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Step-by-step guide on how to register a company in India
Before you think of setting up a business in India, there are certain ground rules you need to know and comply when registering a company in India. Apart from having a concrete business plan and available funds, the last state of turning your dream of starting your own company into a reality is, doing the registration process. A variety of businesses are required to follow certain procedures. You can set up your business as a sole proprietor, or as a partner in a LLC company. You can register your business in partnership, or a private company. These are the basic categories of businesses that you can register with a legal authority that deals with registration of companies.
Let’s start listing the steps involved, so you can learn thoroughly how to register a company?
- Worth Reading: How to Start a Business in India?
What is covered here?
Every type of business is registered under a certain act and complies of certain guidelines and parameters to be fulfilled for the same. You will need valid documentation, funds, and experience to be able to fit into that category to be able to register as a company. This report will give you a walk through in simple language on how to register a company in India. Without worrying about the legal jargons used, this report will be useful for anybody wanting to register a company in India.
Why should you read this report?
Once you are clear if you want to take up your business independently or in partnership, you can use this report as a tool to know what kind of registration you would require. Most of your dilemmas with regard to registration process will be addressed through this report. When you read this report, you don’t have to browse for basic information on registering a company in India, as this report is well structured and comprehensive and will give you valuable insight on the same. Reading this report will also save a lot of your time and money, as you don’t have to visit a legal entity to gain this basic information about registering a company.
Planning is the key
Therefore, even before making a business plan, your first thoughts that you must explore and decide is what kind of business entity you need for your company. This depends on the kind of investment you would like to make, the number of people you would like to have working for you, and also, your margin for future investments that you would like to make. Apart from business model, if you are also able to think about the growth model, that is, planning for the next five years, you can use this report as a yardstick to decide what kind of category you would like to register your business. Once you have clarity on these factors, going for the registration process is only a matter of time.
Almost everything requires a registration with concerned authorities
Whether you are taking your business online, offline, or both, or if you just want to be a supplier, there are certain processes that you will have to register. Even if you want to have a warehouse that stocks products for imports and exports, you must go for a registration of your business. This report will cover all the possible categories for registration of a variety of business entities in India.
What is expected from you?
Apart from knowing the process of registration, no matter what is the size of your company, you most certainly need an accountant; also, you yourself must have primary knowledge of book keeping, and most of the ethical business practices with regard to your business. When the registration documents are in place, you will not be required for paying penalties and you will not be liable for not completing the business registration process. Registration of your business is the first thing you must do, in order to protect your business from any external damages or allegations.
How to register a Sole Proprietorship in India?
Every business entity that is registered comes with a certain pros and cons. As a sole proprietor you have certain advantages as well as disadvantages. Every business entity has a certain legal structure. Not all sole proprietor businesses need registration. Here is a simple overview to give you a heads-up on the advantages and disadvantages of sole proprietorship.
- You get to keep the complete profit of your business.
- You have full control of your business in terms of creation, ideation, marketing, sales, and expansion.
- You will require less investment to start a business entity in the category.
- The registration process of a sole proprietorship is simple.
- The investment needed to complete this process is less.
- A few businesses operation as a sole proprietor entity might not require licensing for their businesses.
- No charted accountant is needed for a sole proprietorship type of business entity.
- However, as a sole proprietor if you want to have a physical business establishment, and sell products and services, then, a few registrations and licenses are required.
- Sole proprietorship has limited options in terms of growth.
- You will be accountable and answerable for all kinds of problems arising in your business.
- The liability of this kind of business is unlimited. That is, you have to pay financial debts of your business from your personal account, as you alone are accountable to start this business. It could cost your properties and personal assets if you are held liable for any kind of practice.
Steps for Registering a Sole proprietorship
You will need the following registration and documentation in place to operate a business as a sole proprietor.
- A PAN card in your name or the name of your business. This is required to file tax returns for your business. When you apply for a PAN card you will get it within seven days. It will only cost you ninety four rupees, when you apply it online.
- TAN number (Tax Collection and Deduction Account Number) if and only if you are collecting a tax for your products or if you are collecting tax from the salaries of your employees, then you will need a TAN number.
