So, you have a great business idea that is buzzing in your head. You have discussed with friends, perhaps even developed a rough plan. Now what? The next major, and frequently frightening, step is to formalize it. Your company must be registered.
The words company registration, legal formalities and government portals can give you jitters but there is nothing to worry. You are in the right position. This article is a friendly guide on how to register a company in India, which will take you through the whole process step by step. We will simplify all into easy to understand steps. No technical mumbo-jumbo, I assure you.
At the conclusion of this, you would have a clear guideline of how to transform your dream into a legally recognized business entity in India.
The Importance of Company Registration in India
You may be asking yourself, why should I even register my company? Is it not possible to Can I not simply begin to sell my products or services?” Whereas you may do that as an unregistered freelancer or a small-scale business, formally registering your company is like constructing a solid foundation of a house. It is a game changer and here is why:
- It Provides You with an Independent Legal Personality: This is the greatest benefit. After registering your company, it is considered as a separate person under the law. This implies that the assets and liabilities of the company are not your personal assets and liabilities. In case the company takes a debt, your personal assets (home or car) are not at risk. This is referred to as limited liability.
- Creates Confidence and Credibility: A registered company, such as a “Pvt. Ltd.” or “LLP,” instantly appears more professional and credible to customers, suppliers and partners. It demonstrates that you are serious with your business.
- Eases the Process of Obtaining Funds: Investors, venture capitalists and even banks are much more likely to invest in or lend money to a registered company. It instills in them confidence that the business is structured and in line with the law.
- Easier to Attract Talent: A registered company can provide benefits such as stock options (ESOPs) which can be a massive attraction and retention tool with respect to talented employees.
- Perpetual Succession: A company does not come to an end when the owners or directors change. It does not fall apart when a member dies or leaves, therefore business continuity.
- Protects Your Brand: After you have registered your company name, no other company in the country will be allowed to register a firm with a similar or same name. It is the initial measure of safeguarding your brand identity.
Types of Companies You Can Register in India
India has a number of business structures. Selecting the appropriate one is like selecting the right car on a trip. A bike will be good in the city, but an SUV will be needed during a mountain trip. Likewise, the appropriate form of the company will be determined by your vision, size, and funding strategy.
Here are the most popular options.
Private Limited Company (Pvt. Ltd.)
This is the most preferred option among the startups and the small and medium sized businesses in India.
To whom is it addressed? Ideal for startups that intend to raise funds, scale and want a formal corporate structure.
- Members: You must have at least 2 members (shareholders) and can have a maximum of 200.
- Directors: There should be at least 2 directors.
- Liability: Limited. This is the main characteristic The shareholders can only be liable to the extent of their shares. Their personal property is secure
- Key Strength: It is a distinct legal entity, which has credibility, and is the most desired form of structure by investors. You can also provide stock options (ESOPs) to the employees.
- Compliance: The compliance (such as regular board meetings, annual filing) is more compared to LLP or OPC.
Public Limited Company (PLC)
Consider large, well-established companies that are listed on the stock exchange, such as Reliance Industries or Tata Motors.
- Who is it intended to be? Big companies that wish to raise funds through issuing their stocks to the general population in the form of listing their shares on a stock exchange.
- Members: You must have at least 7 members and no maximum number.
- Directors: Minimum of 3 directors are needed.
- Liability: Limited.
- Key Strength: Capability to raise a large sum of money in the form of capital by the masses.
- Compliance: The compliance is very high and complex in terms of legal and regulatory compliance. This structure is not advisable to new start ups.
Limited Liability Partnership (LLP)
LLP is an excellent hybrid It is a combination of flexibility of operation of a partnership and the limited liability of a private limited company.
- To whom is it addressed? Professionals such as lawyers, chartered accountants, architects and small businesses that need limited liability but do not want to go through the red tape of a private limited company.
- Partners: The minimum is 2 partners, there is no maximum. There must be at least 2 designated partners.
- Liability: Limited. The liability of partners is restricted to their mutual agreed contribution to LLP. The misconduct or negligence of one partner cannot be charged to another partner.
- Pros: It is less costly and less cumbersome to establish and operate. The compliance requirements are minimal as compared to a privately owned limited company
- Limitation: LLPs are not able to attract equity capital in the form of venture capital as a privately held company would.
One Person Company (OPC)
As the name implies, this is a company that can be initiated by an individual. It was added to promote the individual entrepreneurs.
- Who is it to? Solo founders and entrepreneurs that do not need a business partner but still want the advantages of a corporate structure.
- Members: 1 member (shareholder).
