How to Open a Company in India?

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How to Open a Company in India?

To open a company in India, first, the entrepreneur has to choose a legal structure for the company and then follow the process of setting up the company. So, the entrepreneurs have multiple choices to choose from. The companies are further divided into other categories. In the article, we share the most common companies that Indian entrepreneurs set up.

Different Types of Companies in India

Entrepreneurs can register the different types of companies in India under the Companies Act, 2013. There are different types of legal structures for the business and these are as follows:

• One Person Company
• Private Limited Company
• Public Limited Company
• Section 8 Company (NGO)

Private Limited Company

A private limited company is a privately held in which the government has no ownership. This company is popular among Indian entrepreneurs because of its multiple benefits. 

The advantages are limited liability protection, status as a distinct legal entity, easy formation of the company and maintenance. The company has a separate entity from its owners. So it enjoys other benefits such as perpetual succession, easy funding, tax benefits, and limited liability means no effect on shareholders in case of winding up or debt.

How to Form a Private Limited Company?

There must be at least two shareholders and a maximum of 200 shareholders. The directors must be two, of which one must be an Indian citizen. Maintain a minimum paid-up capital of Rs. 1 lakh. In the name of a private limited company, the name must conclude the word “Pvt. Ltd.” 

In the private limited company, there are further classifications such as: 

• Company Limited by Shares
• Company Limited by Guarantee
• Unlimited Companies

Check the eligibility criteria, documents, and incorporation process of a private limited company. This is important to form a company with proper legalities and avoid future penalties.

Public Limited Company

The public limited company is registered under the Companies Act, 2013. It offers shares of the company to the general public, on the other hand, the private limited companies don’t offer their shares to the general public.

The shares of public companies can be acquired by anyone either through IPOs or through trading in the equity market. The regulations of these companies are strict and they must publish their financial statements to their shareholders. These companies are considered more transparent as they transfer their ownership in the company by just selling the shares. 

How to Register a Public Limited Company? 

To form a public limited company, you are required to have a minimum of seven shareholders, 3 directors and a minimum share capital of Rs. 1 lakh. The company must create documents such as Article of Association (AoA), and Memorandum of Association (MoA). 

So, to register a public limited company, you have to follow a process. It includes applying for a Digital Signature Certificate (DSC), Director Identification Number (DIN), Registration on the MCA portal, and lastly obtaining a Certificate of Incorporation. With the application of any 

To apply for any of the procedures, the attachment of a document is a must with the application. Some of the documents are proof of identity, PAN card,  and address of the shareholder. NOC (No Objection Certificate) from the landlord, where the office is located.

One Person Company 

The concept of OPC was introduced under the Companies Act, 2013 to enable single individuals to create a company. In this type, the individuals have the benefit of sole proprietorship and traditional company as well. The liability of a member is limited to his/her shares, so the member is not personally liable for the company’s loss.

However, the main objective behind creating a one-person company is to encourage the MSMEs (Micro, Small and Medium Enterprises). So as per the Companies Act, anyone can form a company with just one director and one member, and both roles can be handled by the same individual.

What is the Process of Incorporation of One-Person Company?

For company formation, several documents are required such as MoA, AoA, nominee consent, proof of registered office, proposed director declaration in Form INC-9 and consent in Form DIR-2. 

In the process of incorporation, you have to file an SPICe+ form (Simplified Proforma for Incorporating Company Electronically Plus). The registration process of OPC consists of two parts:

1. The initial section of the SPICe+ form (Part A) is dedicated to securing the company name, Director Identification Number (DIN), and Permanent Account Number (PAN) for the proposed director.
2. Part B involves details regarding the incorporation. This includes details regarding the registered office address, share capital, directors and shareholders.

When you receive the certificate of incorporation, your OPC gets officially recognised and ready to commence the business operations. Remember, after incorporation, following specific compliance formalities is required.

Section 8 Company 

As per the Companies Act, 2013, the Section 8 company is a non-profit organisation that promotes arts, commerce, science, research, sport, education, culture and other similar activities with the same goal. These organisations use their profit for their main mission and do not distribute it as a dividend among shareholders. 

How to Register a Section 8 Company in India?

To register a Section 8 company, a minimum of two directors is required, and there is no limit on minimum paid-up capital to set up a company. The NGO can register under the Registrar of Societies. An Indian national or Hindu Undivided Family (HUF) can register a company and it must have at least two directors.

The Section 8 company incorporation process includes applying for DSC, DIN, reserve name, applying for incorporation, and obtaining a certificate of incorporation. The company cannot collect capital through deposits but can accept donations from the public and funding from foreign contributions.

Conclusion

The setting up of a company is a complete process from planning the structure of the business to finally obtaining a legal certificate. The structure of the company can be any but the process of each company registration includes some similar steps. For instance - applying through a form on the official website, documentation, complying with the compliances, paying fees, follow up and getting a license.

We at Registrationwala, assist clients regarding the different incorporation processes as per their requirements. Reach out to us for any business registration-related query.

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