- If you do not apply for a TAN, you will have to pay a penalty of ten thousand rupees. Even if you are paying a commission to someone, you will still need a TAN number. Unless and until you have a PAN card, you cannot apply for a TAN number.
- You can also apply for a TAN by filling Form No. 49B. The fee for application is fifty five rupees, and the fee for processing this application is sixty two rupees.
- The payment of the fee can be made by demand draft, credit/debit card, net banking, and cheque. These are payable in your respective cities where you want to start your business.
- You must be authorized to pay these amounts. You must pay these amounts from your own bank account only.
- NSDL of your respective cities is the governing authority to apply for TAN. You can visit their website online as well and fill the forms.
- If you apply by taking a form, then you will need an APPLICATION FOR TAN that has the application number and the demand draft of the amount for applying for this number, posted to these authorities. This takes fifteen days after the amount of the application and registration fee is deducted.
- If you do this online, your receipt will be notified by email and you will get a TAN number within five days. You should use only one registered TAN number for all of your businesses. Having more than one registered TAN number is illegal in India. You can also make modifications to this TAN number, such as, your business address, name, etc. You can also cancel your TAN number anytime you want.
- The only time you need to pay a service tax registration for this kind of business entity is if your business makes a profit that is more than nine lakhs. If it crosses the said threshold, ten percent of your profits as a service tax will be levied. For this you have to fill a form called, ST-1. When you visit the government website for service tax, and fill an online form and get a service tax number even if you have not cross that threshold of nine lakhs.
- VAT registration. If the goods and services that you are selling in the name of your business are taxable, then you need to register for a VAT. A VAT registration works for buying and selling goods within the state. If you are buying and selling across different states in India, then you will need a CST registration. The fee for VAT registration is different for each state. If you have more than one business, you must fill VAT-3 form. All this information is available in the government websites for VAT registration of their respective states. The commercial tax department is responsible for this kind of registration.
- Once you set up your shop or establishment in any area, within a month’s time, you must apply for the shop and establishment license to the inspector of that area. This statement that you send to the inspector will contain your name, the name and address of your business etc. The processing fee for this license is usually between one hundred and twenty five to twelve thousand five hundred rupees, depending upon the number of employees and manpower you are employing for your business. You will get a license certificate immediately, once your application is accepted.
- If you are selling products internationally, you need an Importer Exporter Code which is similar to your PAN number. It is issued by Ministry of Commerce in India for companies as well as individuals who want to sell their products internationally. It takes two hundred and fifty rupees for registration.
- Professional tax is a kind of tax that you must pay if you are employing anyone for your work. A few states in India do not have this tax requirement. While in other states, you can pay a fee of two thousand five hundred annually.
- If you have employees working for you in more than twenty numbers, then you will need to apply for employee provident fund. This registration is done with the Employee Provident Fund Organization. It requires no fee register with this organization. This expense is deducted from your tax that you pay.
- The ESI or the Employee State Insurance registration is done for no fee even if you are employing only ten employees for your company. This has to be done to safeguard the health of your employees. The deductions for the same are decided by the National Government.
All the above mention points are very important to know for you if you are looking to know how to register a company?
So, whether you want to own a shop or a restaurant, or take your business online, then these are the licenses you need in order to sell any product or service online or offline within India.
The next thing you need in place as a sole proprietor or any company is to have a current account in your name or the name of your company in any nationalized banks.
The following is the procedure to obtain the current account from a bank
- You need a service tax registration number and a VAT/CST number along with a letter from a CA stating the nature of your business, letterhead having the firm’s name and address, stamp in the name of the proprietor.
- After you submit all these documentation and registration copies to the bank, you can obtain a current account for your business. You are required to have a minimum bale ranging from give to twenty five thousand in this account.
The next thing to look into is the Intellectual Copyrights, such as, Copyrights, Trademark, and Patent Registrations. When you register your brand name or label name as a Trademark, it means that nobody else can use that name to operate a business with the same name such as you business name.
If you are an artist, a musician, an author, etc, who has created work using your mind and thoughts, then you, will need a Copyrights registration for all of your published and unpublished works. This way, you can protect your work and talent from being misused. Patent is for inventors and scientists in the field of engineering, technology, and many other industries that deal with machines, chemicals, and manufacturing processes. For instance, Apple has patented iPhones. Only Apple can produce iPhones, since it is their patented product. No other company is authorized to produce this product.