- Directors: At least 1 director (who is normally the member). You also have to designate a so-called nominee, i.e. a person who will succeed the sole member in case of his or her death or incapacity.
- Liability: Limited.
- Pros: It gives a single founder all the benefits of a different legal entity and limited liability.
- Limited: An OPC has to be converted to a Private Limited Company when its paid up share capital is more than 50 lakhs or average annual turnover is more than 2 crores. It also limits some business activity.
A Brief Mention of Partnership & Sole Proprietorship
It should be mentioned that Sole Proprietorships and Partnership Firms are not companies that are registered under the Companies Act, 2013, with the Ministry of Corporate Affairs (MCA).
- Sole Proprietorship: This is the easiest type of business whereby there is only one owner. The business and the owner are not legally differentiated. Liability is unlimited and your personal assets are at risk. Registration is usually easy, and may only require a GST registration or a local business license.
- Partnership Firm: It is a company of two or more individuals and it is governed by the Indian Partnership Act, 1932. The partners are usually liable without any limitation.
A Private Limited Company or an LLP is nearly always a better option in any serious scalable business, because of the important benefit of limited liability.
What You Need to Know Before Registering a Company
These are some of the things to put in order before you get into the paperwork. It will simplify the entire procedure.
Settle Your Company Name
Your business name is your identity. It must be original and not too close to any other company or trademark in India. The MCA is very strict on this. Brainstorm some alternatives We will see how to check availability later.
Determine the Number of Directors/Partners:
- An OPC: 1 Director.
- In a Private Limited Company: 2 Directors are the minimum.
- In case of LLP: At least 2 Designated Partners.
- Ensure that your co-founders or directors are in agreement and have the relevant documents at hand.
Calculate Your Authorized and Paid-up Capital:
- Authorized Capital: This is the amount of share capital that the company can be issued to the shareholders. You can raise it later on, at a fee
- Paid-up Capital: This is the money that the company has received in actual fact in exchange for shares.
India has abolished the minimum capital requirement to start a company. You can invest as low as 10,000 or 1 lakh. The ideal way to begin would be with a modest amount that is commensurate with your initial business needs.
Get a Registered Office Address
You will need a physical address in India to be your registered office. All official communication by the MCA will be sent here. It may be a business address or even your residential address to begin with. You will have to submit proof of address (such as an electricity bill or a rent agreement) and a No Objection Certificate (NOC) of the property owner.
Also Read: How to Start a Property Management Company
How to Register a Company in India: 6 Steps to Follow
OK, time to get to the real thing! If you’re wondering how to register a company in India, the whole process has now gone online and is managed through the Ministry of Corporate Affairs (MCA) web portal. The primary form to be used in incorporation is the SPICe+ (pronounced as Spice Plus). It is a web form that has incorporated a number of services into one application.
The following is a step-by-step process of how this will be done:
Step 1: Choose the Company Type
This is the first and most important choice. Depending on your requirements, select the type of company that you want to register like a Private Limited Company, LLP, OPC, etc. In the majority of the startups, a Private Limited Company is a standard option.
Step 2: Get Digital Signature Certificate (DSC)
All the documents must be signed electronically as the whole process is carried out online. Digital Signature Certificate (DSC) is the digital signature of a physical signature.
- Who requires it? The proposed directors/partners of the company should have DSC.
- How to obtain it? To obtain a DSC, one must go to one of the government-certified agencies such as eMudhra, Sify, or Capricorn. You will be required to provide your identity proof (PAN card) and address proof (Aadhaar card, passport, etc.) and go through a brief video verification.
- What kind? You will require a Class 3 DSC. It is normally a USB token and lasts 1-2 years.
- Time: It normally takes 1-2 days.
Step 3: Apply for Director Identification Number (DIN)
A director identification number (DIN) is a unique number allocated to any person wishing to be a director of a company. It is a single time need; in case you have a DIN, you do not need another one.
- Where to find it? Fortunately, you do not have to apply DIN separately any more. It is now used directly in the SPICe+ form when the incorporation process is being done itself. The DIN is allocated, together with the incorporation, in the case of up to three directors.
Step 4: Verify the availability of Company Names
This is one of the key steps where most applications fail to go through. The name that you have suggested as that of your company should be distinctive.
- The Guidelines: The name must not be one that is too similar or the same as an existing company or LLP name. It must not be offensive or suggestive of any affiliation with the government.
- How to verify? The MCA portal has a company name checking service, which you can use to see whether a name is available. This provides you with a rough conception
- Formal Process: The formal process of applying the name is by a section of the SPICe+ form known as SPICe+ Part A. You will be able to suggest two names in order of preference. The names will be reviewed by the Registrar of Companies (RoC) and one will be approved in case it fulfils the criteria.
