Both domestic and internal trade plays a vital role in contributing to the nation’s economy. Thus, the scope of public and private limited companies is quite high. The Indian Chamber of Commerce recognizes those companies that come with proper registration under the act of the company’s law. Many young entrepreneurs plan to incorporate a business after completion of their degree in Business. A registered office is going to be mandatory. The government of India has made company registration online mandatory. Even after the formation of a company, many organizations do not have proper registration. There are different types of companies each with a different structure and way of operation.
Types of business structures in India:
1. One person company (OPC) – This type of company or business enterprise is also known as the sole proprietorship business. Here, a single person will take all the decisions of a company. If there is a profit in a business, a single person will gain. Also, all the losses would be borne by the single person with whose name the company is operating.
2. Limited Liability Partnership ( LLP) – particular business organizations have several partners. But, all of them have limited liability but those depend on the jurisdiction. In a Limited Liability Partnership (LLP), each partner is not liable for any of the wrong deed or the misconduct of the other partner or partners associated with the organization. The liability of the partners will be just like the shareholders of a company. But, the only difference is, the partners of LLP have the direct right to manage the business of the organization.
3. Private limited company (PLC) – The private limited company has private ownership. The government has no share in profit or loss of such an organization. Unlike the public limited companies, the private limited company has a few staff as well as the employees. Usually, these companies have the number of employees within the limit of 50. But, there are private limited companies that have more employees than the benchmark of 50. For them, the laws and regulations are slightly different.
4. Public limited company (PLC) – Public Limited companies are owned by many shareholders. It is incorporated under the Indian company act 1956. The shares and debentures are presented in the stock market. The public can easily buy the stocks and shares of those companies. Now, if the organization suffers a loss, the shares will go down. As a result, the shareholders being the general public who bought the shares have to suffer loss. Similarly, when the profit is realized, the same is shared among the stakeholders.
The above-mentioned list of companies is regarded as legal in India. Also, all these companies must go ahead with the registration of the company at the time of incorporation. Any of these who have not done it’s registered under the company’s law can be penalized.
Read more: 40th GST Council Meeting Highlights
Why the registration of a company is important?
There was a time when setting up a company and becoming a businessman is a big thing. But these days everyone has a business idea. Thus, even if they don’t have capital, investors are present for investment on a particular project. But, that should again be a private limited company. Investors would always wish to hold equity shares in a particular company. In doing so, investors will be able to participate in the profit and loss of a company. Also, if the company decides to dissolve at some point in time, the financer or the equity shareholder can easily participate in the company’s asset.
When you decide to do business, registration of the company is a vital step. Your company will get corporate identification after completion of the registration process. The ministry of corporate affairs will allot a number to a particular company. That is known as the corporate identification number.
Following are some of the advantages of a registered company:
- Customers and clients dealing with a business organization will always look for the registration of the business. This denotes the authenticity of the enterprise.
- It is only after the company’s registration that the current account can be opened. As a result, the company can accept its payment from its clients.
- If you want to avail bank loan for your business, it is mandatory to show some legal documents. The company’s registration number is important
- Once you have the company’s registration number it is quite easy to track the expenses of the business and separating the same from the personal expenses will be easy
- The company is a separate legal entity. Thus, it does not belong to anyone. It has a seal that denotes its identity with perpetual existence.
Some of the young entrepreneurs have an opinion that the process of registration is complicated. But, it is incorrect as the government has made it very simple. Even if two people wish to form a company with their mutual consents, it will be possible. The registration process will be completed based on their KYC documents. Also, the process won’t take much time. You can get your companies registration papers in your hand just in 15 to 20 days.
Role of Indian Chambers of Commerce:
The Indian Chambers of Commerce plays a vital role in the growth of traders and the business operating within the nation. The body also keeps track of the sustainability of the internal trade within the nation. The Chamber of commerce keeps on coordinating with the government agencies and also approaches the state government directly. Their contribution includes assistance in the policy-making which ensures all interests of the traders within the industry. Some of the vital functions include:
- Helping the agro products – Many businesses are based on agro products. The chamber of commerce acts as a mediator between the cooperatives as well as farming associations. The organization also helps such societies to sell agricultural-based products.
