The Indian economy is experiencing a meteoric rise in business and entrepreneurship. This exponential growth is a direct result of the increase in ease of doing business in India. Today, more and more startups are lining up for ambitious fundraising campaigns and blockbuster IPOs. Entrepreneurs find it very convenient to set up SMEs and market-ready startups within a matter of weeks. To that, all they need to know is how to register a company in India, and they are good to go.
If you are an entrepreneur with a rapidly germinating business idea, then setting up a registered company is your first legal milestone. It is a way of creating a separate legal entity, based upon your mental blueprint.
It is only after registration that we can begin executing our business plans, interacting with clients, and creating that market-ready product or service. Once registered, we can proceed with the detailed functioning and use integrated software like TallyPrime to handle regular compliance and other operational needs.
What is the best business type we should register?
Before we can learn the details of how to register a company, we must decide whether we want to start a company or choose any other available business structure. In India, there are several business types that we can proceed with, depending on our individual needs.
Types of businesses in India:
- Sole Proprietorship: It is the simplest business structure, and most entrepreneurs start with this. A sole proprietorship doesn’t separate its assets and liabilities from those of its owner. Hence, this business model comes with a substantial risk factor.
- Partnership: The next best option is to set up a partnership. Here, the business is handled by several partners, bound by a legal contract. The assets and liabilities of the partnership are divided among the partners.
- Limited Liability Partnership (LLC): This is a type of partnership under which the liabilities of the partners are restricted to the extent of their business investment.
- One Person Company: It is a business setup comprising a single person as the founder. But unlike a sole proprietorship, it is a separate legal entity.
- Private Limited Company: One of the most scalable business models, it is most suited for individuals looking to raise funds and operate with limited liability.
What are the steps towards successful registration?
Once we identify the type of business, the next step is to conduct a detailed observation of how to register a company in India. The Ministry of Corporate Affairs (MCA) is responsible for registering all companies within the country.
Aspiring companies can log into the MCA portal and follow the registration procedure. This makes the entire process more streamlined and time-efficient. It also boosts overall operational transparency.
The registration usually involves the following:
- Digital Signature Certificate: This is a must-have for the company directors and other concerned members. It enables users to sign, authorise and submit various types of forms on the MCA website.
This is the first document that new companies must collect before proceeding further with the registration process.
- Digital Identification Number: After acquiring the DIS, the next step involves acquiring a unique digital number. This is assigned to every company director, making them digitally identifiable and unique entities.
- Company Name Acquisition: One of the most crucial steps of learning how to register a company involves the naming of the organisation. We must select a legally acceptable business name that is unique. This is usually undertaken through the Reserve Unique Name service.
- Filing Documents: Once the above steps are completed, we need to submit the required company documents to the Registrar of Companies (ROC). These documents include the Articles of Association (AOA), Memorandum of Association (MOA), and other important details including identity proof and the office address.
- Certificate of Incorporation: Finally, once all the above steps are completed, each document and step will be meticulously checked by the ROC. Once all necessary checks are done, the formulating company/business will receive a Certificate of Incorporation (COI). This certificate comprises of a Permanent Account Number (PAN), a Tax Deduction & Collection Account Number (TAN), and finally the business’s unique Corporate Identification Number (CIN)
The entire procedure is handled online and usually takes around 10 days to receive the certificate of incorporation.
Why should we register our business/company?
You might be wondering that, even before knowing how to register a company in India, one should know the ‘why’ behind the need for registration.
A legally compliant company is a recognised business institution. So, it's of paramount importance that we register our company. It comes with a myriad of functional benefits, which include the following.
- Easy loan sanction & Fund access: A legally registered company falls under the direct jurisdiction of the Indian government. So, it is a recognised institution that provides credibility and goodwill. Banks and other financial institutions find it more viable to provide funds to organisations that are officially regulated and legally transparent.
- Perpetual Succession: If our business exists as a separate legal entity, then its existence isn’t based upon its founders. So, the company can function perpetually, even after the founding members leave or cease to exist. Hence, facilitating operational stability with longevity.
- Limited Liability & Easy Tax Compliance: Dovetailing from the last point, businesses having a separate legal existence enjoy a lot of jurisdictional benefits. The company’s liabilities are independent of its founders. So, the director’s personal liability isn’t pulled while fulfilling the company’s outstanding liabilities.
There is also the added advantage of having a unique TAN number, which facilitates easier tax filing, return and overall transparency. This process is made even more streamlined when we use integrated software like TallyPrime to keep track of compliance and other similar operational hurdles.
In Conclusion
So, as we can see above, the need and benefits of registration are necessary and substantial. In a country that sees a new unicorn company emerge every other week, having a registered company can be the difference between exponential expansion and stagnation.
In this rapidly shapeshifting startup culture, having a clear view of how to register a company in India is a crucial business skill that every budding entrepreneur should internalise.