- Name Reservation: After your name has been approved, it is held in reserve to you for 20 days, during which time you must submit the incorporation documents (SPICe+ Part B).
Step 5: Prepare and File Incorporation Documents
This is the gist of the application process. You will complete the key form of incorporation, SPICe+ Part B, and append a number of other electronic forms and documents.
What Part B of SPICe+ covers
- The company information (capital structure, registered office address).
- The information about the directors and subscribers (shareholders).
- Filing PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) application of the new company. They are automatically allotted with incorporation.
- Application to EPFO (Provident Fund) and ESIC (Employee State Insurance) registration.
- Application of Professional Tax registration (in some states such as Maharashtra).
- Application of opening a bank account of the company.
In addition to SPICe+ Part B, you will have to submit the following associated forms:
- e-MOA (Memorandum of Association): This document determines the principal business goals and the scope of your company.
- AOA (Articles of Association): This document has the internal rules and regulations of managing the company.
- This is the form used to apply GSTIN, EPFO, ESIC, Professional Tax and opening a bank account.
- INC-9: A self-statement of all the subscribers and initial directors.
All these are filled online, digitally signed with the DSCs and uploaded to the MCA portal. The forms must also be signed and certified by a professional (such as a Chartered Accountant, Company Secretary or Lawyer) who must digitally certify the forms.
Step 6: Obtain Certificate of Incorporation
After submitting all the forms and they are processed, your application will be reviewed by the Registrar of Companies (RoC).
- Scrutiny: Assuming that all is okay, the RoC will grant an application. In case of any mistakes or inconsistencies, they will send the application back to be resubmitted and you will have to fix the mistakes and re-upload the forms.
- On approval, the RoC grants the Certificate of Incorporation. It is the official birth certificate of your company! It will hold the Identification Number (CIN), PAN and TAN of the Company.
- Congratulations! Your company has been registered and is legally ready to start business. The whole process including start to finish may take 7 to 15 working days, depending on whether your documents are up to standard and the name is approved within a short time.
How to Check if a Company is Already Registered in India
Want to verify the information about an existing company or whether your competitor is registered? It is quite simple and open.
- Visit the Ministry of Corporate Affairs (MCA) web site (mca.gov.in).
- Click on the tab of ‘MCA Services’.
- In the section of Master Data, click on View Company/LLP Master Data.
- You may search the company by its Corporate Identification Number (CIN) or by its name.
- Once you enter the company name and the captcha, it will show a list of matching companies.
- By clicking on the CIN of the company, you can access its Master Data that contains information such as the date of its registration, registered address, names of directors, and filing status.
It is also the most effective to conduct an initial search of your proposed name to check whether similar-sounding names already exist.
Cost of Company Registration in India
Registration fees of a company can be divided into two: government and professional fees.
Government Fees
These are the charges you pay directly to the government in the forms of filing and stamp duty.
- Filing Fees: In case the authorized capital of the company is up to 15 lakhs, then the fee to file the SPICe+ form is nil. This was the government’s move to promote entrepreneurship.
- Stamp Duty: This is a tax levied by the state, and it differs by states. It is determined on the basis of the authorized capital and the state in which the registered office is located. It may be a few hundred rupees to several thousand.
- PAN and TAN Fees: The allotment of PAN and TAN has a small fee of about 110.
Professional Fees
You are not an expert in corporate law, so you will have to engage a professional to do this on your behalf, be it a Chartered Accountant (CA), Company Secretary (CS) or a lawyer. They check the accuracy of all documents, certify the forms and communicate with the MCA.
Professional charges are quite different depending on the city, the complexity of the case and the reputation of the firm.
This is a rough estimate:
Company Type | Government Fees (Approx.) | Professional Fees (Approx. INR) | Total Approx. Cost (INR) |
Private Limited Company | ₹1,000 – ₹5,000 (mainly stamp duty) | ₹6,000 – ₹15,000 | ₹7,000 – ₹20,000 |
One Person Company (OPC) | ₹1,000 – ₹4,000 (mainly stamp duty) | ₹5,000 – ₹12,000 | ₹6,000 – ₹16,000 |
LLP | ₹500 – ₹3,000 (mainly stamp duty) | ₹5,000 – ₹10,000 | ₹5,500 – ₹13,000 |
Documents Required for Company Registration
The trick to a smooth process is to get your documents in order ahead of time. What you will require of all Indian directors and shareholders:
- PAN Card: It is a requirement of all Indians. A clear and self attested copy is necessary.
