Guide to Registering Companies in India

February 2015

QuickCompanyREGISTER A COMPANY ONLINE

TM

IN INDIA

MAKE IN INDIA

Introduction

1. Business Organisations / Company

2. Proprietorship

3. Company

4. Common Terminology

5. One Person Company (OPC)

6. Private Limited

7. Public Limited

8. Other Companies

9. Partnerships

10. Limited Liabilty Partnerships (LLP)

Registration Process

11. Terminology

12. Non Resident Indians (NRIs)

13. Considerations for Entrepreneurs

14. Cost

15. Frequently Asked Questions

Author

Paras Mehra


TM

INTRODUCTION

We, on a daily basis interact with many entrepreneurs, inspire with

many ideas of theirs, and the kind of imagination they carry is really

awesome. But, in almost every case, we notice that they all lack the

legal part or even the basic knowledge about the legal environment.

Due to this, they sometimes end up either paying huge penalties or

paying to the professional who takes advantage of their lack of

knowledge about the subject.

Guide to Registering Companies in India is the initiative of

Quickcompany.in to pour the basic knowledge about the forms of

business, registering companies and also about the legal environment

in which they will work in future.

Paras Mehra

[email protected]

1. Business Organisations / Company

PROPRIETORSHIP PARTNERSHIP

COMPANY

1

Every business whether registered or unregistered works under a form.

The form of the business organisation creates a severe impact on the

business and its prots.

The 2 most common types of business organisations / companies is as

follows

Choosing a business form is like choosing a vehicle for your

journey. You must choose the form seriously, because it will

provide you ease in the long run, not to mention the added

legal benets

We have noticed that startups tend to choose their company type in a rush

(generally, a Private Limited Company) which not only costs more, but

also keeps them away from many legal benets.

Choosing the right business organisation for you depends on your needs

and requirements. While there is not set formula to do so, this guide aims

to help you put in the right direction.


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FORMS OF BUSINESSES

PROPRIETORSHIP PARTNERSHIP

PRIVATE COMPANY PUBLIC COMPANY

ONE PERSON COMPANY

COMPANY

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1.1 Forms of Business Organisations


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32. Proprietorship

The sole proprietorship is the simplest business form under which one

can operate a business. The sole proprietorship is not a legal entity. It

simply refers to a person who owns the business and is personally

responsible for its debts.

A sole proprietorship can operate under the name of its owner or it can do

business under a ctitious name, such as TransCorp Enterprises. The

ctitious name is simply a trade name--it does not create a legal entity

separate from the sole proprietor owner and also there may be chances

that someone might steal your trade name because it is unregistered.

The sole proprietorship is a popular business form due to its simplicity,

ease of setup, and nominal cost. A sole proprietor need only register his or

her name and secure local licenses, and the sole proprietor is ready for

business.

In case the sole proprietor or, even one of the employees is involved in a

business-related accident in which someone is injured or killed. The

resulting negligence case can be brought against the sole proprietor

owner and against her personal assets, such as her bank account, her

retirement accounts, and even her home.

Consider the preceding paragraphs carefully before selecting

a sole proprietorship as your business form. Accidents do

happen, andbusinesses go out of business all the time. Any

sole proprietorship that suers such an unfortunate

circumstance is likely to quickly become a nightmare for its

owner


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42.1 Advantages of a Proprietorship

2.2 Disadvantages of a Proprietorship

2.3 When to register a Proprietorship

Owners can establish a sole proprietorship instantly, easily and

inexpensively

Proprietorships carry little, if any, ongoing formalities

Owners may freely mix business or personal assets, bank account,

personal retirement accounts, and even property (housing etc.)

Owners are subject to unlimited personal liability for the debts, losses

and liabilities of the business

Owners cannot raise capital by selling an interest in the business.

Sole proprietorships rarely survive the death or incapacity of their

owners and so do not retain value.

You may already be operating a sole proprietorship. Sole proprietorship is

generally formed only when you are just about begin your business. Later

on, generally business converts themselves into other complex forms

After introduction of One Person Company (OPC) in 2013, it is

not recommended to form a sole proprietorship. Although

convenient, it comes with a big risk of unlimited liability.


