Updated on May 03, 2023 04:04:32 PM
Whether you are a new startup or an established business, the moment you decide to set up your business, you should think of registering your company. It is very important to choose the right business structure before registering a company. The right company structure is necessary for getting several benefits, such as credibility and protection from liability. In this article, we will discuss the different types of company registration in India and how you can register your business.
Company Registration Certificate [Sample]
Company registration is the process of incorporation of a business entity in India under the Companies Act, 2013. A company is a separate legal entity from its shareholders and directors and it can sue or be sued. it has its own liabilities, assets and operations.
A company is registered through the office of the Registrar of Companies (ROC). It is a long legal process involving the various offices and The Ministry.
These are the different types of company registration or business structures under the Companies Act 2013. Each type has its necessity depending on the activities of the business.
A private limited company is a distinct legal entity from its owners, which offers the benefits of limited liabilities to its stakeholders and directors. It can have a minimum of 2 members and a maximum of 200 members. Each member of a company is considered an employee of the company. Private limited company registration is India's most preferred way to incorporate an entity.
A public limited company is an association of 7 or more members; it must also have at least 3 directors per the rules. The public limited company is incorporated under the companies act 2013. They offer their shares to the general populace; hence their stocks can be bought by anybody, and the liabilities of their stakeholders are limited to the stocks they hold.
Limited Liability Partnership (LLP) is a company registered under the ministry of corporate affairs (MCA) companies act. LLP is an Enhanced form of partnership Firm with the advantages of private limited companies where each partner is liable for the amount they have put into the company and shall not be responsible for the misconduct of one another. A minimum of 2 partners are required for LLP company registration. However, there is no limit to the maximum number of partners for an LLP.
One-person company (OPC) is a new concept introduced by the government under the companies act in 2013. OPC are similar to a private limited and also enjoys limited liabilities of a Pvt. limited company, but only a single person is required for one person company registration who also acts as both director and stakeholder of the company.
A company is attributed as a Section-8 company when the company is registered as a non-profit organisation. It is India's most prominent form of NGO registration under the Companies Act 2013. The purpose of section-8 NGOs is to promote culture, art, education, charity, and sports. The section-8 company can be incorporated as a Pvt limited company and a public limited company.
Nidhi company is considered a Non-banking financial sector company which works on the principle of mutual benefit and does not require RBI approval for company registration. It is founded to borrow and lend money from and among its members. The company must incorporate “Nidhi Limited” with its name.
A producer company is a hybrid between a cooperative society and a private limited company. It is incorporated under section 465(1) of the company Act as a private limited entity. A producer company can be formed by 10 or more individuals or a group where the liability of stakeholders is limited.
A partnership firm is a form of a company where 2 people incorporate a business together and share all the losses and profit. This kind of structure is suited for small and medium businesses as it's easy to maintain and has fewer legal compliances. Such firms are highly unrecommended to run a business as the liabilities are unlimited.
Sole proprietorship firm is a business owned and managed by just a single person; unlike OPC, such a business has unlimited liabilities and no separate legal identity; it's not governed by any law and, therefore, very easy to operate.
|Company Type||Ideal for||Taxation||Compliances||Benefits|
|Private Limited company||Start-Ups and small businesses||Lower tax rate and tax relief for 3 years under start-up India scheme||Initiation of business must be done within 180 days of incorporation, Mandatory annual return filing||100% FDI is allowed|
|Public Limited Company||Business with high annual turnover||30% annual tax charges on the total turnover of the company||Annual submission of accounts with RoC, mandatory return filing||Stocks can be bought by anybody|
|Limited Liability Partnership||For MSME’s and individual partners||Tax benefit on depreciation||Statement of Solvency by 3oth -OCT each year
Annual return by 30th May every financial year
|No minimum capital is required|
|One Person Company||For individual start-ups and innovators||Tax relief for 3 years under start-up India||Must appoint an auditor within 15-days of company registration
The mandatory annual return must be filed
|Requires only one person to set up a company|
|Section-8 Company||For NGOs and social cause||100% Tax exemption if registered under section 12AA||Financial statement to be filed with RoC annually. An annual return must be filed.||High credibility among donors|
While registering your company selecting the right business structure is very important as it will impact taxes, liabilities, personal liabilities, and annual returns each business structure has different levels of Statutory compliance, and benefits. For example, the legal compliance for a public limited or a private limited company will be different than that of One person company (OPC).
While registering a company, it is also very important to remember that not all business structures are investor-friendly or profit-oriented; for instance, an investor will hesitate to invest in a sole proprietorship firm as it has less credibility than an LLP. Companies registered under section-8 (NGO registration) are more focused on social causes than profit.