Before filing for a trademark registration, do a research that no identical name for trademark exists for your category of business. If your suggested name is available, you can directly click on the IP website by the Government of India and process your request by selecting the applicable categories for your Trademark. Most of these trademarks are valid for ten years after which you can renew the trademark. A trademark can be registered for your brand, label, products, logos, slogans, titles, words, letters, sounds, colors, and dimensions of the letters that you use as the name of your label or brand.
Many legal service firms do the trademark, copyright, and patent registration on your behalf. But their charges to do the same are high compared to the fee you pay when you directly register. You can fill a form, Form XIV to file for a copyright of your product, business, service, etc, and submit this online form on the Copyright Office government of India website. You can save all your artistic, dramatic works in this category, make the payment through the payment gateway and get the necessary copyright on your works. It could cost anywhere in-between five hundred to forty thousand depending upon the nature of your work. Most of the entertainment and software companies go for copyrights registration.
If you are a manufacturing company that has invented a solution or a product, then you can patent that product. The Indian patent office does the patenting procedure for your products and services. It takes twenty to thirty thousand approximately to perform the search and patent your invention. It usually takes eighteen months from the date of application to receive the patent for your invention.
Therefore, whether your business entity falls in the category of sole proprietorship, partnership, LLC, or any other type of business category, these are the basic registrations you need before physically establishing and operating your business.
Partnership is a kind of business entity where you need all the registrations mentioned previously in this report along with the names and details of your business partners. Whether registered or not, all the partners involved in the business share the profits, losses, and liabilities equally. Even the business model of a Partnership, personal assets of all the partners are at risk.
Registration of a Limited Liability Partnership
Before starting this part of the article, we must inform you that while searching for information on how to register a company in India, deciding what type of establishment should you use is very crucial.
This is one of the best options to go for if you want to protect your personal finances, properties, and assets. An LLP type of business structure has many advantages over a general partnership. When you start an LLP, you can have as many partners as you want and you don’t have to pay the Dividend Distribution Tax or the double tax when you share the profit among your partners, for each partner. Registration is easy and costs less without much interference from the government bodies of commerce, especially, with regard to attending annual general body meetings etc. Anybody can join, leave and transfer the ownership of the company in this business structure. Auditing is not required unless your company makes a turnover of a minimum of sixty lakhs.
Rules and steps for registering an LLP
- It requires a minimum of two partners to form an LLP. It is best if all the partners who join your LLP have a DIN (Designated Partner Registration Number). This holds all the partners liable for any kind of penalties and issues that arise from running this business.
- You must fill the DIN-1 form to register for a new LLP. All the partners are required to fill this form as and when they join the LLP.
- A CA will require registering a DSC (Digital Signature Certificate) for your LLP. You will also be required to fill DIR-3 and DIR-6 forms with all the particulars duly filled in that form. Only after all these applications are approved, you will get a RSC certificate registration done for your LLP.
- The same is the process to register Directors, Managing Director, Secretary, and other practicing Professionals in their respective fields.
- If you want to convert your partnership into an LLP, you have to fill Form 1 and Form 2 to incorporate a LLP. This has to be approved by the ministry of the corporate affairs. Once this is approved, then you can go for filing the LLP agreement in Form 3. You will get Limited Liability Partnership agreement within thirty days of application.
- You can file this online when you log onto the MCA government website. You can file an e-form by submitting all the scanned documents and providing a registered digital signature. You can make the payment online through the payment gateway.
A LLP should be registered with a ROC (Registrar of Company). The name that you choose for your LLP must be approved by the ROC. You have to fill a Form 4 to get the notice of appointment of partners. After this registration is done, you need a PAN card number and a TAN number registration done in the name of this firm. This can only be done after the registration of the firm process is completed, and not before that.
Your LLP agreement has all the details about you business, such as, which partner is contributing how much money, what is the percent of their share in the profit, for how long they will be staying as partners in the company, which department of the business will be managed by which partner, and how much time they will be contributing towards this business.