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ONE PERSON

COMPANY

PRIVATE

COMPANY

PUBLIC

COMPANY

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Only one person

is needed

Minimum Capital

one Lakh

Minimum Capital

one Lakh

Minimum Capital

ve Lakh

At least 2 persons

are needed

At least 7 persons

are needed

3 Company

3.1 Types of Companies in India

Company is a simple form of business that can handle the complexity of

the modern needs. It is basically like a person, it has its own identity,

dierent from the owners. Once created, it has a perpetual (ever lasting)

life even if the founder of the companies die, it will have no impact on the

company. A company has almost all the legal rights of an individual,

except for the right to vote and certain others.

Company is a customised form of business that can handle the complexity

of the modern needs.

As per the norms, there should be at least one director who should be a

resident of India. Every company name ends up with the word limited

which means that the company has limited

liability.


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64. Common Terminlogy

SHARES

are a unit of ownership. If a company has 10,000 shares, it means that the

ownership has been divided into 10,000 units. The more number of

shares the person holds, the more the hold of the share owner.

DIRECTORS

manage the aairs of the company. Company is a separate legal entity but

it cannot function itself, it needs someone to do job on its behalf, the

persons who do this job are called directors.

SHAREHOLDERS

are the people who invest money/time/skill into the business. Any person

who owns shares is called a share holder. Shareholders do not necessarily

govern the company, nor are they allowed to interfere in the business until

unless the directors are failed to do their job.

SHAREHOLDING AGREEMENTS

are contracts which are established between the shareholders to agree

upon certain terms between the business organisation


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25. One Person Company (OPC)

OPC can be regarded as a rened form of proprietorship. Only one person

is required to form the OPC and enjoys all the benets of a normal limited

liability company.

OPC is classic substitute for sole proprietorship business. Unlike sole

proprietorship, OPC has limited liability and also enjoys the status of

separate legal entity.

5.1 Advantages of OPC

5.2 Disdvantages of OPC

OPC has benets of limited liability and also enjoys a separate status

from its owners

Unlike a private limited company, there are very few rules govern the

OPC and therefore oers more exibility

Legal Cost of running a business is quite low

OPC is considered for small business, OPC will have to be converted

into private limited company if turnover crosses the upper limit of 2

crores

Owners cannot sell their stake to raise the funds.

When to register a One Person Company?

If you are a single founder and planning to start a business or

your are already running a business as a proprietor, then OPC

is actually an ideal choice for you. Also, owner can anytime

convert OPC into private limited at ease


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76 Private Limited

Private company is the most preferred form of business. Private company

can be form by two persons. Private company is the ultimate form of

business, because in this form, owners can do any type of complex

business transaction as they like. For e.g. they can issue ESOPs, raise

capital by selling stakes etc.

According to Entrepreneur.com, it has been noticed that valuation of

business increases by 4 to 5 times, if the startup has been incorporated as

a Private Limited Company

6.1 Advantages of a Private Limited Company

6.2 Disdvantages of a Private Limited Company

Finance is easily available for the private limited company

Owners can raise investments by selling their stake

Limited liability, separate legal existence, trusted form of business, also

most preferred form

Private limited company is governed by the many rules and

regulations, therefore oers less exibility.

Legal cost of running a business is quite high as compared to other

forms

If legal compliances are not handled properly, then it can lead to

penalties

When to register a Private Limited Company?

If you are two people, willing to start a business, and also plans

to raise the funds in future, then private limited company is the

best option for you. If you dont plan to raise funds, but you

wants to have a strong foundation, then also private limited

company is recommended


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87 Public Limited

Public limited Company is the biggest and the most powerful form of

business in India.

According to Entrepreneur.com, Public limited companies gives the trust

that you are doing something big and also they have noted that the

valuation of business increases by 10 to 15 times.

It needs at least seven persons to form the company. Public company can

go to public for funds. It can raise any type of nance; can enjoy any type of

legal relaxation. Public companies in India are only permitted to list their

shares in the stock markets.

7.1 Advantages of a Public Limited Company

7.2 Disdvantages of a Public Limited Company

Enjoys its large status from every corner nationally and internationally,

due to which business value increases manifolds

It can also accept money as public deposits from the general public.

It also enjoys every benets that a private company, LLP or any other

form enjoys.

Costly aair and also a time consuming process.

Hefty compliances, because governed by various rules and

regulations.

When to register a Public Limited Company?

