Company incorporation in India: benefits of registering company

1
COMPANY INCORPORATION IN INDIA BENEFITS OF
REGISTERING COMPANY

• In the article we have discussed about the
  company incorporation features and the types of
  company filing available in detailed manner.

2

• Chiefly, India is a major place where the
  start-ups and the entrepreneurs are growing
  rapidly. Company incorporation is not an easier
  task. Choosing your business is easy, but you
  have to register your company under the right
  sector. The registered company gains more
  advantages compared to other companies. Majority
  of the people desire to incorporate a registered
  company having separate legal entity in their
  eyes of laws.

3
Moreover, company refers to the mode of
doing business. Mostly, it depends on what are
your expansion plans, future team size, funding
requirements and business vision. There are
several options like private limited company,
public limited, one Person Company and limited
liability partnership the most preferred option
will be private limited company. This is due to
enormous benefits associated with the business
structure.
4
Company incorporation and commencement steps

• First of all, formation of a company is a long
  and complicated process. The foremost step
  involved in forming the company is company
  incorporation. After that, there are several
  other procedures followed by the company before
  the commencement of the business. The company
  formation is an early and initial task. It
  involves certain legal formalities and procedures
  to be done at the initial stages. The authorities
  have the special powers and system that are to be
  followed by each and every business organisation
  for the business commencement.

5

• For instance, when a human being takes birth, his
  body parts are the immense element which is being
  formed before taking the birth. Similarly, when a
  company is formed, before that it has its several
  aspects which have to be built after which the
  company is taken into an account to commence its
  business
• Promotion of a company
• Registration of a company
• Certificate of incorporation
• Commencement of business

6

• Promotion of a company
• The process of business promotions comes when
  someone comes up with the good idea and that idea
  is converted into action. (i.e.) the formation of
  the firm and commencement of the business. It is
  the effort thrown by the members of the company
  put to make the company.
• A successful promoter is the creator of wealth.
  The person who is related to the promotion of a
  particular business or an enterprise is known to
  be a promoter

7

• For example, Dhirubhai Ambani is the promoter of
  Reliance Industries. He created the idea of
  starting a business and takes all the measures
  required for bringing the enterprise into the
  existence. Moreover, the promoter finds out the
  way to generate the money, search business idea,
  arranges for finance, gather resource and
  establish a going concern. The company law does
  not give any legal status to promoters. He stands
  in fiduciary position.

8
There are different types of the promoter,
occasional promoters, company promoter, financial
promoter, entrepreneurs, lawyers, and engineers
etc. They all play different roles during
the company incorporation, and all of them only
hold a fiduciary position until such company is
incorporated. Once the promoters have decided to
launch a company next step is to select a name
for the company and get it registered with the
registrar of companies of the state in which the
registered office of the company is to be
situated. An application with three names, in the
order of their priority, is filed with the
registrar to get the name approved.
9

• Registration of company
• Consequently, the company registration is nothing
  but giving birth or existence to a company. A
  company is properly effectively when it is
  registered under the companies act. There are
  certain procedure for the registering the
  company, it should be followed by each and every
  organisation. Meanwhile, it involves the
  following documents and procedures,
• Memorandum of Association
•  It is signed by minimum member that is 7 persons
  for the public company and 2 in case of private
  company. It should be duly stamped.
• Articles of Association
•  The document is signed by all persons who have
  signed the memorandum of association.

10

• List of directors
• A list of directors with their names, address,
  and occupation is prepared and filed with the
  registrar of the companies.
• Written consent of the directors
• A written consent of the directors that they had
  agreed to act as directors has to be filed with
  the registrar of the company along with a written
  approval to the effect that they will take the
  qualification shares and will pay for them.
• Notice of the address of the registrar office
• Consequently, it is also necessary to file the
  notice of the address of the companys registered
  office at the time of incorporation. It is to be
  provided within 30 days after the date of
  incorporation.

11

• Statutory declaration
• A statutory declaration mentioning that the
  requisites of the act and the rules there-under
  have been compiled. It must be signed by an
  advocate of the Supreme Court entitled to appear
  before a high court or a practicing chartered
  accountant in India, who engages in the company
  incorporation or by a person indicated in the
  article as a director, managing director,
  secretary or manager of a company. Moreover, it
  is also to be filed with the registrar of the
  company.