A point to be noted here is that, you can convert a partnership into an LLP but there is still no provision to convert an LLP into a private company.
How to Register a Private Limited Company?
It is good to have an insight into this kind of a business entity before going in for registration. The basic structure of a private company has two directors. The stake holders and directors are not allowed to transfer their shares to anyone in the company. A private limited company cannot have more than fifty stakeholders. The shares of a private limited company cannot be purchased by general public. Only members and directors and their relatives can fund this company.
- You have to register with the Ministry of Corporate Affairs (MCA). The government website for the same is available online and you can fill the INC-29, Integrated incorporation Form-29 online. Since the month of May 2015, you don’t have to fill a separate DIN form to register the directors of your company as this form is integrated with the INC-29 form.
- Now you have to go through a single registration to register your company as a private limited company. Though all the forms, such as, DIN, DSC, Name Approval form, Final Incorporation Filings form, PAN and TAN are all incorporated in a single form of INC-29, all these sections are processed separately.
- Now, as per the new rules, the entire process of application only takes two thousand rupees and gets processed within fifteen to thirty days. While the old procedure required you to fill the form in four separate forms and each form needed to be approved first in order to process the next form, with the new procedure you don’t have to go in cycles. You can submit all forms at once and only wait to get your company registration number.
- All the procedures to register a company in India are more or less similar, be it LLP or a private company, with only slight variation in their procedures and fee.
- In brief, these are the following steps to register a private company
- You will need a minimum two directors and an investment of two lakhs, where in one lakh goes as a share capital and the other lakh goes in to the company’s account.
- You then have to apply for DIN and fill the DIR-3 form and also apply for DSC.
- You have to pay to search and see if the name of company that you wish to register is already existent or not. If it is already existent, then you cannot use this name and you have to come up with some other name and perform a search again to check if the name has not been used and is available. After search results for the proposed name of your company are clear, you can register your company with this name.
- To perform this search, you have to file a separate application called Company Name Availability. Once this search is clear, you can register the next step.
- You then have to draft the Memorandum of Association (MOA) and Articles of Associations (AOA). In this MOA you are required to define all the business activities you will perform with the outside world, and your association with businesses outside of India. It also has an object clause which states if your will allow or restrict your board of directors to be involved in day trading other than the intended business. The object clause is stringent and you will have to decide these guidelines in a way that does not permit unlawful use of power or resources within or outside the business set up.
- The articles of associations draft states the responsibilities the directors of your company will have, the level of control the stakeholders of your company can have on these directors with regard to running the business, and also the activities of your business that will be undertake under the name of your business.
- The MOA and AOA must be drafted carefully as they define what activities your business can permit and what it does not with regard to management, products, services, policies etc.
- The next step is to register with the ROC( Registrar of Companies)
- There is a fee to register with the ROC and some fee is required to complete the stamp duty as well. The fee for each process is standardized by the respective governing authorities.
- All the above documents are verified by ROC and upon verification are approved. You will be given a Certificate of Incorporation by ROC. Post this certificate; your company will be officially registered as a private company.
- Other proof of documents which are required for this registration are, ID proof of all the directors, managing directors, PAN card, and their address proof. If you are using a certain establishment for conducting your business, then you have to produce the latest electricity bill or the telephone bill of that property that you are using for your business. If you can also provide the rental deed of the property or the ownership deed of the property as well as the latest tax receipt as the identity proof.
- There will be two kinds of charges that you have to bear to register a company in India. They are government charges to complete the registration process of your company with the Ministry of Corporate Affairs, and second the professional charges that you pay to a charted accountant, and company secretaries to process digital certificates, attestation etc.
How to Register an Import and Export Business?
If you are importing or exporting either goods or services, then there are different procedures for registering importing/ exporting goods and importing/exporting services. To import/ export services, such as, providing consultation, writing, graphic designing, programming, etc, you need the following registrations.
- A PAN number
- Bank Account in your name as a sole proprietor
- TAN number if you are collecting a tax for your service
- Professional tax if you are hiring people and their services from outside
This applies only if you are importing goods or services. If you are exporting your services, these documents will not apply to you, but you will only receive a FIRC (Foreign Inward Remittance Certificate) from your bank and you can show this to the service tax authorities that you are getting paid from foreign companies, so Indian tax is not applicable to you.