If you are really planning something big or you have actually

running a big business and also you wants to expand it, public

limited company is the best option for you. Also, some of the

transactions are restricted to private limited companies,

therefore public limited company will be required for those

transaction like accepting deposits, Forming NIDHI Company

etc.


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98. Other Companies

NON BANKING FINANCIAL COMPANIES (NBFC)

The companies whose main objective is to provide loan and accept

deposits from the public are generally known as NBFCs. These types of

companies are required to be registered with the Reserve Bank of India

(RBI).

NIDHI COMPANIES

companies which can accept deposits from members only and can

provide loan to members only are known as Nidhi Companies. Only Public

limited companies can be formed as Nidhi Companies.

NGO

are special categories of companies registered under section 8 of

Companies Act, 2013. NGO are the organizations which are formed for

nonprot making. NGOs need to be registered with the income tax

authorities.


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9. Partnerships

A business organization in which two or more individuals manage and

operate the business. Both owners are equally and personally liable for

the debts from the business. Partnerships are easy to form. There is no

minimum capital requirement. Only two people are needed to

incorporate the partnership.

FEATURES

Atleast two peoples are needed

Registered Partnership deeds

No minimum capital requirements

In case terms are not decided, then it shall be governed by Indian

Partnership Act

Very simple to form and less time consuming

Very less legal governance, hence highly exible

Very minimal cost of running a business

Unlimited liability, personal assets are not safe

No separate legal existence

9.1 Advantages of a Partnership

9.2 Disadvantages of a Partnership

When to register a Partnership?

Partnerships are basically like proprietorship with an only

dierence that it involves two persons. If you are two or more

persons wants to start the business early and you have no

plans for raising funds from public then you can register

partnerships


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10. Limited Liability Partnerships (LLP)

LIMITED LIABILITY PARTNERSHIP (LLP) was introduced in the year 2008.

Partnerships when given the feature of limited liability, the LIMITED

LIABILITY PARTNERSHIPS came into picture. LLP is a separate legal entity

and which can be formed in India by minimum of two persons with a

motive of earning prot.

The registration process is very much similar to that of company, only LLP

agreement is also to be led in the case of the former.

Enjoys exibility like partnerships and limited liability like private

company

Separate legal existence, i.e. separated from its members

Very minimal compliances unlike private companies

Cannot raise funds by selling the interest

Foreign Direct investment is not allowed

10.1 Advantages of a LLP

10.2 Disadvantages of a LLP

When to register a LLP?

LLP enjoys the benets of private limited company and

traditional partnerships, therefore, because of increasing

compliances in private limited company, it is recommended

for start-ups to incorporate LLP if they are not planning to raise

investments in future


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COMPANY REGISTRATION PROCESS

Due to extensive bureaucracies in India, registering a company is

unnecessary complex and it discourages entrepreneurship. Until the

laws and processes change, our aim is to simplify the services as much

as possible.

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11 Terminology

it can be understand as a signature which is done electronically. We all do

Manual signatures by Pen, but we cannot sign on computers, therefore, to

sign any electronic document we need a digital signature. Digital

signatures are also protected with the PIN. It

generally takes 1-2 days with a cost Rs.800 to Rs.1500

unique Identication Number allotted to an individual who is an existing

director of a company or intends to be appointed as director of a

company.

Simply put, DIN is a unique number allotted to every individual.

DIN generally takes 2 hours to 1 day. DIN can be applied for online at the

Mca website. The cost of DIN is Rs.500.

DIN is an eight digit number allotted to every director. No person can

become a director without a DIN

Every company has unique name. No company can be registered with a

name which is resembling with a existing company name. Every name

should reect the proposed objective (business) of the company. For

example: " Mr.X wants to start a entertainment company, so the right

name could be

ABC (First Word) Entertainment (Objective) Private Limited

11.1 Digital Signature (DSC)

11.2 Director Identication Number (DIN)

11.3 Name Approval


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11.4 Memorandum of Association (MOA) &

Articles of Association (AOA)

Every company needs to have MOA and AOA. MOA states the companys

proposed objective for which company is being incorporated. No

company can go beyond its MOA.

In simple words, the proposed business of the company will be written in

the documents which is called MOA.

AOA states the companys legal policies for its operations. Every company

is governed by the companies act and hence, it has to work according to

the rules. These rules are to be drafted in a document which is called AOA.