Hence deciding on the right kind of business structure before incorporating a company is more beneficial for the growth of your company and the key to success.
Before deciding on the right business structure for your company, every entrepreneur must ask the following important question to themselves.
Ideally, all business structures are classified among single owners and multiple partners; start-ups and small businesses who don't want to share their unique ideas opt for OPC or sole proprietorship. Companies with 2 or more members are more structured and more credible among investors.
If you are an individual who doesn't want to spend more at the initial stage, then choosing a sole proprietor or partnership firm would be wise to avoid the extra burden of taxation and compliance with the companies act and initial company registration fee during the incorporation of the company.
The level of risk involved in running a business depends on the structure it is incorporated into. Companies registered under HUF and partnership firms have unlimited liabilities, whereas for businesses who opt for LLPs, PLC and Pvt. Ltd, their liabilities and personal risk are limited.
Before filing for company registration, an entrepreneur must understand tax structures for all types of company incorporation, as some business structure invites high taxes than other.
The Initial one-time company registration fee is very similar for almost all the business structures under the companies act 2013. However, the fee for proprietorship firms is lower and more accessible to incorporate than others.
The maintenance cost of a company includes the cost of annual compliances, which can vary depending upon the kind of business structure you have incorporated for.
Raising money or bringing investment for the company's growth is one of the most crucial aspects of the existence of a successful business. Hence choosing the right business structure become very important because many investors and banks prefer a well-structured company to invest in or provide easy loans.
The process of company registration in India for all the listed business entities is the same as one another. Here are the following steps required to register a company in India.
The company incorporation process is completely online, and the DSC must file for registration on the MCA portal. It is mandatory for all the directors and subscribers of MoA and AOA.
The director identification number is also required to be obtained by all the supposed directors of the company before registering their company DIN can be acquired online for a maximum of 3 directors through the SPICe+ company registration form. A company with more than 3 directors can obtain other DIN numbers through the DIR-3 form after incorporation.
The company director is required to create an account on the MCA online portal to fill out the SPICe+ form for company registration. The company must reserve a unique name by submitting its proposed name in Part-A of the SPICe+ form.
A unique name is necessary to avoid similarities among registered private limited companies, LLPs, or other business houses. The applicant shall not use prohibited names and trademarks to avoid objection or rejection from the authorities.
Once the name is approved, applicants need to fill out part B of the SPICe+ form and provide all necessary documents of the company and directors to complete the registration process for the company.
The office of the registrar of companies (ROC) will verify and examine the application after the application submission; once the verification is done, the certificate of incorporation will be issued along with the PAN and TAN as per the guidelines of the income tax department.
|Company Type||Cost Start From|
|Private Limited Company||Rs. 4,999|
|Sole Proprietorship||Rs. 1,999|
|Limited Liability Partnership||Rs. 4,999|
|Partnership Firm||Rs. 2,499|
|One Person Company||Rs. 4,999|
|Section-8 company||Rs. 4,999|
|Public Limited company||Rs. 11,999|
|Nidhi Company||Rs. 10,999|
|Producer Company||Rs. 12,999|
|★NOTE: The registration fee can vary State to State|
The following documents are required for online company registration in India.
Documents of Directors and stakeholders.
Identity and Address proof of director as follows:-
For the proof of the registered office, the following documents are required.
Incorporating a company has its following benefits, which can help in the growth of the business.
Some following mandatory annual compliances need to be followed by a company after the incorporation.
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Director's identification proof such as Aadhar, PAN Card, and passport is required along with address proof of the company such as electricity bill, and phone bill which should be older than 2 months.
The minimum number of directors depends upon the business structure of a company. In the case of one person company (OPC), the sole person is responsible for all the company's activities. Ideally, 2 directors are mandatory except for the public company where 3 directors are required.
Before registering your company under start-up India, you must incorporate your business under the companies act 2013. Only after that, you can apply for DPIIT recognition to get start-up India benefits.
For the approval of the name concerned company needs to file E-form1 A with the concerned registrar of companies along with a fee of Rs. 500.
Company registration is subjective to what kind of business a company wants to carry; each business structure has its benefits and disadvantages. For instance, if only one person wants to start a business, then one person company registration would be preferable for a start-up.
|Private limited company||Limited Liability Partnership (LLP)|
|The maximum number of members shall not be more than 200||No limit on the maximum number of members|
|The company name should end with Pvt. Ltd||The name should end with LLP|
|Can transfer shares easily.||Can transfer shares by executing an agreement before a public notary.|