- Identity Proof: A self-attested copy of any of the following documents: Aadhaar Card, Voter’s ID, Passport, or Driver’s License.
- Address Proof: A recent electricity bill, telephone bill, mobile bill, or a bank statement (not older than 2 months) showing your current address.
- Photograph: A recent passport-size photograph of each director and shareholder.
For the Registered Office:
- Proof of Address: A recent electricity bill, gas bill or telephone bill of the registered office address (not older than 2 months).
- No Objection Certificate (NOC): A letter issued by the owner of the property to allow you to use the premises as the registered office of the company. Even when one of the directors owns the property, this is necessary.
- Rental Agreement (in case of renting): The copy of the rent agreement should be provided in case the property is rented.
In the case of foreign nationals, the necessary documents are more or less the same but must be notarized and apostilled (certified internationally) in their home country.
How to Register a Foreign Company in India
When a firm that is incorporated outside India wishes to establish a place of business in India (such as a branch office or project office), it must register with the Registrar of Companies (RoC).
- The procedure is not the same as that of adding a new Indian subsidiary. The foreign firm is required to submit Form FC-1 within 30 days of having a place of business in India.
The major requirements are:
- Certified copies of the company charter documents (such as the MOA & AOA) of the country of origin.
- The full address of the registered or main office of the company in its country of origin.
- A list of directors and the company secretary.
- The name and address of an individual residing in India, who is empowered to receive any notice or process in the legal proceedings against the company.
This is a more complicated procedure and it is strongly advisable to employ a legal or financial expert in India to do so.
Common Mistakes to Avoid While Registering a Company
There are minor mistakes that many entrepreneurs make and this can slow down the registration process. These are some that you should be wary of:
- Selecting a Generic or Similar Name: The most likely cause of rejection is the name of the company. Do not use names that are generic (e.g., Best Software Solutions) or too close to names of existing companies. Be original.
- Mistakes in Director/Subscriber Information: Make sure that the names and addresses that are filled on the forms are the same as those on the PAN and Aadhaar cards. A minor spelling error is enough to be rejected.
- Improper Registered Office Documents: The proof of address should be less than 2 months old and the NOC should be worded properly and signed by the property owner.
- Vague Object Clause in MOA: You should have clear and specific objects in your Memorandum of Association about the business you are going to do. Be specific, avoid being vague
- Attempting to Do It Yourself: It is technically possible to do the company registration yourself, but the process is very nuanced. One little error is very expensive and time-consuming. It is worth investing in a professional hire
Tips for Startups Registering in India
As a startup founder here are some additional tips:
- A Private Limited Company: A Pvt. Ltd. is best suited to 99% of startups that intend to grow and seek funds. Do not over analyze it.
- Make Your Authorized Capital Low: You do not have to begin with a high authorized capital. The standard capital is 1 lakh and this keeps your initial stamp duty expenses down. You may always add it afterwards
- Think Long-Term about Your Name: Select a name that is scalable, brandable, and that can be used as a domain name.
- Get a Founders’ Agreement: This is not a requirement during the registration process, but it is important to have a separate agreement between the co-founders that establishes the roles, responsibilities, equity split and exit terms. This may save a lot of disagreements in the future.
- Pay Attention to Compliance Right at the Start: After registering your company, you will have to meet compliance requirements on an annual basis (including filing financial statements and an annual return). Know these and be compliant to avoid penalties.
Conclusion
The process of how to register a company in India may appear to be a challenging one, but it has been made much easier and more online over the years. Being aware of the various types of companies, having your documents ready, and going through the steps in a sequential order will help you go through the process successfully.
It is the initial formal act of your entrepreneurial adventure—a time when your idea becomes a real thing with its own name. It is the basis on which you will grow your business, employ a staff, and pursue your dream. Relax, do your paperwork, and jump. Your business dream awaits to become a reality!
FAQs
1. Can I incorporate a company by myself without a CA or CS?
You can do it technically but it is not advisable. The procedure is associated with legal subtleties and demands the certification of the forms by the professional. It is cheaper to hire a professional and save time and costly mistakes.
2. Is it possible for me to use my home address as a registered office?
Yes, absolutely. The use of your residential address as the registered office is possible in the initial stages. All that you have to do is to submit the necessary address proof and a NOC by the property owner.
3. How long will the complete company registration process take?
In case everything is in order and the name is accepted within a short time, the process may take 7-15 working days.
4. What is the distinction between a Shareholder and a Director?
A director is charged with the responsibility of running the daily operations of the company. A shareholder is a stockholder in the company. In most start-ups the directors are also shareholders.