They are to be drafted and to be led to the ROC.

This certicate is a proof that your company has been incorporated.

This step has been recently introduced in case of private companies also.

To obtain this, shareholders/subscribers/ owners has to deposit the

minimum amount of capital (One lakh in case of OPC and private

company, FIVE lakhs in case of Public limited companies) into the bank

account of the company.

11.5 Incrorporation Certicate

11.6 Certicate of commencement


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Individual Two or More persons

One Person Company Limited Liability Partnership

Private Company

Public Limited Company

DSC

of the Directors/Partners

Apply for DIN/DPIN for the

Directors / Partners

Name approval ling


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12. Non Resident Indians (NRIs)

Basic Information

NRI are citizen of India, i.e. they hold the valid Indian passport but are

residing outside India, and however, if the NRI gets the citizenship of other

country, then he will have to surrender his Indian passport and then he

will be treated as foreign national i.e. Nonresident (NR).

Sometimes, persons also holds dual citizenship, this is only possible if the

home country allows the same, in India it is allowed under Overseas

Citizen of India scheme. A Person is OCI, if he holds two citizenships

subject to other guidlines issued in this respect.\

Basics about investment

Investments in India are governed by the Foreign Direct Investment (FDI)

policy and FEMA Regulations. FDI policy contains set of rules which are to

be followed while investing in India and it is sector specic, i.e. there are

dierent rules for dierent sector. It provides two entry routes to invest in

India.

Automatic Route: It means that a person can invest in India, without

taking any approval subject to the limit specied.

Approval Route: It means investment can be made only with the prior

approval from the Reserve Bank of India (RBI). There are many forms of

business like Private Company, Partnership etc. However, a NRI cannot

freely invest in any form. Entry routes dier according to the form you

take to invest

In case of NRI, every document (refer document required

page) should be duly notarised by the Indian embassy in the

resident country of the NRI and original should be sent by a

courier.


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13. Special points for Enterpreneurs

We have analyed various start ups , their idea's and their knowledge about

the legal, so we would like to share some of the important points that

would be helpful for you in building your own startup.

1. Always choose company as your form of business, as it will be provide

you a strong legal base and also you will be open to funding and choosing

private limited company certainly adds value to the business.

2. While incorporating company, always have shareholding agreements

with the existing shareholders/promoters. This will help you setting out

terms more clearly and it will protect you against any malicious intentions

and wrong doing of others.

3. Now a days, it is a trend to have pool of shares in the beginning and then

to be issue at a later stage of business and the pool may be managed

either singly or jointly by promotor(s). However, initially, in India it is

prohibited to have pool of shares (however it may done after

incorporation) and Indian laws also do not permit the company to issue

ESOPs (shares from pool after a vesting period) shares to promoter(s).

4. Usually startups, mostly relates to online or E-commerce business. and

they almost every time wants their company name to be same as their

domain name. But remember, it is not mandatory to have company name

same as your domain name. You may have your brand name and

company name dierent, like FlipKart.com etc.


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14. Cost

with QuickCompany, you only pay for the services you use. All our services

have an honest and transparent cost structure.

If you have a case where an existing CA dropped you and left your

company registration incomplete, we can pick up from where he left and

on top we will not charge your for the work already completed.

OPCONE PERSON COMPANY

PVT LTDPRIVATE LIMITED

LLPLIMITED LIABILITY PARTNERSHIP

DIN FOR 1 DIRECTOR

DSC FOR 1

NAME APPROVAL

MOA / AOA

REGISTRATION

CERTIFICATE

COMPANY PAN CARD

DIN FOR 2 DIRECTORS

DSC FOR 2

NAME APPROVAL

MOA / AOA

REGISTRATION

CERTIFICATE

COMPANY PAN CARD

DIN FOR 1 DIRECTOR

DSC FOR 1

NAME APPROVAL

LLP AGREEMENT

REGISTRATION

CERTIFICATE

COMPANY PAN CARD

REGISTER NOW REGISTER NOW REGISTER NOW

Quickcompany also oers incorporation services for other

types of companies like public limited company, nidhi

companies, NBFC etc. We also oers you services after

incorporation


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15. Frequently asked questions

Q. I am a salaried employee works in a MNC, can I incorporate company

in my name? Can I become the director of the company?