- Interstate transport – The business also involves the transportation of goods to various places and even to the state borders. Lots of logistics are involved in the process of transportation. The chamber of commerce help that business with the transport policies, e- waybills, insurance, etc
- Metrological assistance – The law related to the good’s weight as well as measures are formed by the chamber of commerce. The law is made to ensure, neither the trader nor the customer gets cheated during the process of trading. FICCI is the body that ensures proper labelling and warning within the packing material.
- Taxes and Levies – Consultation is always done among the Indian Chamber of Commerce when there is a talk about taxes. This is just due to the reason that the taxes from the traders and consumers are one of the major sources of the Government’s income. Also, when the law of GST was levied, bodies such as ASSOCHAM, FICCI played a vital role. The company has to pay income tax every year.
- Labour legislation – There are frequent discussions among the chamber of commerce as well as the Indian government about the labor legislation. Within the trade industry, labor law plays a vital role. To maintain peace within the workforce the representatives work effectively.
Also read: Internal Audit and its Value to the Organization
The required list of documents:
If you are going to set up your businesses in India, there are some documents that you need to produce under the company’s act 1956. Following are the documents:
1. Memorandum of Association – This is one of the most important documents to be submitted by the founders and the members involved in new company formation. This is the document in which the objective of the company is mentioned. The Indian government has made strict laws concerning the formation of the company in India. Here, it is clearly stated that the formation of the company will not be possible without the memorandum of Association. This has several clauses stated under:
2. Registered office clause – This is the clause in the company’s registration document where the name of the state and the place is mentioned where the registered office of the organization is proposed to be located. The exact location is not required at the time of producing the document to the authority. But, the same must be communicated within 30 days of the time when the company is incorporated.
3. Name clause – As the name suggests, it is the clause where the name of the company is mentioned. It is based on this name that the organization will be known to the rest of the nation. It is based on the name clause that the Digital signature of the company will be made. This can be stated as the first step in the formation of the company.
4. Object clause/objective clause – This is one of the vital clauses mentioned in the Memorandum of Association. According to this, the purpose of the company to be formed is not entitled to take up the activity legally. Again this is beyond the subject stated in the clause. Again this object clause is further divided into the below mentioned two clauses:
- The main clause – According to this clause, it must be observed that the act that is either incidental or essential which is needed for the fulfilment of the main clause is deemed to be valid. But, this may not be specifically mentioned in the sub-clause.
- Other objects – This includes the objects which are not mentioned in the main clause but are always there in the sub-clause. But, the company can pass a resolution and undertake business according to the clause mentioned within the sub-clause. The resolution to be passed should be either a special one or the ordinary and get approved by the central government.
5. Liability Clause – This is the clause where the liability of the members is stated clearly. This will be decided based on shares owned by each member operating within the company.
6. Capital clause – This is the clause where specification about the maximum capital is mentioned. This is on this capital amount that the company will be able to raise its funds. The share capital will be mentioned in this clause. The company will be authorized to raise the share capital with the division among the shares. For example, if the company has the share capital of Rs 50 lakhs, it will be divided into 5 lakhs shares of Rs 10 each.
7. Association Clause – This is the clause in the company’s Memorandum of Association where the members of the signatories of the company give the consent about the purchase of shares. The Memorandum of association must be signed by seven people when it is a public company and is two people when it is a private company at the time of company formation.
8. Articles of Association – This is an important document of the company where all the rules about the internal management of a company will be mentioned. But, it is very important to note that all these rules are subsidiary to the memorandum of association. There should not be any contradiction of the rules in both Memorandum and the articles of association.
9. Consent from proposed directors – The directors of the company will decide on several factors before and after the business completes its incorporation. These directors will provide written consent about the pay for the qualification shares.
10. Agreement – Every company has a deed or an agreement where the company proposes to enter into a deal with the individuals who are appointed as the directors and the managing directors. This will be submitted to the registrar of the company with regards to the formation of the Company in India. The documents related to the director or the whole time managing director should be submitted to the registrar at the time of the company formation.
11. Statutory declaration– This is the declaration by the company to be formed which states that, the entire legal requirement associated with the registration of the company is complied with according to the act of company formation in India. Also, there is a signing authority of this document. Either this will be signed by the advocate of the high court or the chartered accountant of the company.
