Starting a business in India can be a complex process, but with the correct information and resources, it can also be an exciting and rewarding endeavour. One of the first steps in setting up a business in India is registering the company. This process involves obtaining the necessary licences and permits and choosing the appropriate legal structure for your business.
In this article, we will guide you through the process of registering a company in India, including the different types of business structures available, the documents required, and the steps involved in the registration process.
What is company registration?
Company registration is the process of legally incorporating a business as a separate entity from its owners. This involves obtaining a legal registration certificate from the government, which grants the company legal recognition and the ability to enter into contracts, own property, and conduct business activities.
The process of company registration typically involves the following:
Submitting an application to the relevant government agency.
Providing documentation and information about the company.
Paying any required fees.
Once the company has been registered, it is treated as a legal entity and is subject to certain legal obligations and responsibilities. Company registration is an essential step in establishing a business and can provide numerous benefits to the owners and stakeholders of the company.
See also: 9 things to keep in mind for quick property registration
Types of companies in India
In India, several different types of companies can be registered, each with its own unique characteristics and requirements. The six main types of companies are:
Private Limited company
A private limited company is a business structure owned by a small group of shareholders and offers limited liability protection to its owners. The following requirements must be met to register a private limited company in India:
- At least two directors and two shareholders are required.
- The company’s name must end with “Private Limited.”
- The company’s articles of association and memorandum of association must be filed with the relevant government agency.
- The company must have a registered office in India.
Public Limited company
A public limited company is a business structure owned by a large group of shareholders and offers limited liability protection to its owners. The following requirements must be met to register a public limited company in India:
- At least three directors and seven shareholders are required.
- The company’s name must end with “Limited.”
- The company must have a minimum paid-up capital of 15,00,000 rupees.
- The company’s articles of association and memorandum of association must be filed with the proper government agency.
- The registered office of the company must be in India.
One-person company
A one-person company (OPC) is a business structure owned by a single individual and offers limited liability protection to its owner. It is a hybrid between a sole proprietorship and a private limited company, allowing the owner to retain complete control over the company while providing some legal protection. To register a one-person company in India, the following requirements must be met:
- At least one director and one shareholder are required, with the shareholder and director being the same individual.
- The company’s name must end with “One Person Company.”
- The company doesn’t need a minimum paid-up capital.
- The company’s founding documents (the articles of organisation and the memorandum of association) must be submitted to the appropriate regulatory body.
- A physical presence in India is required, such as a registered office.
Producer company
A producer company is a type of business structure owned by a group of producers, such as farmers or small businesses. It is formed to promote their interests and support their economic development. The following requirements must be met to register a producer company in India:
- At least ten members and five directors are required.
- The company’s name must end with “Producer Company Limited.”
- The company’s founding documents (its articles of organisation and memorandum of association) must be submitted to the appropriate regulatory body.
- There has to be an Indian registered office for the business.
Nidhi company
A Nidhi company is a type of non-banking financial institution that is owned by its members and operates for the mutual benefit of its members. It is typically used to cultivate the habit of thrift and savings among its members and provide loans to its members. The following requirements must be met to register a Nidhi company in India:
- At least three directors and 200 members are required.
- The company’s name must end with “Nidhi Limited.”
- The articles of organisation and the memorandum of association need to be submitted to the appropriate government body for the firm.
- The company must have a registered office in India.
Section 8 company
A section 8 company is a type of non-profit organisation established for charitable or social purposes. It is named after Section 8 of the Companies Act 2013, which outlines the requirements for registering this type of company. The following requirements must be met to register a section 8 company in India:
- At least three directors and seven members are required.
- The company’s name must end with “Limited” or “Private Limited,” depending on the type of organisation.
- The company’s founding documents must be submitted to the appropriate regulatory body, including the Articles of Association and the Memorandum of Association.
- The company is required to have a registered office in India.
