Company Formation in India
Start a Limited Company.
Separate your personal and business finances.
A limited company is considered a separate legal entity from its owners. It provides limited lability protection for the personal assets of the owners.
What is a Limited Company?
A Limited Company is a legal business structure that is separate from its owners (shareholders) and has its own legal identity.
It is the most commonly used form of business in India.
Based on the business motives, business liability, structure of ownership and management, companies are classified as Private Limited Company and Public Limited Company.
Limited Liability
‘Limited Liability’ refers to the liability of the shareholders limited to the value of their shares. Personal assets of the shareholders are protected in the event of financial difficulties faced by the company.
Separate Legal Entity
A Limited Company is a separate legal entity from its owners (shareholders). It can own property, enter contracts, and sue or be sued in its own name.
Perpetual Existence
A Limited Company has perpetual existence, meaning it continues to exist even if shareholders change or pass away. It does not dissolve upon changes in ownership.
Shareholders and Directors
Limited Company is owned by shareholders who hold shares and is managed by directors who are appointed by the shareholders.
Are you starting a business in India?
Start it as a Limited Company to get more acceptance.
Get your personal assets protected against business risks and losses.
How to register a company in India?
Company registration in India is administered by Registrar of Companies, Ministry of Corporate Affairs. Registering a company in India involves several steps. You can register a company by submitting the required information and documents online MCA21 E Filing system.
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1. Business Structure
Determine whether you want to form a Private Limited Company, a Public Limited Company, or a Limited Liability Partnership (LLP).
2. Company Name
Choose a unique name for your company. The proposed name should not be the same or too similar to another registered company or LLP name. Company name must end the words ‘Private Limited’.
3. Shareholders & Share Capital
Shareholders are the owners of a company. Identify the shareholders and specify the number of shares and their value. There should be a minimum 2 shareholders (Individuals, Companies or LLPs) to form a private limited company.
4. Directors of Company
There should be a minimum of two directors in a company and at least one of them must a Resident Indian. Directors are appointed by the shareholders to manage the day-to-day affairs of the company.
5. Registered Office Address
You need to provide a registered office address for official communications. Proof of address and consent from the address owner should be filed with the Registrar of Companies.Â
6. Memorandum and Articles of Association
The memorandum contains details of the name, registered office, objects, capital, and first shareholders of the company. Articles contain rules and regulations for the internal management of the company.
7. Digital Signature Certificate (DSC)
The first step in the registration process is to obtain a Digital Signature Certificate for all the shareholders and directors of the company. This is necessary for filing the registration documents online with the Registrar of Companies.
8. Director Identification Number (DIN)
Director Identification Number (DIN) is a unique identification number allocated to all the Directors from the Ministry of Corporate Affairs (MCA). Each director of the company must obtain a DIN. DIN will be allocated to new directors along with company registration.
9. Reservation of Company Name
You need to apply for the reservation of the company name. The name should be unique and should not be similar to the name of an existing company name or trademark. The proposed name should also comply with the Company name guidelines as well.
10. Incorporation Filing
Once the name is approved, you’ll need to file the necessary incorporation documents with the Registrar of Companies (ROC). This includes the Memorandum of Association, Articles of Association, KYC of directors and shareholders, proof of registered address etc.
11. Registration Fees & Stamp duty
Pay the requisite fees for company registration. The amount of fee varies depending on the authorized capital of the company. Payment of stamp duty depends on the State in which the company is registered.
12. Certificate of Incorporation:
Registrar of companies will review the documents and if all the documents are in order the Registrar will issue a Certificate of Incorporation. This signifies that the company is officially registered.
FAQ – Company Formation in India
1. What is a Limited Company?
Limited company is the most common form of legal entity in India. It is formed by a group of individuals or entities to engage in any legal business activities.
2. What are the types of business structures in India?
In India, there are primarily four types of companies: Private Limited, Public Limited, One Person Company (OPC), and Limited Liability Partnership (LLP).
3. What is a Private Limited Company?
A Private Limited Company is a business structure where ownership is limited to a small group of shareholders. Minimum two shareholders and two directors are required to form a private limited company. It offers limited liability and has restrictions on the transfer of
4. What is a Public Limited Company?
A Public Limited Company is a business structure that can raise capital from the public by issuing shares. It must have minimum seven shareholders and three directors to form a private limited company.
5. What is an OPC (One Person Company)?
OPC is a type of company that can be formed with only one person as its member and director. It combines the benefits of a sole proprietorship with limited liability. However, only Indian Nationals resident in India can form a One Person Company.
6. What is an LLP (Limited Liability Partnership)?
An LLP is a partnership where partners have limited liability. It combines elements of a partnership and a Limited company.
7. What are the minimum requirements for company formation in India?
For Private Limited Companies, a minimum of two shareholders and two directors are required. For Public Limited Companies, a minimum of seven shareholders and three directors are required. For an OPC, only one shareholder and one director is required. An LLP requires at least two partners and two designated partners.
8. What is the minimum capital required to start a company in India?
There is no minimum capital requirement for forming a limited company or an LLP in India.
9. What are the steps for company formation in India?
Steps for company formation in India typically includes name reservation, obtaining Director Identification Number (DIN) and Digital Signature Certificate (DSC) for directors, drafting the Memorandum of Association (MOA) and Articles of Association (AOA), and filing incorporation documents with the Registrar of Companies (RoC).
10. How long does it take to register a company in India?
The time required for company registration varies, but it usually takes between 15 to 30 days, provided all necessary documents are submitted and all the process happens in normal processing time without any technical glitches in MCA online filing system.
11. Can a foreigner or an NRI (Non-Resident Indian) start a company in India?
Yes, a foreigner or NRI can start a company in India by following the guidelines set by the Foreign Exchange Management Act (FEMA). The
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