How to Register a New Company in India: Step-by-Step Guide
Setting up a foreign company in India is a streamlined, quick, and efficient process. The entire procedure is regulated by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013 and the Companies (Registration of Foreign Companies) Rules, 2014. Typically, it takes between three to ten working days to complete the registration. This article serves as a comprehensive guide to registering a new company in India.
If you’re planning to do business in India, your first step is to establish a legal presence—either by registering a business in India as a subsidiary or as a foreign company. It is essential to determine whether the entity will be used for commercial purposes or otherwise.
As per Section 2(42) of the Companies Act, 2013, a foreign company is defined as any company or body corporate incorporated outside India that establishes a place of business within the country, either directly or through an agent.
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How to Register a Company in India?
India offers multiple business structures for both domestic and foreign investors. Among these, the private limited company is the most common and preferred form of business entity in India. It offers flexibility, limited liability, and ease of management, making it the preferred choice for entrepreneurs seeking to establish a business in India.
How To Register A Company In India: Steps You Need To Follow
The Registrar of Companies (ROC) is a department working under the supervision of the Ministry of Corporate Affairs and all companies operating in India must register with them.
To form a company in India,, there are specific steps that investors must follow. Once you have chosen a business form suited to your investment needs, you should start selecting a trading name for the company. It has to be unique. Your trading name should not resemble any other company already in operation, and must comply with the requirements imposed under the Prevention of Improper Use Act, 1950.
Next, you should prepare the application for registering the new company’s business name. It should include a minimum of four and a maximum of six proposed trading names.
Once all the company’s statutory documents are prepared, you need to file them at the ROC. You can proceed to register for Social Security once the company has concluded the first employment contract.
There are a few things that are necessary for you to obtain: –
- Director Identification Number (DIN)
- Class II Digital Signature Certificate (DSG), which can be obtained from a licensed vendor of the Ministry of Corporate Affairs (MCA). This represents the director’s signature necessary for various company documents (filed and registered with the ROC).
- Company’s Statutory Documents, such as Articles of Association and Memorandum of Association, must be signed by a company secretary.
- There are certain fees, including stamp duty.
Once all the steps above have been successfully completed, the investors will receive the certificate of incorporation.
What are the Types of Entities that can be registered in India?
Private Limited Company (PLC)
A PLC is one of the most suitable methods to start a business in India. A private limited company has many advantages, one of which is its great flexibility. Keep in mind that investors will be able to modify the structure of the company’s ownership. This can be done through the transfer of shares, which requires the consent of other shareholders.
Private Limited Companies (PLCs) in India are governed by the regulations of the Companies Act 2013, and the Company Incorporation Rules, 2014. The company must be founded by at least two shareholders and must be represented by a minimum of two and a maximum of fifteen directors. At least one director must be an Indian citizen and the founders can be natural persons or legal entities domiciled in India or abroad. Investors must also set up an official business address for the new company registration in India.
Sole Trader
A sole trader is the simplest way to start a company in India, it is also known as an individual entrepreneur. A sole proprietorship is for those who can carry the business operations in his/her own name and will be held liable for everything related to the company, including debts. Liability is not limited and also covers the owner’s personal assets.
The advantage of a sole trader is its simple registration procedure and basic compliance with the local authorities. The basic aspects that need to be decided are the selection of a suitable company name and a location to be used as the company’s official address. There are multiple ways for a sole trader or proprietor to be registered in India depending on the nature of your business.
A key point to note is that Indian legislation provides the legal framework for the conversion of a sole trader to a limited liability company (LLC). This conversion is recommended when the company is starting to expand, as a growing business may incur more debt.
There are a few steps to follow:
- The investor must obtain a Digital Signature Certificate and a Director Identification Number, as a limited liability company requires a director.
- You will need to apply with the MCA for the registration of a new company.
- Then, you need to update the information of your existing bank account with your new company information. You will also need to submit all required documents, such as identity documents, proof of registered office, etc.
One Person Company
One person company is another unique business form available in India. This is a hybrid legal entity which shares the characteristics of a sole trader and a limited liability company. According to the Companies Act 2013, in a one-person company, the company and the founder are separate legal entities. Though this is similar to an LLC, it is only recommended for registration in the case of small businesses. It cannot be be converted into a company, as stated under Section 8 of the Companies Act 2013.
Public Liability Company
The registration of a public limited company is allowed by the Indian legislation. This type of entity has similar characteristics to an LLC. The only difference is that the shares offered by a public liability company can be offered to the general public, whereas an LLC cannot. This type of business entity can also accept foreign direct investments, and a minimum of seven members must set it up. A key point to note is that it is relatively easy to transfer company shares, and members are only liable to the extent of their capital participation in the company, unless the debt arises from their wrongdoing.
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