So you have a business idea and want to start off your entrepreneurship life as soon as possible but don’t know the first thing about the legalities involved in incorporating your business?

To give shape to your idea, you need to have your company registered first. This keeps you on the right side of the law by giving you a legal license to run your business and comply with the government rules and regulations. Not only this, but it also protects you from personal liability and makes your business more attractive to your investors and customers.

In this article, you will get to know about the dos and don’ts you need to be aware of before starting your own business.

What is Company Registration?

Company registration is the establishment of a corporation or company by enrolling it with the rules and regulations of the government, giving a legal structure to the business. Once registered, the new entity is considered as a new artificial legal person, separate from its founders and gets a license to do run and operate it’s business legally.

The legal body which is responsible for the proper functioning of the corporate sector in India is the MCA ( Ministry of Corporate Affairs). It does so by implementing various laws through the Company Acts of 1953 and 2013, Limited Liability Partnership Act of 2008, Insolvency and Bankruptcy Code of 2016 & other allied acts, bills, rules and regulations. The MCA also protects investors and offers many services to stakeholders.

Benefits of Company Registration

Getting your company registered gives you a vast array of advantages and opportunities. Moreover, it provides your business credibility and approves its authenticity.

• Your liability becomes limited, thus protecting you from personal threats and losses.
• Makes your company look legit to your customer and portraits an enhanced brand image to them.
• Provides a well-structured image of your company to investors and banks; gives them the confidence and trust to invest in your company.
• Greater capital contribution and easy transfer of shares.
• Offers legal security and lets you secure your assets.
• Gives your company the necessary stability required to create faith in your employees.
• More convenient to sell or exit the business due to less documentation and cost.

Types of Company Structures

Each business structure type has its own benefits, and it is up to you what suits your business the best. As a founder, one must be aware of different technicalities involved with each type before taking the final decision. The most popular ones are–

• OPC (One Person Company)
• LLP (Limited Liability Partnership)
• PLC (Private Limited Company)

OPC (One Person Company)

Recently introduced in 2013, OPC is for those individuals who want to run their corporate business and be a sole-proprietor. It is best for entrepreneurs who wish to incorporate their startup as a company with limited liability and avail tax benefits.

Advantages

• Lesser compliance compared to a private limited.
• Limited liability for the owner.
• Legal Recognition
• Obtaining loans from banks gets easier.
• Total 100% ownership of the company.

Documents Required

• Director’s PAN Card
• Director’s Aadhaar Card
• Director’s Identity Proof (Passport, Voter ID, Driving License)
• Director’s Address Proof (Bank Statement, Telephone Bill, Mobile Bill, Electricity Bill)
• Address Proof for Registered Office (Rent Agreement, Lease Agreement, Utility Bills)
• NOC (No Objection Certificate) from the owner of the property
• Other Supporting Documents

You have to apply for DSC (Digital Signature Certificate), DIN (Director Identification Number) and name approval (RUN Form). Post name reservation, you have to fill e-AOA, e-MOA, e-declarations including applications for PAN (Permanent Account Number), TAN (Tax Deduction Account Number or Tax Collection Account Number) and SPICe Form for the incorporation of the OPC.

LEGAX can do all these on behalf of you. Check out our One Person Company registration package by clicking here. 

Limited Liability Partnership

LLP is best for startups with co-founders where the liability of each partner is limited to their agreed contribution; best for partnership businesses looking to get the status of a company. It is also a perfect Way to Secure your assets. LLPs are flexible and have lesser compliances also 100% FDI is allowed in Indian Markets.

Advantages

• The paperwork in LLP is much lesser as compared to other registrations.
• Keep members safe from liabilities like personal debts and legal hearings.
• Provides tax flexibility where the income, expenditures, and profits become the part of the owner’s tax returns.
• No need for following a business structure.
• Profit-sharing is also flexible in LLPs.

Documents Required

• Partner’s PAN Card
• Partner’s Aadhaar Card.
• Partner’s Identity Proof (Passport, Voter ID, Driving License)
• Partner’s Address Proof (Bank Statement, Telephone Bill, Mobile Bill, Electricity Bill)
• Address Proof for Registered Office (Rent Agreement, Lease Agreement, Utility Bills)
• No objection certificate from the owner of the property.
• NOC (No Objection Certificate) from the owner of the property

One has to get DSC and DIN for two partners and name approval form (RUN LLP Form). Post name registration one has to fill applications for PAN, TAN and FiLLiP Form for the incorporation of the LLP. At last, one also has to draft an LLP Agreement.

Check out our Limited Liability Company registration package by clicking here.

Private Limited Company

A PLC is considered as a separate legal entity apart from their partners, similar to an LLP. It is controlled by a private group of people and required at least two shareholders (maximum of 200). It is best for startups looking to raise capital and for entrepreneurs seeking to expand business activities.

Advantages

• The liability of the company’s owner concerning its debt is only limited to his/her shares.
• The shares of the company are easily transferrable to the other person.
• The company can issue debentures and can receive funds from public platforms, thus making it easier to raise the money.
• There are more tax benefits and, the percentage of applied tax is also lesser as compared to other types of company registrations.

Documents Required

• Passport size photos of directors.
• Address proof of directors.
• Photo ID proof of directors.
• Specimen signature.
• Self-declaration about your directorship in other companies.
• Rent agreement of your registered office.
• No objection certificate from the owner of the property.
• Aadhaar card.
• PAN card.

You have to apply for DSC & DIN for all the directors of the company and name approval (RUN Form). Post name reservation, you have to fill e-AOA, e-MOA, e-declarations including applications for PAN, TAN and SPICe Form for the incorporation of the PLC.

Check out our Private Limited Company registration package by clicking here.

Importance of Choosing the Right Business Structure

Business structures like PLCs and LLPs are relatively more appealing to investors than others and, will always prefer a company with a recognised and legal business structure rather than an OPC or proprietorship.

A company has to file annual returns and income tax return with the company registrar. Thus, it becomes very significant to choose the right business structure for your company as it affects your income tax returns.

The company’s account books are required to be audited mandatorily every year and to comply with such legal rules money needs to be spent on tax filing experts, accountants, and auditors. Thus the owner should have a clear idea of its requirements and the type of legal compliances he/she is willing to take care of before applying for company registration.