Company Registration Online – How to Register a Private Limited company in India

Company Registration Online : Registering your company online under the right business structure is an important decision. Find out the prose and cons of different structures.

Updated on Jun 29, 2020 - 07:49:58 PM

Picking the right company structure for your business is as important as any other business-related activity. The right business structure will allow your enterprise to operate efficiently and meet your required business targets. In India, every business must register themselves as part of the mandatory legal compliance. Before we learn how to register a company, let’s try and understand the types of business structures in India.

The article covers the following:

Updates as on 20th May 2020

1. MCA has extended the 20-day time limit to submit Part B of SPICe+ for name reservation by newly incorporated companies until 20th June 2020, for names expiring any day between 15th March 2020 to 31st May 2020.

2. MCA has extended the 60-day time limit to submit form INC-24 for company name change reservation until 30th July 2020 for names expiring any day between 15th March 2020 to 31st May 2020.

3. MCA has extended the RSUB validity of those Service Request Number (SRN) whose last date for resubmission expires between 15th March 2020 and 3rd May 2020 until 15th June 2020, except those marked as ‘Not to be taken on Record’ (NTBR) which will be extended only on case-to-case basis.

4. MCA has extended the 90-day time limit to submit FiLLiP/Form 5 for name reservation by newly incorporated LLPs or for LLP name change reservation until 20th June 2020, for names expiring any day between 15th March and 31st May 2020.

5. MCA has extended the RSUB validity of those Service Request Number (SRN) whose last date for resubmission expires between 15th March 2020 and 31st May 2020 until 15th June 2020, except those marked as ‘Not to be taken on Record’ (NTBR) which will be extended only on case-to-case basis.

What are the types of business structures in India?

Let’s try and understand the types of business structures available in India. Here is a list of some of them:

1. One Person Company (OPC)

Recently introduced in the year 2013, an OPC is the best way to start a company if there exists only one promoter or owner. It enables a sole-proprietor to carry on his work and still be part of the corporate framework.

2. Limited Liability Partnership (LLP)

A separate legal entity, in an LLP the liabilities of partners are only limited only to their agreed contribution.

3. Private Limited Company (PLC)

A company in the eyes of the law is regarded as a separate legal entity from its founders It has shareholders (stakeholders) and directors (company officers). Each individual is regarded as an employee of the company.

4. Public Limited Company (PLC)

A PLC is a voluntary association of members which is incorporated under company law. It has a separate legal existence and the liability of its members are limited to shares they hold.
You can choose what business structure suits your business needs best and accordingly register your business.
Here is a comparative list of the popular business structures in India.

Company type	Ideal for	Tax advantages	Legal compliances
Limited Liability Partnership	Service-oriented businesses or businesses that have low investment needs	Benefit on depreciation	Business tax returns to be filed ROC returns to be filed
One Person Company	Sole owners looking to limit their liability	Tax holiday for first 3 years under Startup India Higher benefits on depreciation No tax on dividend distribution	Business returns to be filed Limited ROC compliance
Private Limited Company	Businesses that have a high turnover	Tax holiday for first 3 years under Startup India Higher benefits on depreciation	Business tax returns to be filed ROC returns to be filed An audit is mandatory
Public Limited Company	Businesses with a high turnover	Tax exemptions under	Business tax returns to be filed. Mandatory Audits

Other forms of business structures include Sole proprietorship, Hindu Undivided Family, and Partnership firms. Please bear in mind, these structures do not come under the ambit of company law.

Why is it important to choose the right business structure?

It is important to choose your business structure carefully as your Income Tax Returns will depend on it. While registering your enterprise, remember that each business structure has different levels of compliances that need to be met with. For example, a sole proprietor has to file only an income tax return. However, a company has to file an income tax return as well as annual returns with the registrar of companies.
A company’s books of accounts are to be mandatorily audited every year. Abiding by these legal compliances requires spending money on auditors, accountants and tax filing experts. Therefore, it is important to select the right business structure when thinking of company registration. An entrepreneur must have a clear idea of the kind of the legal compliances he/she is willing to deal with.
While some business structures are relatively investor-friendly than others, investors will always prefer a recognised and legal business structure. For example, an investor may hesitate to give money to a sole proprietor. On the other hand, if a good business idea is backed by a recognised legal structure (like LLP, Company, etc) the investors will be more comfortable making an investment.

How to choose a business structure while applying for company registration in India?

Let’s take a look at some important questions every entrepreneur must ask himself before he/she finally decide upon a business structure.
i. How many owners/partners will your business have?
If you are a single person who owns the entire initial investment required for the business, a One Person Company would be ideal for you. On the other hand, if your business has two or more owners and is actively seeking investment from other parties a Limited Liability Partnership (LLP) or Private Limited Company would suit you best.
ii. Should your initial investment determine your choice of business structure?
The answer to that question is – Yes if you want to spend less initially, it would be wise to go in for a Sole Proprietor, or a HUF or a Partnership. But, if you are sure that you will be able to recover the setup and compliance costs, you can opt for a One Person Company, LLP or a Private Limited Company
iii. Willingness to bear the entire liability of the business
Business structures like sole proprietor, HUF, and partnership firm have unlimited liability. This means, in case of any default in loans, the entire money will be recovered from the members or partners in profit sharing ratio. The risk to personal assets is high in these cases.
Whereas, Companies and LLPs have a limited liability clause. This means that the liability of its members is restricted to the amount of contribution made by them or the value of shares each member holds.
iv. Income Tax Rates Applicable to businesses
The income tax rates applicable to a sole proprietorship and a HUF are the normal slab rates. In case of a sole proprietorship, the business income is clubbed with the individual’s other income.
But in the case of other entities like partnership and company a tax rate of 30% is applicable.
v. Plans of getting money from investors
As mentioned earlier, it is difficult to get investments when your business structure is unregistered. Entities like LLP and Private Limited Company are trusted when it comes to investment. Make sure you choose the right structure, seek the help of an expert so that you register under proper guidance.

Benefits of Company Registration in India

A company registration provides many advantages. A licensed company makes it genuine, and enhances the business’ credibility.

Protects against personal obligation, and defends against other threats and losses.
Builds goodwill and also supports more customer attraction
Gives reliable investors bank credits and good investment with ease.
Provides cover of the responsibility to protect the company’s assets
Bigger commitment to wealth and greater stability
Increases the ability to develop and grow large

For detailed understanding about the advantages of obtaining a company registration, read our article on Advantages of Company Incorporation.

How to Register a Company in India?

Registering a company in India is now a simple 4-step process. Here is what you’ll need to acquire:
i. A Digital Signature Certificate(DSC)
ii. A Director Identification Number (DIN)
iii. Registration on the MCA Portal or New user registration
iv. Certificate of Incorporation
With this, we have covered the basics of how to register a company. If you still need help registering your company, don’t stress over it, and let our team of experts guide you.

Documents required for Company Registration

In India, registration of private limited company can not be done without proper proof of identity and proof of address. Proof of identification and address would be required for the incorporation of all the company’s directors and shareholders.

The organisation must have a registered office in India for online business registration in India. A recent copy of an energy bill or the property tax receipt or water bill must be sent to confirm admission to the registered office. In addition to the tenancy agreement, the maintenance bill or the sale deed or a letter from the landlord with his/her permission to use the office as the company’s registered office is accepted.

An identity and address proof of all the directors and the subscribers to the share capital must be submitted.

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