The incorporation of a legal entity is the first step to commence any business in India. There are multiple ways to register a legal business entity to perform businesses of both the profitable and not-for-profit activities. The Companies Act of 2013 or any earlier Companies Act and the Limited Liability Partnership Act 2008 administered by the Ministry of Corporate Affairs (MCA) lays out procedures for the registration of companies for profit whereas not for-profit businesses can be registered under the Societies Registration Act 1860
As a legal business entity, the company or any other legal entity such as a society or cooperative or farmer producer organization (FPO) can commence business as per their defined objectives. The registered business entity can benefit in multiple ways including opening office and current bank accounts, signing contracts, carrying out transactions, raising funds, setting up facilities such as factories, warehouses etc, availing benefits of Government schemes and filing suits in its own name, relieving the owners from using their personal names for these purposes. Each legal business entity is considered as a separate taxable entity under the Income Tax Act, 1961 thus it can be registered for Permanent Account Number (PAN), Goods and Services Tax (GST) and Tax Deduction and Collection Account Number (TAN). Accordingly, the registered business entity can file the Tax Deducted at Source (TDS), Goods and Services Tax (GST) and avail the Input Tax Credit (ITC) under GST. Moreover, the annual income tax return (IT) of the registered company can be submitted to the Income Tax department whereas the ROC returns are filed with the Ministry of Corporate Affairs (MCA). This limits the liability on the owners to use their financial credentials for business operations. However, the owners) of the registered legal entity must obtain a Director Identification Number (DIN) from the MCA to become a
director of the registered company or a new company or any other legal entity.
The biggest advantage of registering a legal entity however, is the transparency in the company's data, scaling up business opportunities, raising funds and managing financial information. All of the company's data is publicly available for viewing and inspection on the MCA portal. This makes the legal entity more credible and reliable for the investors, customers, creditors and
Government agencies alike.
Essential Requirements for Incorporation of a Company
1. Type of Businesses
One can incorporate a legal entity or company in the following business type to suitone's business objectives:
Sole Proprietorship Firm
- A Sole proprietorship firm is established and managed by an individual. This setup allows for sole ownership and operation, making it suitable for small business ventures with limited investment such as kirana stores etc. The sole proprietor retains full control over the business and enjoys its profits, but also bears full responsibility for any losses incurred. The sole proprietorship firm can be registered with a stamp paper, and minimal investment.
Partnership Firm
- A partnership firm is formed when two or more individuals
come together to establish it, Partners within the firm evenly divide the responsibility and profits generated by the business, while also jointly bearing any losses incurred. Governed by the Partnership Act of 1932, this structure is well-suited for small businesses operated by multiple individuals with modest investments. However, the scope of partnership firms is also limited to small and localized businesses
One Person Company (OPC)
- Introduced in 2013, the One Person Company (OPC) offers an optimal option for individuals with sole ownership. This structure allows a sole proprietor to conduct business while being part of a corporate entity. Registered under the Companies Act of 2013, it is particularly suitable for small businesses seeking to raise capital.
Limited Liability Partnership (LLP)
- An Limited Liability Partnership (LLP) is a
distinct legal entity wherein partners' liabilities are restricted solely to their agreed contributions. Established under the Limited Liability Act of 2008, it is registered with the Registrar of Companies (ROC). Combining aspects of both partnership firms and companies, LPs offer an appealing option for businesses founded by partners seeking limited liability protection.
Private LImited Company (PLC)
- In the legal terms, a Private Limited Company (PLC) is recognized as an Independent legal entity distinct from its founders. Company directors oversee Its operations, while shareholders, who are also stakeholders, Invest in the company and hold partial ownership. Registered under the Companies Act of 2013 with the ROC, PLC are well-suited for medium to large businesses seeking to raise capital and scale ofthe business.
Public Limited Company (PuLS)
-A Public Limited Company
(PULC) is formed by a minimum of seven members in accordance with the Companies Act of 2013. Company directors oversee its operations, and it operates as a distinct legal entity where members' liabilities are confined to their shareholdings. Well-suited for medium to large enterprises seeking public capital investment, a PulC offers an avenue for raising funds from the public.
Farmer Producer Company (FPC)
- * A Farmer Producer Company (FPC), popularly
known at FPO can be established by at least 10 primary producers, two or more producer institutions, or a combination of both. FPCs blend the features of cooperative societies and private limited
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companies. Registered under the Indian Companies Act, 2013, these FPCs operate with democratic governance, ensuring that each producer or member has equal voting rights, regardless of the number of shares they hold.
2. Unique Name of a Company
The name of the new company should be unique and not already registered with the Registrar of Companies (ROC). The name should also comply with the naming guidelines issued by the Ministry of Corporate Affairs (MCA).
3. Registered Office Address
One must have a registered office address in India for the incorporation of a new company. This address will be used for official communication and to receive legal notices.
4. Directors and Shareholders
One must have a registered office address in India for the incorporation of a new company. This address will be used for official communication and to receive legal notices.
5. Documents Required
One needs to obtain and submit following
documents to incorporate a legal entity or company such as:
How to Register a Company in India?
Acquire DSC of Promoters
Obtain a class 3 Digital Signature Certificate (DSC) and Director Identification
Number (DIN)
Select & Reserve Company Name
Reserve the company name and keep required documents ready
Draft MoA & AoA
File the incorporation documents such as simplified proforma for incorporating company electronically (SPICe-INC-32), with Mo (INC-33) and AOA (INC-34)
File SPICE Plus Application
Obtain the Certificate of Incorporation (COl) of a new company
Get Company Registration Certificate
Certificate of Incorporation (COI) carries the name of company, registered address, corporate identity number, PAN and TAN of the company
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