Benefits of company registration
There are several benefits to registering a company in India, which can help support your business’s growth and success. Some of the main benefits of registering a company in India include the following:
Legal recognition
When you register a company in India, you create a legal entity recognised by the government and has an actual existence. This means that the company is treated as a separate entity from its owners and is subject to certain legal obligations and responsibilities. This can be particularly useful when it comes to entering into contracts, owning property, and conducting business activities, as the company is seen as a reliable and trustworthy entity.
Limited liability protection
One of the main benefits of registering a company in India is the limited liability protection it offers to its owners. This means that the personal assets of the directors or shareholders are not at risk if the company incurs debts or is sued. This can provide important legal protection to the company’s owners and be a critical factor in attracting investors and partners.
Easy transfer of ownership
In a registered company, the transfer of ownership can be done quickly through the transfer of shares. This is particularly useful in the case of a public limited company, where the transferability of shares is easy even when the public is involved. This can make it easier to sell or transfer ownership of the company as needed and can be an essential factor in the growth and development of the business.
Increased borrowing capacity
Registered companies often have a higher borrowing capacity than unregistered businesses, as they are seen as more trustworthy by banks and other financial institutions. This can make it easier for the company to access credit and financing, which can be essential for the growth and expansion of the business.
Ability to raise equity
Registering a company in India can also make raising equity for your business more accessible, as investors may have more faith in a legal business entity. This can provide significant funding for the company and can help to support its growth and development.
Power to file cases or be sued
As a registered company is a legal entity with the status of an “individual,” it can file court cases against others or be sued the same way as an individual. This can be important for protecting the company’s interests and resolving disputes or issues that may arise.
Perpetual existence
A registered company can exist perpetually, meaning it can continue to operate indefinitely unless it is dissolved or wound up. This can be an essential factor for businesses planning for the long term and want to ensure that their company can continue to operate even if key shareholders or directors leave or retire. Unregistered businesses may have a limited lifespan and need to be dissolved or reorganised if specific vital individuals leave the business.
Eligibility requirements for online company registration
Several requirements must be met to register a company in India. These requirements are in place to ensure that the company has the necessary regulatory infrastructure to operate effectively and to protect the interests of shareholders and stakeholders. Some of the critical requirements to keep in mind when registering a company in India include the following:
Number of directors
Depending on the type of company being registered, there may be minimum requirements for the number of directors. For example, a private limited company must have at least two directors, while a public limited company must have at least three directors. These requirements are in place to ensure that the company has sufficient oversight and decision-making power.
Directors and shareholders
In some cases, the directors and shareholders of a company can be the same individuals. This is typically the case for one-person companies, where the sole director and shareholder are the same person. In other companies, the directors and shareholders may be different individuals or groups. The roles and responsibilities of directors and shareholders may vary depending on the type of company and the specific arrangement between these parties.
Types of Limited companies
When registering a company in India, you must choose whether the company will be “limited by shares” or “limited by guarantee.” A company limited by shares is owned by shareholders, who are typically required to contribute a certain amount of capital to the company in exchange for shares. A company limited by guarantee is owned by members, who may be required to contribute a certain amount of capital to the company, but are not entitled to shares. The type of company chosen will depend on the specific goals and needs of the business and the arrangement between the owners.
Resident directors
At least one of the company’s directors must be a resident of India. This requirement is in place to ensure that the company has a connection to the Indian market and is subject to Indian laws and regulations.
Unique company name
The company’s name must be unique and not contravene the rules and regulations of the Companies Act of 2013. This means that the name must not be identical or similar to the name of an existing company, and it must not be offensive or inappropriate in any way. The company name is integral to the company’s identity and branding, and choosing a distinctive and memorable name is essential. The process for selecting and registering a company name may vary depending on the type of company and the specific requirements of the relevant government agency.