If you are Importing or Exporting Goods, then you need the following registrations.
- Importer Exporter Code (IEC) and authorized dealer code that specifies if you are importing and exporting by sea or air.
- If the goods that you import or export fall under Excise Duty, then you have to register with an excise duty department for your products and services. This is an indirect form of tax for the goods that you import and export.
- But, if you are manufacturing and exporting products across the border of India, the Indian government supports this, as doing so will boost the Indian economy. If you fall under this category, then you have to register with Registration Cum Membership Certificate of the Export Promotions council in India.
- If you own a shop that sells imported items, then the registration for the same falls under the jurisdiction of the location of the shop.
- You also need a sales tax if you are importing goods.
How to register as a Franchise in India?
You can go to franchiseindia website and select the kind of franchise business you want to set up in India. You can choose a franchise business as per the brand or the business model. For this kind of business, you have to initially invest some amount as an initial fee and service fee payment. You have to pay fee towards management of this franchisee, to attain the royalty for using trademark of the Franchiser, etc.
The agreement between the Franchisee and the Franchiser is covered under the Contract Act and Specific Relief Act. You as a franchisee must always read the terms and conditions before signing this contract which cover damages and breach of contracts etc. In this kind of business, you do not own the trademark or copyright registrations. You only need the following licenses and registrations to operate the business as a franchise.
- Current Bank Account
- VAT registration
- Shop and Establishment act registration
- Legal structure registration, such as, LLP, sole proprietorship, or private company registration, etc depending upon the legal structure of your business entity.
- PAN and TAN number registration.
- DIN and DSC registration if required.
The rest of the registration procedure is same as the registration of any other business entity. You will, however, have no control over the business model, the business structure, or the brand of the franchiser. You only have to run a business under their banner and gain maximum profits. Training the staff and management is your responsibility.
Up until this part of the article should be enough for someone, who is in search of information on how to register a company in India for any general type of company. But if you want to start an eCommerce company, read below:
How to register an eCommerce company?
An eCommerce company can be run as LLP, public or private company, or as a sole proprietorship. Depending upon the business entity you choose for an eCommerce company, you need the respective registrations done, which are already mentioned in this report for each category. Additionally, you also need the following registrations done.
- Domain name registration
- Payment gateway
- MOA(Memorandum of Association)
- Articles of Association
Once you submit all the documentation and complete the registration process of the eCommerce business, you will find mainly four payment gateways available in India, such as, CCavenue, PayU, EBS, and DirectPay. You can also use Paypal for your business, but PayPal has to take the license from RBI to collect revenue on behalf of your business.
Apart from this, if you are selling foreign products on your online portal, then that foreign brand needs to register with the RBI and also comply with all the cyber rules in India. For this, you have to publish the web private policy, the terms and conditions of use of the website, and products the users purchase.
How to register a retail store in India?
If you want to build a brand in any sector where you are able to sell your products and want to do this from a physical establishment, then after choosing your business structure, whether as a sole proprietor or a private company, you have to follow all the procedures for the same as they are the standard procedures to register these kinds of business entities in India. No matter what legalized product you want to sell in India, to register as a retail store or a branded retail store, you need the required licenses and registrations to operate a retail business. This is same as starting any shop and registering it as a company. Additionally, you need the trademark and copyright registrations to protect the uniqueness of your brands and products. If you are selling imported products in your retail store, then you need the IEC code and the authorized dealer code in India.
The marketing and inventory for your retail store is something that you have to plan and decide. You must also plan your revenue model for this kind of set up. All the tools and software that you will be using for this business must have a registered license. For instance, if you have an advertising firm that designs fliers, posters, business cards, etc, apart from having the registrations required by the government bodies, you also need valid registrations and invoice receipts of purchasing the software that you will be using commercially for your business.
Software licensing is the most crucial part of such a business. Whenever the license of the software that you use for your business expires, you must renew it as long as you are using that software commercially. Using software from an unauthorized dealer to conduct such a business is considered illegal and there will be heavy penalty for doing the same.
