Complete Guide for Start-up Companies - How to Register a Company in India?

In India, we have a Government online portal to register a company i.e. Ministry of Corporate Affairs (MCA) portal. The entire company incorporation process will be carried on the MCA online portal and all the required documents will be uploaded along with the application form and then the same will be verified and approved by the Ministry of Corporate Affairs (MCA) and issue the Certificate of Incorporation along with Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN), the entire company incorporation process will take 7 to 10 working days.

CONTENT

Why do start-up companies prefer to choose Private Limited Incorporation?
Benefits of Private Limited Company
Advantages and Disadvantages of each type of companies
What is the difference between Firm and Company?
Process of Company Incorporation in India
Analysis of the different type of establishment

WHY DO START-UP COMPANIES PREFER TO CHOOSE PRIVATE LIMITED INCORPORATION?

Start-up companies choose Private Limited Incorporation rather than Proprietorship or Firm for the following reason

In Proprietorship or Firm, the liability of the proprietor is unlimited but the liability of the Private Limited Company is limited to the extent of the shareholding.
In the Proprietorship or Firm the liability of the Proprietorship or Firm is unlimited but for the Private Limited Company that’s limited.
The personal property of the Proprietor/Partner is liable for the liability of the company.

For the above said reasons Start-ups prefer to choose Private Limited Incorporation rather that Proprietorship or Firm.

BENEFITS OF PRIVATE LIMITED COMPANY

Separate Legal Entity

A person before law is a separate legal entity apart from its directors, shareholders and members of the company. A company is a legal entity under companies Act 2013.

Limited Liability

In Proprietorship & Partnership the liability of the company is limited to the extent of shareholding but in in case of the Private Limited the personal property of the directors is not liable for the debts of the company.

Transfer of the Shares

The Private Limited Company shares are easily transferable from one person to another but in Proprietorship and Partnership transfer of shares from one person to another is by using share transfer form.

ADVANTAGES AND DISADVANTAGES OF EACH TYPE OF COMPANIES

Type of Company	Advantage	Disadvantage
Private Limited Company	Separate Legal Entity Perpetual Existence Limited Liability Easy to raise funds of the company Transfer of the shares	Audit is compulsory Income tax percentage is much higher compared with proprietorship Complex accounting procedure compared with Proprietorship and Firm There is a restriction about the sale of shares to rise of the venture capital.
Public Limited Company	Can raise large share capital Separate legal entity Public Limited Company can issue shares and debentures to the public Limited Liability	This is a very long registration procedure The corporate tax applies to both profits as well as dividends declared by the company. Shareholder of the company can take over the company
One Person Company	One person is enough to start a company Separate legal entity Limited liability Unlike proprietorship, there is a corporate legal entity of the one-person company.	FDI is prohibited Audit is compulsory Dividend distribution tax and income tax is applicable Rising of venture capital is difficult

WHAT IS THE DIFFERENCE BETWEEN A FIRM AND A COMPANY?

Firm	Company
The firm is registered under the partnership Act 1932. To register a firm is optional To register a firm, partnership deed is essential A firm can be up to 100 partners There is no separate legal entity Audits of the firms need not be audited The liability of the partnership firm is unlimited The partnership can be dissolved by mutual consent The firm does not require minimum share capital	The private limited company can be registered under companies Act 2013 To Company registration is compulsory The registrar issues certificate of incorporation for a company A private limited company can be up to a maximum of 200 members There is a separate legal entity Audit of the company is compulsory The liability of the company is limited to the extent of the shareholding In the company there is a separate procedure for winding up a company Private limited company requires one lakh share capital and the public limited company requires 5 lakh share capital.

Firm

Company

The firm is registered under the partnership Act 1932.
To register a firm is optional
To register a firm, partnership deed is essential
A firm can be up to 100 partners
There is no separate legal entity
Audits of the firms need not be audited
The liability of the partnership firm is unlimited
The partnership can be dissolved by mutual consent
The firm does not require minimum share capital

The private limited company can be registered under companies Act 2013
To Company registration is compulsory
The registrar issues certificate of incorporation for a company
A private limited company can be up to a maximum of 200 members
There is a separate legal entity
Audit of the company is compulsory
The liability of the company is limited to the extent of the shareholding
In the company there is a separate procedure for winding up a company
Private limited company requires one lakh share capital and the public limited company requires 5 lakh share capital.

PROCESS OF COMPANY INCORPORATION IN INDIA

Director Identification Number – (DIN)

To incorporate a company it is mandatory to obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA), to obtain DIN directors of the company must fill all required details in the SPICE Form and attach all the required documents.

Foreign citizens what wants to obtain Director Identification Number (DIN) must attach the passport and provide identity and address proof of the country.

Digital Signature

Digital Signature Certificate (DSC) of the authorized to sign in the spice form and E-MOA and E-AOA is also introduced from Ministry of Corporate Affairs (MCA), so the subscribers and promoters of the company should digitally sign E-MOA AND E-AOA and it is necessary to have Class II Digital Signature to sign and authenticate SPICE form.

Name Approval

To register a company the company name should be applied on the MCA portal by using RUN form, the company name should consists of Private Limited at the end of the company name in the case of Private Limited and the name consists Limited at the end of the name in the case of a Public Limited company.

Once the company name gets approved from Ministry of Corporate Affairs (MCA), the company should get registered within 20 days from the date of company name approval as the name approval is valid only for 20 days.

Memorandum of Association and Article of Association (MOA and AOA)

The Memorandum of Association is the scope of the company’s main objectives and other objectives related to business. In the MOA subscribed shares of the promoters will be mentioned and finally it is signed digitally by the promoters of the company and The Article of Association of the company is the rules and regulations of the Company for its internal management, In the E-MOA and E-AOA name address and occupation of the promoters of the company should be filled.

Form Submission

Both Indian and Foreign companies should be register on Ministry of Corporate Affairs (MCA) portal for Incorporate a company, the company can be registered by provide SPICE form with E-MOA & E-AOA and along with all the supporting documents for company incorporation by paying the prescribed government fees.

Registrar of the company will then verify all the documents then approve the same and issues Certificate of Incorporation with Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) of the company.

Certification of Incorporation is not final; then the company should file 20A within 180 days from the date of incorporation to get certificate of Business Commencement, all companies irrespective of the company is private limited, public limited or one person company this is w.e.f 2 November 2018.

ANALYSIS OF DIFFERENT TYPES OF ESTABLISHMENTS

Particulars	Private	Public	OPC	LLP
Min. Members	2	7	1	2
Max. Members	200	No Limit	1	No Limit
Min. Directors	2	3	1	2
Max. Directors	15	15	15	No Limit
Legal Status	Separate legal entity	Separate legal entity	Separate legal entity	Separate legal entity
Law	Companies ACT 2013	Companies ACT 2013	Companies ACT 2013	LLP Act 2008
Annual Return	Annual accounts along with annual return have to be filed with ROC	Annual accounts along with annual return have to be filed with ROC	Annual accounts along with annual return have to be filed with ROC	Statement of accounts have to be filed with ROC
Commencement of Business	Must	Must	Must	No Necessary

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Complete Guide for Start-up Companies – How to Register a Company in India?