stating their willingness to act as directors of the company.
The Process of Registering a Company in India, Including Limited Liability Partnership (LLP)
Registering a company in India, whether it's a Private Limited Company, Public Limited Company, One Person Company (OPC), or Limited Liability Partnership (LLP), involves several steps and compliances with the relevant authorities. Below is a comprehensive step-by-step guide to the company registration process, including LLP registration:
Step 1: Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN)
- For all types of companies, at least one designated person (director or partner) needs to obtain a Digital Signature Certificate (DSC) from a licensed Certifying Authority in India.
- Each director or designated partner must apply for a unique Director Identification Number (DIN) by filing Form DIR-3 with the Ministry of Corporate Affairs (MCA).
- Identity proof, address proof, and passport-sized photographs of the directors or designated partners are required for DSC and DIN applications.
Step 2: Select a Unique Company/LLP Name
- Choose a unique name for the company or LLP, ensuring that it is not similar to any existing company or LLP names.
- Check the availability of the name on the MCA portal.
Step 3: Draft Memorandum of Association (MOA) and Articles of Association (AOA) or LLP Agreement
- For companies (Private Limited and Public Limited), draft the Memorandum of Association (MOA) and Articles of Association (AOA) defining the company's objectives and internal regulations.
- For LLP, draft the LLP Agreement defining the rights, duties, and obligations of the partners.
- MOA, AOA, or LLP Agreement must be notarised on stamp paper.
Step 4: File Incorporation Documents
For Private Limited Company, Public Limited Company, and One Person Company:
- Prepare and file the incorporation form (SPICe) along with MOA and AOA with the Registrar of Companies (RoC).
- Attach the required documents, such as address proof, identity proof of directors, and consent letters.
For LLP:
- Prepare and file the LLP registration form (Form FiLLiP) with the RoC.
- Attach the required documents, such as the LLP Agreement, address proof, identity proof of designated partners, and consent letters.
Step 5: Payment of Registration Fees
- Pay the prescribed registration fees to the RoC through online or offline modes.
Step 6: Verification and Approval
- The RoC will examine the application and documents submitted for compliance.
- If everything is in order, the RoC will issue a Certificate of Incorporation (CoI) for companies or a Certificate of Incorporation (CoI) and assign an LLP Identification Number (LLPIN) for LLP.
Step 7: PAN and TAN Application
- After obtaining the CoI, apply for the company's or LLP's Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) with the respective authorities.
Step 8: Opening a Bank Account
- Open a bank account in the company's or LLP's name using the CoI, LLPIN (for LLP), and PAN.
Step 9: Registration with Other Authorities
- Depending on the nature of the business, additional registrations such as Goods and Services Tax (GST) registration, professional tax registration, etc., may be required.
Conclusion
Registering a company or LLP in India is a significant step towards establishing a legally recognized business entity. The process involves obtaining Digital Signature Certificates, Director Identification Numbers, selecting a unique name, drafting the necessary documents (MOA, AOA, or LLP Agreement), and filing the incorporation forms with the Registrar of Companies. By following these steps and fulfilling all the requirements, you can set up a legally compliant and thriving business in India. Remember to seek professional guidance to ensure smooth compliance with the registration process.
