Starting a business in India requires compliance with a legal framework, which is designed in a well-structured approach to ensure compliance with legal and regulatory frameworks. Incorporation is the first crucial step in setting up a company, and it involves several procedural steps and documentation requirements. This article will discuss in detail the various elements of a checklist for incorporating a company in India, covering all essential elements, which include legal requirements, documentation, procedural guidelines and various other miscellaneous requirements.
Types of Companies in India
Before incorporating a company, it is important to choose the appropriate type of entity. The available options include:
- Private Limited Company
- Public Limited Company
- One Person Company (OPC)
- Limited Liability Partnership (LLP)
- Section 8 Company (Non-Profit Organization)
- Sole Proprietorship
Each type of company has its own advantages, compliance requirements, and suitability depending on the nature of the business.
Checklist for Incorporation of a Company
1. Pre-Incorporation Checklist
a) Select the Business Structure
- Decide the type of company based on business needs and growth plans.
- Understand the compliance and tax implications of each business structure.
b) Choose a Unique Company Name
- Always ensure that you have chosen a unique name of the company and adheres to the Companies Act, 2013.
- Conduct a name search on the MCA (Ministry of Corporate Affairs) portal.
- Reserve the company name using the RUN (Reserve Unique Name) service on the MCA website.
c) Identify Directors and Shareholders
- Minimum 2 Directors for Private Limited Companies, 3 for Public Limited, and 1 for OPC.
- At least one director must be an Indian resident.
- Shareholders can be individuals or entities.
2. Obtain Digital Signatures and DIN
a) Digital Signature Certificate (DSC)
- Required for directors and authorized signatories.
- It can be obtained from authorized certifying agencies.
b) Director Identification Number (DIN)
- Every director must obtain a DIN by filing Form DIR-3 with the MCA.
3. Preparation of Incorporation Documents
a) Memorandum of Association (MOA)
- Defines the company’s objectives, scope, and operations.
b) Articles of Association (AOA)
- Lays down the rules and regulations for company management.
c) Declaration by Directors and Promoters
- Self-declaration regarding compliance and eligibility to act as a director.
d) Address Proof and Utility Bills for Registered Office
- Rental agreement and NOC from the landlord if the property is rented.
- Various types of proof like electricity bills, water bills, or property tax receipts for the business address.
4. Filing for Company Incorporation
a) SPICe+ Form (Simplified Proforma for Incorporating Company Electronically)
- SPICe+ (INC-32) is the primary form for company registration.
- Covers name reservation, incorporation, DIN allotment, PAN, and TAN registration.
b) AGILE-Pro Form (INC-35)
- Mandatory for GST, EPFO, ESIC, and bank account opening.
c) e-MOA and e-AOA
- Electronic versions of MOA and AOA must be filed along with the SPICe+ form.
5. Post-Incorporation Compliance
- Obtain a Certificate of Incorporation: Once approved, MCA issues a Certificate of Incorporation with the Corporate Identification Number (CIN).
- Apply for PAN and TAN: PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) are issued along with the Certificate of Incorporation.
- Open a Bank Account in the Company’s Name: Submit incorporation documents, PAN, and other required proofs to open a business bank account.
- Register for Goods and Services Tax (GST): Mandatory if your company turnover exceeds the limit of Rs. 40 lakhs (Rs. 20 lakhs for states which fall under special category) or for specific businesses.
- Compliance with Shops and Establishment Act: Register under the Shops and Establishments Act as per state-specific laws.
6. Other Regulatory Registrations (If Applicable)
- Import Export Code (IEC) for businesses involved in international trade.
- Professional Tax Registration (state-specific requirement).
- ESI (Employee State Insurance) and PF (Provident Fund) Registration if applicable.
7. Compliance and Reporting Requirements
a) Annual Compliance
- Filing of Annual Return (MGT-7) and Financial Statements (AOC-4) with the MCA.
- Conduct Board Meetings and General Meetings as per the Companies Act 2013.
b) Income Tax and GST Filings
- Timely payment and filing of GST Returns (GSTR-1, GSTR-3B, GSTR-9, etc.).
- Filing of Income Tax Returns (ITR-6 for companies).
c) Maintenance of Books of Accounts
- Maintain proper books of accounts, ledgers, invoices, and records.
- Appoint the auditor within the duration of 30 days of incorporation.
8. Additional Compliance for Startups
- Startup India Registration: Register under the Startup India initiative to avail of tax benefits and government support.
- Intellectual Property Protection: File for trademarks, patents, and copyrights if applicable.
- Employee Contracts and Policies: Draft employment agreements and establish HR policies.
9. Common Challenges in Company Incorporation
a) Rejection of Name Approval
- Ensure that the name proposed for the company is unique and novel and also adheres to MCA guidelines.
- Conduct a thorough trademark search before applying.
b) Errors in Documentation
- Incomplete or incorrect documents may lead to rejection.
- Seek professional help to ensure all filings are accurate.
c) Delays in Processing
- Government processing times may vary; track application status regularly.
- Follow up with MCA if necessary.
d) Compliance Burden
- Post-incorporation compliance can be complex; hiring a consultant may be beneficial.
Conclusion
Incorporation of a company in India involves a well-defined and systematic process that requires a well-planned structure and careful planning which needs to comply with legal policies and various regulations. With the help of following the checklist discussed above, entrepreneurs can ensure a smooth and hassle-free incorporation process. It is always highly advisable to seek guidance from legal and financial professionals to ensure compliance with all statutory requirements and avoid any legal complications in the future to get a better understanding of the regulations, make a wise decision, and avoid unnecessary complexities.
Incorporating a company is just the beginning; maintaining compliance and fulfilling annual statutory obligations are crucial to sustaining and growing the business in the long run.
Frequently Asked Questions
1. What will be the minimum capital requirement for incorporating a company in India?
Answer is simple that there is no minimum capital requirement for Private Limited Companies and OPCs, because it depends upon your type and category of your company which you want to incorporate.
2. How long does it take to incorporate a company in India?
The process usually takes 7-15 working days, depending on document verification and approvals.
3. Can a foreign national be eligible to be a director in an Indian company?
Yes, but at least one director must be an Indian resident.
4. What is the validity of the Certificate of Incorporation?
It remains valid as long as the company complies with regulatory requirements.
5. Is GST registration mandatory for a new company?
Yes, but only if the annual turnover of your company exceeds the limit of Rs. 40 lakhs (Rs. 20 lakhs for states which fall under special category) or for inter-state businesses.
6. Do I need a physical office address for company registration?
Yes, a registered office is mandatory, but it can be a commercial or residential address.
7. Can I convert my sole proprietorship into a Private Limited Company?
Yes, by following the prescribed conversion process and obtaining MCA approval.