12. Registration fee– Along with all the documents, it is mandatory to pay a registration fee. But, this fee is not the same for all the organizations. It mostly depends on the authorized capital of the company. Once you pay this fee to the authority, your final step of company formation will be completed. Once this step is completed you will be provided with the certificate of Incorporation. Your company will be in existence just after this.
Also read: ESI and PF Registration – Procedures and Its Benefits
Incorporation of a company:
Once the completion of all the formalities related to the document submission of the company takes place the next thing that becomes vital is the Incorporation of the company. If you are the owner or the director of the company, it is mandatory to fill the application with the registrar of the company. After this, a plan will be made about the establishment of the registered office. This application must include the documents which state the identity of the premise as well as the directors of the organization.
The process of company formation/Incorporation of the company include:
- Memorandum of association duly stamped and signed
- Articles of Association
- The consent in writing from the proposed directors
- Agreement with the managing directors
- A copy from the registrar that states the name of the company
- A document that states you have paid the fee for company registration.
Read more: Key Metrics in Company Financials
Company registration online:
Today everything has become digital. Even if you have formed the company with all the necessary documents a decade ago, it is important to see whether your company has any existence online. People are now too dependent on the internet and the information furnished through the worldwide web. Thus, customers and clients willing to know about your company must have the information online. Following are the process for company registration online:
1. Online Registration of Private limited company
If you are one of the partners of the private limited company, it is important to know about the company registration online of a private limited company. There is an official website by visiting which you can simply do your company registration online. It takes 12 days to complete the registration process.
The process can be completed in these simple steps:
- Upload all your documents online including the Permanent Account Number (PAN), bank statements, tax returns, brand name and stamp duty
- Make the payment Via secured payment gateway
- Track your application status online
- Get DSC, AOA, DIN, MOA and RC
2. Online registration of limited liability partnership firm
For this type of company 21 days registration process takes place. The following are the steps of company registration online for the limited liability partnership firms.
The process of online registration is as follows:
- All the documents related to the company’s registration must be uploaded. This will include bank account, corporate identity, registrar of companies
- Once all the documents are received, the representative of the company can easily make a payment through the secure payment gateway
- The third step is tracking the application status online
- You can then get the DIN, DSC, MON, AOA, and RC
Have a good plan before starting a business
A business cannot be started instantly. A good plan and forecasting are required before starting an organization. The first thing which an entrepreneur must decide is the type of business. Should it be a sole proprietorship business/ partnership business/ company with shares holdings? If you are willing to start a partnership business, the profit-sharing ratio must be clear. The decision about the product/ services to be carried on within the business is an important consideration. The tax law must be known by the partners and the directors of the company. If you don’t have enough capital, looking for investors is an important part. Information technology must be deployed at the time of the operation.
You must survey the product or services likely to be promoted with the registered trademark. This will help you to get an idea of the customer’s willingness to avail of the product or services you are planning for your business entity.
The legal part is very important before starting a business. You must plan to employ a company secretary to manage several accounts of the entity. A legal person from the law firm must be consulted about several legal affairs. The corporate tax, goods, and service tax are two important taxes associated over here. In certain cases, double taxation is levied. You can speak to the Chartered accountant of the company to avoid such taxes. Whether and at what stage you should put the name of your company at the stock exchange is a vital step. The business also needs to pay the turnover tax. There are some schemes with the help you can get some of the taxes waved off.
Today, every company must have an online existence. Thus, an official website is vital. It is always a wise act to choose among the good hosting companies. You can easily get the Domain name as per your choice. The registered user can log in with the user name and password by the hosting company. Along with the online registration of the company, having a website with decent content and pictures will be an added advantage. People staying in various parts of India can easily have access to the website from anywhere. The feedback and testimonials of the customers will give the new customer a positive view about the particular company.
Today, the government has made the company registration mandatory. Not only in hardcopy, even there should be an online registration with the number generated digitally from the authority. The advantages of registering online are many. It will make both the company and the customers secured. There is no chance of any fraudulent activity. It builds the goodwill of the company as the customer can easily see the registration details from the official website. It brings greater stability and a bigger commitment. Chances of getting credit from a bank will increase.