12

• Company Incorporation certificate
• The registration of the memorandum of the
  association, the article of association and other
  documents are filed with the registrar of the
  company. After getting fulfilled with the
  application documents submitted, Registrar will
  issue the Certificate of incorporation. A
  certificate of incorporation is the ultimate
  proof for the existence of a company.

13

• Certificate of Commencement of Business
• As soon as a private company gets the
  certification of incorporation it can start its
  business. Once the certificate of incorporation
  is received by the company, a public company
  issues a prospectus for inviting a public to
  subscribe to its share capital. It fixes the
  minimum subscription in the prospectus. Then it
  is required to sell the minimum number of shares
  mentioned in the prospectus.
• After completing the sale of the required number
  of shares, the certificate is sent to the
  registrar along with the letter from the bank
  stating that all the money is received. The
  registrar then inspects the documents. If all the
  legal formalities are done then the registrar
  issues a certificate known as certificate of
  commencement of businesses. This is the
  conclusive evidence for the commencement of
  business for the public.

14
Company incorporation Types

• The different types of company formation are 
  Private limited company, public limited company,
  one Person Company, Nidhi Company, proprietorship
  registration, section 8 company, limited
  liability partnership, Partnership firm
  registration, non-banking finance companies etc.

15

• Private limited company registration
• Private limited company registration offers
  multiple benefits such as ease of formation,
  limited liability, freely transfer of shares,
  easy to raise funds, etc. Private Limited Company
  is nothing but a privately held business with a
  minimum of 2 and maximum of 200 members.

16

• Public limited company registration
• A public company has to follow much more
  consequences compared to a Private limited
  company. It can deal in both secured and
  unsecured debts. A public limited company allows
  you to trade in the market and issue shares,
  debentures and accept deposits. Similarly, a
  public limited company registration is always
  beneficial because a public limited company is
  preferred to provide big financial loans as
  compared to Limited liability partnership and
  Firms.

17

• One person company registration
• Moreover, Section 2(62) of Companies Act defines
  a one person company as a company which has only
  one person as its member. Furthermore, members of
  a company are nothing but subscribers to its
  memorandum of association. So, an OPC is a
  company that has only one shareholder as its
  member.

18

• Section 8 company registration
• The primary objective of the section 8
  companies are working for the development of the
  society, protection of the earth and environment,
  working in the field of art, commerce,
  literature, sports, protection of living
  creatures, research, and development, etc.
  without earning any profit. In other words,
  section-8 Company is a non-profit organization
  whose main aim is to contribute its effort for
  the development and betterment of the society,
  but under companies act this non-profit
  organization is known as section-8 Company.

19

• Limited liability partnership
• Further more, the Limited liability partnership
  is the good choice for those who are involving in
  the business of consultancy. LLP have little
  compliance to follow as compared to other
  companies. Under Indian Partnership Act, 1932 the
  registration of partnership firm, but if any
  person wants to run LLP, and then he shall have
  to take a certificate of registration from the
  Registrar and register the LLP agreement.
  Consequently, all the details of the business
  such as profit loss sharing ratio amount of
  capital invested should be mentioned in the LLP
  agreement.

20

• Non-banking finance companies
• In essence, NBFCs or Non-banking financial
  company as it is commonly known as in India is
  the financial institution that provides the
  banking services without any bank licenses.
  Moreover, they are allowed to perform some
  banking activities but they do not require any
  pre-banking licenses for such activity. The NBFCs
  in India runs under the companies act which came
  into place in 1956. Services provided by NBFCs
  include investment, hire purchase, and chit
  funds.

21

• Proprietorship registration
• Besides, the proprietorship registration is the
  good practice for the start of small scale
  business. Moreover, it does allow the business to
  scale up and reach maximum growth as the many of
  the features are missed out in a proprietorship
  firm. In particular, the features of
  proprietorship are transfer of shares limited
  liability, easy funding process etc. are major
  things a growing business should possess.
  A proprietorship firm can be converted into a
  company by executing a proprietorship takeover
  agreement.