Register a company in India

What is Company incorporation?

Company incorporation is the legal procedure to form a company or a corporate entity. To carry on a business, it is necessary to register it. The registration or incorporation involves the separation of assets, income from the firm owners and the rights of the investors. There is no legal entity to the corporate if it is not incorporated as a company.

What is the procedure of incorporating a company?

The procedure of the incorporation of the company is mentioned under Section 33 of the Companies Act 2013, by filing an application with the Registrar of companies, along with the prescribed documents such as – Memorandum of Association and Article of Association.

Four major steps were followed to register a company:

Step 1: Acquire Digital Signature Certificate (DSC)

As per the Information Technology Act, 2000 for the use of digital signatures on the documents submitted in the electronic form to ensure the security and authenticity of the documents filed electronically.

Step 2: Acquire Director Identification Number (DIN)

The concept of a Director Identification Number (DIN) has been introduced for the first time with the insertion of sections 266A to 266G of Companies (Amendment) Act, 2006.

Step 3: Create an account on the MCA portal- New user registration at mca.gov.in

Step 4: Incorporate or Apply for the company to be registered

List of documents required before submission of a company:

  • Original copy of the formal letter issued by the Registrar of the Companies assuring the availability of Company name.
  • DIN of all those directors of a proposed company
  • DSC 
  • Form-1 for incorporation of a company
  • Form-18 for situation or address of the proposed company
  • Form-32 for particulars of proposed directors, managers and secretary

What are the necessities of incorporation of a company?

The incorporation of a company is necessary are as follows:

  • Incorporation is a government procedure for securing a legal entity.
  • After incorporation, like a ‘natural person’, a company can sue and be sued, it can sign contracts and buy and sell property in its own It can be taxed and even commit crimes. 

What are the kinds of incorporation of a company?

Under the Companies Act 2013, here are the kinds of companies that can be incorporated:

  • Private Companies: Under the provision of Sec. 68 of the Act, that private company can be incorporated. A private company must have at least one member and a maximum of 200 members.  A private company is not traded publicly.
  • One Person Company: Under Sec. 62 of the Act, the One person company can be registered. Evident from the name, if there is more than one member, it can not be registered under this provision. If later any more members join, with the registration of such members, the OPC will turn into a private limited company.
  • Public Limited Company: Under the provision of Sec. 71 of the Act, to incorporate a public limited company, there must be at least seven members and there is no cap for maximum members.
  • Unlimited Company: Under Sec. 92 of the Act, a company with unlimited liabilities refers to the legal obligations to the general partners and sole proprietors for any debts or liabilities. In other words, general partners and sole proprietors are responsible for paying off all of the company debts personally if the company can’t make its payments.
  • Section 8 Company: The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives. These companies also apply their profits towards the furtherance of their cause and do not pay any dividend to their members.

What are the advantages of the incorporation of a company?

An incorporated company can enjoy the following advantages:

  • Corporate personality: On incorporation, the company gets a legal entity of its own separate from the owners and shareholders.
  • Limited liabilities: The liabilities of the partners, members and shareholders are specified under this Act. Therefore, no confusion remains regarding the liabilities or carrying on the responsibilities of the members, partners or shareholders.
  • Perpetual Succession: The death or insolvency of individual members does not affect the incorporated company in any way or form. The company will continue to exist indefinitely till the company is shut down.
  • Transferable Share: Under the provision of Sec. 82 of the Companies Act mentions the share or other interests of any member in a company shall be a movable property that shall be transferred in the prescribed manner.
  • Separate Property: A company after incorporation can buy, sell or lease a property in its own name, separate from that of its members.

What constitutes a Limited Liability Partnership?

The Limited Liability Partnership, popularly abbreviated as LLP is one of the most favoured forms of business, and to understand that, it is necessary to know its features:

  • Separate entity: The LLPs have a separate entity like any other company registered under the Companies Act 2013. The LLP can enter into a contract in its name, acquire, buy or sell properties in its name, separate from the identities of its partners and designated partners. The LLP can sue and be sued in its name.
  • Specified Liability: Easily assumed from the name itself, the partners in an LLP have specif liabilities decided as per the partnership agreement. Here, the partners are not responsible to take any further liability, than specified.
  • Lower cost: The cost of forming an LLP is lesser compared to the cost involved in forming a private limited company.
  • Less compliance and Regulations: As the existence of the LLP is dependant on the partnership agreement, the regulatory compliances are specified at the beginning of the operations as an LLP, through the mentioned agreement. Therefore, the compliances are specific and unambiguous.
  • No minimum capital: Unlike the private limited company, there is no cap for the minimum capital requirements for an LLP to be formed.
  • Members: Minimum if two partners can start with a limited liability partnership and there are no limitations on the maximum number of partners.