Documents required for registering a company
Several documents are required to register a company in India online. These documents are necessary to ensure that the company has the legal and regulatory infrastructure to operate effectively and protect the interests of shareholders and stakeholders. Some of the key documents that may be required include:
PAN card of the business
The PAN card, or Permanent Account Number, is a unique identification issued by the Income Tax Department of India. It is a critical document for all matters related to the company’s finances, including tax payments, filing returns, and other financial transactions. The PAN card is a 10-digit alphanumeric number issued to individuals and businesses in India. It is essential to ensure that the PAN card is up to date and accurate to avoid any issues with financial transactions or compliance.
Address proof for the directors
The company directors must provide proof of their address in the form of an Aadhar Card, Ration Card, Driving License, Telephone bill, Bank statements, or other utility bills. This is necessary to verify the directors’ identity and residence and ensure they are eligible to serve as company directors. The address proof must be in the director’s name and current and valid.
Passports of foreign nationals
If any of the directors is a foreign national, they must provide a copy of their passport as part of the company registration process. This is necessary to verify their identity and ensure they are eligible to serve as company directors. The passport must be valid and up to date.
Documentation establishing the registered office
To register a company online in India, the applicants must have a registered office within the country. This is the company’s official address and must be provided as part of the company registration process. Acceptable proof of a registered office may include a sales agreement or rent agreement, which must be in the name of the company and must be current and valid. The registered office must be within the company’s jurisdiction and accessible to the public.
Digital Signature Certificate
A Digital Signature Certificate (DSC) is required to facilitate the process of registering a company online. This certificate is used to verify the identity of the person applying for the company registration and to ensure that the application is authentic and valid. The DSC is issued by a recognised certification authority and must be obtained before the company registration process can begin.
Director Identification Number
To apply for the directorship of a corporation, one must first get a Director Identification Number (DIN). This number is used to uniquely identify the director and is used to track their involvement in the company. The DIN is a unique 8-digit number assigned to each director and is used to verify their identity and ensure that they are eligible to serve as directors of the company. It is essential to ensure that the DIN is accurate and up to date to avoid any issues with the company registration process.
How to register a company?
There are several steps involved in the process of registering and incorporating a company in India. These steps are necessary to ensure that the company has the legal and regulatory infrastructure to operate effectively and protect the interests of shareholders and stakeholders. Some of the critical steps in the process include:
Check company name availability
The first step in registering a company in India is to check the availability of the desired company name. This can be done through the official MCA portal or other online platforms. To check the availability of a company name, you will need to enter the name you wish to use and perform a search to see if it is available. You can proceed with the company registration if the name is available. If the name is unavailable, you must choose a different name or apply to have the existing name reserved for your use.
Gather the required documents
To register a company in India, you will need to gather a range of documents, including proof of identity, address, and other documents, as required. These documents must be certified by a Chartered Accountant or a Company Secretary to be accepted as part of the company registration process. It is essential to ensure that all required documents are gathered and prepared in advance to avoid delays in the registration process.
Obtain a Digital Signature Certificate
To file the application for company registration online, you must obtain a Digital Signature Certificate (DSC). This certificate is used to authenticate the documents you upload to the MCA portal and is essential for the successful registration of your company. The DSC is issued by a recognised certification authority and must be obtained before the company registration process can begin. It is essential to ensure that the DSC is valid and up to date to avoid any issues with the registration process.
Obtain a Director Identification Number
Before applying for company registration, you must obtain a Director Identification Number (DIN) for each company’s directors. The DIN is a unique 8-digit number used to identify the director and ensure that they are eligible to serve as a director of the company. The DIN is issued by the MCA and is valid for the director’s lifetime. You will need to follow a specific process to obtain a DIN, which may involve filling out an application form and submitting it along with any required supporting documents. Once you have obtained a DIN for each of the directors, you can proceed with the company registration process.
Draft the Memorandum of Association and Articles of Association
The Memorandum of Association (MOA) and the Articles of Association (AOA) are important documents that outline the purpose and rules of the company. The MOA outlines the company’s objectives and the directors’ powers, while the AOA sets out the rules and regulations the company must follow. These documents must be drafted and prepared per the Companies Act of 2013 and submitted as part of the company registration process.