Therefore, you can say that apart from investing in registering for government and professional services for registration, you must also register with the respective software companies whose software you are using to create products and make a sale.
Registering for a One Person Company
This is the latest form of business entity that has been introduced by the Ministry of Corporate Affairs in the year 2013. This kind of a business entity is treated as a separate entity. In this entity the business must be registered under the name of the single person only. This kind of company can be a LLP or a private company that can have a maximum of fifteen directors. It is registered under the Companies Act 2013. During the process of registration for an OPC, a nominee must be appointed so that they can take the role of the one person in case of death of this OPC member.
This business structure has many advantages. You can operate as a small or a midsize company, and also expand internationally with the identity of a corporate. So, even though your capital investment to start this company is less, you can still have a global identity of a corporate. This means that the assets and personal properties of an OPC member are protected, and they have easy access to loans, markets and other resources. You can also save on tax when you have this kind of a business identity.
Doing business in India nowadays is very easy, so when you are looking for info on this topic, do also review how to register a company in India for one person. Because sometime you may just be starting with one person and small budget. So, an OPC can be a really good idea in that case.
You need the following to register as a One Person Company
- INC21 form to register as an Incorporation of One Person Company
- DSC (Digital Signature Certificate)
- DIN (Director Identification Number) for the director or the number of Directors you choose of an OPC.
- Like private limited companies end their names with ‘pvt,’ the One Person Company too must end the name of their company with ‘opc.’
- While proposing the name of the company for an OPC, you are required to give three names to check for availability, and these names must describe the objects of your business. You cannot use certain names under the Prevention of Improper Use Act 1952 for naming your company.
- After checking for availability, you will be done with the Company Name Approval process.
- The name that you choose must be unique must not exist or be similar to other companies registered with ROC.
- You have to upload all the required documents that are necessary for either LLP or a private company, which ever business structure you are using to operate an OPC. It takes sixty days to get the verification and registration done once you apply for an OPC and get the Company Name Approval.
- You can convert a sole proprietorship and a private company to an OPC. It requires minimum one lakh of investment to start an OPC.
You can choose from a variety of business models or business structures to run your business based on your capacity to invest, the man power that you want to train, and also your vision of growing your company in future. All these factors need to be in place when you are deciding upon a business structure.
Most of these business structures have more or less similar procedures and forms to register as a company in India. You however, cannot have more than one OPC and also a nominee in your OPC is not allowed to be a nominee in another OPC. If you are not an Indian resident, you cannot form an OPC. Only when an OPC has a net worth of two crores, it can be converted into a private limited company. Also, you can hold board of meetings only once in a half year, unlike that of a private limited company. An OPC is not allowed to hold an annual meeting like the private limited companies.
The procedure of registering most of different kinds of business structures is simple, as long as you have all the documents in place and these documents are submitted as per the compliance of the government regulations and in a few cases, cyber law compliance and regulations. You cannot be a minor to be able to register as a director of any of these business structures mentioned in this article. You have to cross the age of eighteen years to be nominated as the director of any company.
There are many firms and forums available online to help you with this process if you are unsure about applying directly using the online registration portals. If you are new to these procedures, then this report will give you a clear idea on a variety of business structures and what business models you can choose to register your business. Once you have done all the legal documentation, which should always be your topmost priority if you want to run a business, you can take care of other operations of your business hassle free as you can work with a free mind without having any dilemmas or doubts about the procedures.
If you are a start up, you must never ignore this aspect of registering your business, as doing so, you will not be able to protect yourself or your business when faced with any legal liabilities. Registering your company, no matter how small is your investment, is the best way to safeguard your business from any kind of mishaps and damages. There are separate programs and registration processes if you want to start a small scale industry. But, for now, this report is intended to cover registration processes of all kinds of business structures in India. This report has the latest information on the business models that are available and also the new rules and regulations that are applicable to complete the company registration process.
You can keep this report as a reference if you are a start up, instead of getting a paid advice from a legal firm to know about the process of registering a business. Reading this report will give you clarity and also save a lot of your time and money searching for company registration information in India.
We hope we have been able to cover all the aspects of how to register a company in India.