Procedure to incorporate an LLP

To incorporate an LLP the following steps requires to be followed:

Step One: Digital Signature Certificate

Before initiating the official process of registration. It is necessary to obtain a digital signature by the designated partners, as without the digital signature the online procedure shall not be proceeded with. 

The designated partners require to obtain the digital signature certificates at the cost as required by the certifying agencies.

Step Two: Director Identification Number

It is necessary to apply for the DIN by all the designated partners and the ones who desire to be the designated partners of the concerned LLP. The form DIR-3 is supposed to be filled for the application of the DIN number. While making the application the scanned copies of the documents are required to be attached – Aadhaar and PAN. Moreover, the form must be signed by the company secretary who is in the full-time employment of the company where the applicant shall be joining as a director. 

Step Three: Reservation of Name

The LLP requires to reserve a name for the proposed LLP following the procedure by the Central Registration Centre. Before quoting the name in the form for the application for incorporation it is necessary to check whether such a name is available to incorporate or not. One can check for availability online on the MCA portal. The form Reservation of Unique Name for Limited Liability Partnership RUN-LLP requires to be accompanied by the documents and fees as per Annexure A. One can propose two names for an LLP.

Step Four: Incorporation of LLP

Here comes the procedure of filing the final application for the incorporation using the form FiLLiP (Form for incorporation of Limited Liability Partnership) requires to be filed with the Registrar who has the jurisdiction over the state in which the registered office of the LLP is located.

As per Annexure A, the required fee is to be paid with the approved name of the LLP.

Step Five: Limited Liability Agreement

This is the soul of an LLP where the mutual rights and the duties of the partners are to be mentioned, they are:

  •  LLP agreement requires to be filed in Form 3 online on MCA Portal
  • The agreement must be entered into within thirty days from the date of incorporation
  • The agreement must be signed and duly printed on stamp paper.

How much time does the LLP incorporation take?

LLP formation starting from obtaining DSC to Filing Form 3 takes approximately 15 days subject to availability of all the documents.

Legal Compliance of companies in India

  • Companies Act 2013

The provisions under the Companies Act are to comply first at the time of incorporation of the company. As the act regulated the appointment of directors, the annual general meeting appoints auditors and other basic requirements like PAN, TAN, etc. The business depends on its kind and the partners, the incorporation of the company follows a rule specified by the Act, and after the incorporation, the businesses necessitate to comply with the rules and regulations such as with GST, labour law, Income tax rules, environment protection provisions etc.

  • Trademark Registration

The trademark is the identification mark in the form of the logo which carries the goodwill and reputation of the company. It must be unique and represent the business the company runs. This is useful in carrying the identity and goodwill of the corporate and its goods/services on the market among competitors

  • Labour Law

The Labour laws in India is implemented through the Minimum Wages Act, Workmen’s Compensation Act, Industrial Dispute Act, ESI Act, and many more. 

The rules are designed to secure the employees, who do not get exploited by the stronger party, i.e., the employer. 

The protection under the labour laws are not only limited to the wages and the perks, it regulates the policy of the company regarding the working environment and working hours. The Prevention of Sexual Harassment of Women at Workplace Act mandates the establishment of the internal committee to ensure the protection of the women employees, against any kind of manipulation causing harm.

The companies require to comply with the rules, otherwise, they may face a penalty.

  • Income Tax Act

Every business requires to file income tax returns and comply with the procedural liabilities. The companies must get their accounts audited within the specified time by the specified professional and file the returns, disclosing all the relevant details. In case a company does not disclose all the relevant details or mislead the IT department with false and forged details and documents, the company may face legal consequences.

  • Environmental Law

A valid company under the definition specified in the Companies Act 2013, requires to comply with the corporate social responsibilities and contribute to sustainable living.

The companies shall be responsible for the waste management, generated at their office. It requires to be disposed of off in the proper manner, reducing the adverse effect o. The environment. If the company owns a manufacturing plant, the waste disposal.

For example, in the manufacturing unit of jute apparel, chemical dye is a common element that the manufacturer uses. When the manufacturer is using those, the proper treatment of waste is necessary to ensure that the factory is not causing an unhealthy neighbourhood. For that, as per the law of the state, the company in its own identity, through the representative requires to submit a report and let the authorities inspect the workshop in a timely interval.

These were the brief about the basic compliances that a company must be complying with. Moreover, the Government has provided certain leverages to the companies, like tax exemption, rebate in other compliances etc.

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