Fill out the Spice application to register your business
The Spice form is an online application used to register companies in India. It is a detailed and comprehensive form that requires information about the company, its directors, and its shareholders. Once the form has been completed and submitted, it will be processed by the Registrar of Companies, who will review the application and determine whether to approve the company registration.
Processing of the application form
The Registrar of Companies will assess your application form and determine whether it meets all of the necessary requirements for company registration in India. If the form is complete and accurate, the Registrar will approve the company registration and issue a certificate of incorporation. This certificate will contain the company’s registration number and serve as official proof of the company’s existence.
Importance of selecting the right business structure
Here are some crucial factors one should consider before deciding on a business structure:
Number of owners or partners
A One-person Company is a business structure owned by a single individual. The person owns the initial investment required for the business. However, if there are two or more owners of the company looking for investment from other parties, choosing a Limited Liability Partnership (LLP) or Private Limited Company is recommended.
Audit
Registering a company legally necessitates an audit of the business’ accounts and ledger. Thus, it is important to get auditors and accountants onboard. Hence, this is an essential factor when considering the business structure.
Income tax
For a sole proprietorship and a HUF, the income tax applies as per the normal slab rates. In a business based on sole proprietorship, the business income is clubbed with the other income of the individual. However, in the case of other entities such as partnership firms and companies, the applicable income tax rate is 30%.
Business expansion
Certain types of businesses must comply with rules regarding business expansion. This is an important point to note when choosing a business structure. Certain companies are more investor-friendly compared to other companies.
How to register a construction company in India?
A construction company is engaged in activities such as developing a structure, infrastructure, roads and other construction projects. Construction business can be undertaken in the private sector and the government sector.
- A construction company can choose the following business structure:
o Private limited company
o Public limited company
o Limited Liability Partnership (LLP
o One Person Company (OPC)
o Partnership firm
o Subsidiary company
- The company’s directors should apply for Director Identification Number (DIN) and Digital Signature Certificate (DSC) before registration.
- The owner should choose the company name according to the requirements of the Companies Act, 2013 and its rules.
- Submit the company incorporation form along with required documents. This process can be done online through the MCA website.
- The Registrar of Companies will verify the documents. Once approved, it will issue the certificate of registration of the company.
FAQs
What is a company registration in India?
Company registration in India is the process of legally establishing a company in India and obtaining the necessary approvals and licences to operate as a business entity. This process involves following specific steps and requirements set out by the Ministry of Corporate Affairs (MCA) and obtaining a Director Identification Number (DIN), gathering required documents, and submitting an application form.
What are the benefits of registering a company in India?
The benefits of registering a company in India include having a recognised legal business entity, the ability to exist perpetually, limited liability for directors, ease of transferring shares, the ability to own property, the ability to file court cases or be sued, increased borrowing capacity, and the ability to raise equity more easily.
How important are the Articles of Association in the company registration process in India?
The Articles of Association is an essential document in the company registration process in India. It outlines the company's rules and regulations and must be submitted to the Registrar of Companies along with the other required documents for the incorporation process to be complete.
How can I verify the availability of a company name in India?
To verify the availability of a company name in India, you can use the Ministry of Corporate Affairs (MCA) company search portal or a company search platform like Registrationwala. Simply enter the name you wish to use for your company, and the system will indicate if it is already taken or available.
How can I confirm that a company is registered in India?
You can confirm that a company is registered in India using an online company search platform or the official MCA portal. Simply enter the company's name, and the system will provide information about its registration status.
Who issues the registration certificate for a company in India?
The Ministry of Corporate Affairs (MCA) issues the registration certificate for a company in India through the online incorporation process.
Where can I register a company in India?
You can register a company in India through the official MCA incorporation portal. This platform allows you to complete the entire process online, including submitting required documents and receiving approval from the Registrar of Companies.
What is DSC, and how is it used in the company registration process in India?
DSC stands for Digital Signature Certificate, a document used to authenticate the documents you upload on the MCA portal during the company registration process in India. It is an essential part of the online incorporation process and helps.
