Online Company Registration–How to Register a Private Limited Company in Simple 2 Steps
Choosing the right type of company structure for your business is very important like any other business-related activity. The right kind of business structure will let you operate your business efficiently and meet your required business targets. In India, every kind of business must be registered as part of the mandatory legal compliance. Before we start learning, how to register a company, let’s first try and understand the possible kinds of business structures or types in India.
What are the different types of business structures in India?
Let’s try and understand the kinds of business structures available in India. Similarly, the list of the same is given below:
1. One Person Company (OPC)
Comparatively newly introduced in the year 2013, an OPC is the best way to start a company if there is only one promoter or owner. Further, it allows an individual to do business single handily without the interference of any other person in his business.
A separate legal entity, in an LLP the liabilities of partners are only limited only to their agreed contribution.
A company in the eyes of the law is regarded as a separate legal entity from its founders It has shareholders (stakeholders) and directors (company officers). Therefore, each individual is regarded as an employee of the company.
A Public Limited Company is a voluntary association of members which is incorporated under company law. Further, it has a separate legal existence and the liability of its members are limited to shares they hold.
Therefore, you can choose what business structure suits your business needs best and accordingly register your business.
Similarly, here is a comparative list of the popular business structures in India.
|Limited Liability Partnership
||Service-oriented businesses or businesses that have low investment needs
||Benefit on depreciation
||Business tax returns, ROC Returns to be filed and other legal compliance
|One Person Company
||Individual owners looking to limit their liability & control operations
||Tax holiday for first 3 years under Startup India Higher benefits on depreciation No tax on dividend distribution
||Business tax returns, ROC Returns to be filed and other legal compliance, Audit is mandatory
|Private Limited Company
||Businesses that have a high turnover
||Tax holiday for first 3 years under Startup India Higher benefits on depreciation
||Business tax returns, ROC Returns to be filed and other legal compliance, Audit is mandatory
|Public Limited Company
||Businesses with a high turnover
||Tax exemptions under
||Business tax returns to be filed. Mandatory Audits
Similarly, other possible kinds of business structures includes Sole Proprietorship Firm, Hindu Undivided Family (HUF), and Partnership Firms. Therefore, please keep in mind, these structures do not come under the ambit of Companies Act or Company Law.
Why is it so important to choose the right kind of business structure?
It is so important to choose your right kind of business structure carefully as your Income Tax Returns Filings will be dependent on it. While registering your business, keep in mind that each and every business kind of structure has different levels of Compliances that should be completed. For example, a sole proprietor has to file only an Income Tax Return (ITR) with Income Tax department. However, a Company is required to file an Income Tax Return as well as Annual Returns and Financials with the Registrar of Companies (ROC) through their website MCA.
The company’s books of accounts are required to be mandatorily audited every year by an Auditor of the company i.e. Chartered Accountant in Practice. However, complying with these legal Compliances requires spending money and expenses on its Statutory Auditors, Accountants and Tax Filing Experts. Therefore, it is very important to select the right kind of business structure when thinking about the company registration. Therefore, an entrepreneur must have a clear idea of the kind of the legal compliances he/she is willing to deal with.
While some kinds of business structures are relatively investor-friendly than others, investors will always prefer a recognised and legal business structure. For example, an investor may hesitate to give money to a sole proprietor. On the other hand, if a good business idea is backed by a recognised legal structure (like LLP, Company etc.) the investors will be more comfortable making an investment in that business entity.
How to choose a business structure while applying for company registration in India?
Let’s take a look at some important questions that every business entrepreneur must ask himself before he/she finally takes decision on the kind of business structure:
i. How many owners/partners will your business have?
If you are a single person who owns the entire initial investment for the business, a One Person Company is ideal for you. On the other hand, if your business has two or more owners and is actively seeking investment from other parties a Limited Liability Partnership (LLP) or Private Limited Company will suit your business requirements
ii. Should your initial investment determine your choice of business structure?
The answer to that question is certainly – Yes; if you want to spend less initially, it would be wise to go in for a Sole Proprietor, or a HUF or a Partnership. But, if you are sure that you will be able to recover the setup and compliance costs, you can opt for a One Person Company, LLP or a Private Limited Company
iii. Willingness to bear the entire liability of the business
Business structures like sole proprietor, HUF, and partnership firm have unlimited liability. It means that, in case of any default in loans, the Banks, creditors etc recovers money from the members or partners in profit sharing ratio. Similarly, the risk to personal assets is high in these cases.
Whereas, Companies and LLPs have a limited liability clause. In other words, this means that the liability of its members is restricted to the amount of contribution made by them or the value of shares each member holds.
iv. Income Tax Rates Applicable to businesses
The income tax rates applicable to a sole proprietorship and a HUF are the normal slab rates. In case of a sole proprietorship, the business income clubs with the individual’s other income.
But in the case of other entities like partnership and company a tax rate of 30% is applicable.
v. Plans of getting money from investors
As mentioned earlier, it is difficult to get investments when your business structure is unregistered. The persons who make investment in LLP or Private Limited Company generally prefers these kind of business only. Make sure you choose the right structure, seek the help of an expert so that you register under proper guidance.
4. How to Register a Company in India?
Registering a company in India is now a simple 4-step process. In other words here is what you’ll need to acquire:
i. A Digital Signature Certificate(DSC)
ii. A Director Identification Number (DIN)
iii. Registration on the MCA Portal or New user registration
iv. Certificate of Incorporation
Further, with this, we have covered the basics of how to register a company. If you still need help registering your company, don’t stress over it, and let our team of experts guide you.
Frequently Asked Questions
Where can I register my company?
If you intend to register a new company in India then you must submit an application to the Ministry of Corporate Affairs (MCA). Further you make the application online at MCA portal remotely too. Therefore for registration, you’ll need a Digital Signature Certificate(DSC), and Director Identity Number(DIN), among other things.
What happens if my company name is already taken?
The Ministry of Corporate Affairs (MCA) that maintains a record of registered company names. Further you’ll have to access that directory and check if your company name is already registered. If the company name appears in the company Registration directory, you’ll have to choose another name. If you have already made an application, you’ll have to make another application for a different name that is previously not registered.
Can a foreign national be a director of a company?
Yes, as per the Indian company law, a foreign national can be a director of a company registered in India. However, he must fulfil all the criteria laid down in the Act. The most important being allotment of a Director Identification Number (DIN).
Any person, including a foreign national, appointed as a Director cannot act in the capacity of a Director unless he/she gives it formally in writing. So, a company can appoint any person as director by filing Form DIR-2 within 30 days.
Are there any benefits of forming an OPC?
A combination of a sole proprietorship and a company an OPC offers the best of both worlds. Therefore, registering an OPC is easier and requires less documentation. Further, an OPC has to commit to lesser corporate formalities like conducting frequent AGMs/ EGMs, maintaining quorum, minutes, ROC filing formalities etc.. In conclusion, an OPC is ideal for small businesses and yet can avail of all the benefits of a private limited company.
How many days does it take to register a company?
Generally, the new changes brought about by the MCA have made it easy to register companies of any nature with the government. Provided that you have all your documents in place, it can take anywhere between 5 – 10 days to register your company formally.