A. You can incorporate a company and also you can become the owner of

the company. You can become a director only if your company permits

you to. Usually people Form Company in their name and appoint any of

their family members as a director.

Q. I would also like to know as you have your oce in Delhi and Gurgaon

and we put up in Bangalore, is it possible for you to form a new

company for me as we are located in dierent place?

A. Yes, we can incorporate your company anywhere in the country with

ease and with best of the services that we oer to our every valuable

customer.

Q. Do you also provide support after incorporation?

A. Yes, we do provide every possible support that our customer requires.

Q. If my signature on PAN\passport is dierent than current will it be

accepted (I have applied for change in Signature in PAN, waiting to get

the new PAN Card)

A. Yes that can be accepted, there is a form called specimen signature, so

you can sign your current signature there and then they will be accepted.

Q. We have checked our name on your portal, it is showing that name is

available, then what are the chances that we will get the same name?

A. If our portals show that the name is available, then there are good

chances that the name will be available, however, there may be chances

that MCA might not approve the name.

Q. Does your charges also include registration for VAT, Sales Tax or Extra

charges for that?

A. No, it does not include. Charges only include company registration.


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Q. I want to start a small business selling packed desi ghee in big bazaar

and other malls and online under a brand name. Please suggest what

legal licenses and rm registration formalities required and will u be

able to take care all these?

A. First of all, you need a business organization to work under, you may

choose like one person company (if you are a single person, this is a best

option for you, because it involves least cost and least compliances. Yes

we provide a single solution to all our customers, and we will take care of

all your responsibilities.

Q. I am in service industry and want to open in my wife's name. What

required a bank account (type?) pan card(?) or what other document.

Would I be able to put my home address in my company address?

A. Yes, you can open in your wife name, the documents required to open

an OPC can be seen from the documents required section of this guide

and the total cost involve in the process. Yes you can use your

home address as your corporate address.

Q. Should I go for sole proprietorship for tax benet? Or OPC? Is there

any legal license also required starting food business (ghee) and would

you also help in this regard?

A. In our view, you must not go for sole proprietorship rather you should

opt for One Person Company (OPC). OPC is a new concept and it is actually

a wonderful substitute for proprietorship. No, initially you don't need any

license, but when you will cross the 10 lakh revenue, and then you will

have to apply for VAT registration (we will provide you with the solution)

Q. My website domain is www.abcaxyz.com, can I get the company

registered with the same name? Or will there is any problem if the

domain name is dierent from the company name?

A. If the specic name is available then you might get the name.

However, it will have no eect if you get the company name dierent

from the domain name. Companies like lenskart.com has there domain

name dierent from the company name. Your domain name is your brand

name; you can get it secure by applying for a trademark.


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Q. Can Pvt Ltd raise money from crowd funding sites for particular

projects since no funding from Public is mentioned in your doc?

A. You can raise any private funding including seed funding, but you

cannot raise funds from public through Public oer.

Q. Your document says No investments allowed in OPC, Means?

A. In OPC, investment is not allowed, as there cannot be two shareholders.

OPC can raise loan funds, but cannot raise investments including seed

funding etc.

Q. Doc requirement says PAN+Registered address proof (Registered

sale deed), but for residence proof it requires ElecBill,Tele Bill,Mobile

Bill,Bank Statement. if I want to use my Residence as Oce then what?

only Sale deed will do?

A. No both will be required

Q. What is the means of 1 lakh capital? Does it requires in the form of

CASH or it can be adjusted by Assets that I will bring in like (Laptop,

Modem, Softwares etc)

A. 1 lakh capital means the minimum capital that you are required to bring

into the business. After incorporation, you will have to bring 1 lakh into the

bank account of the company, which you can use it for business purpose.

It is like moving the money from one pocket to another.

You can bring it in kind as well, but it is always advisable to bring

money in account rst and then adjust it against the assets you bring.


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Address

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Sector 18, Gurgaon, Haryana 122015

www.QuickCompany.in

[email protected]

[email protected]

96546 22792, 95406 18336


Acknowledgement

We at Quickcompany are committed to excellence of service and

promoting entrepreneurship in India.

We have an honest and transparent pricing structure, where you know

before hand exactly what you are paying and the services ocered..

Further, we provide you with a Guarantee of 100% Satisfaction.

Thanks and Regards

QuickCompany.in

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Documents

Guide to Registering Companies in India