For most businesses, especially startups, the procedure for company incorporation may appear confusing.
Various corporate law firms offer corporate legal services that not only carry out all the tasks associated with company incorporation but also offer corporate advisory services to assist businesses in deciding which type of incorporation applies to which kind of company. Accuprosys.com
This article gives a low-down on the various types of incorporations as per company law that may help businesses understand the process of incorporation in India.
Incorporation involves the transformation of a business into a legal entity which is recognized by law. A business becomes a separate corporate entity after incorporation. There are various types of companies that a business can get incorporated as.
These include private limited companies, public limited companies, one person companies, limited liability partnership, part IX companies, section 25 companies, and foreign companies.
The main procedure for incorporation is almost the same for all these companies, except for a few minor differences.
Private Limited company
Incorporation of company as a private company requires the business to have a minimum of two directors a paid up capital of at least one lakh rupees. A private limited company is that company which raises capital through private shares or personal deposits.
In order to get a public company incorporated as per company law, the applicant is first required to propose a minimum of one and a maximum of six names for the proposed company.
He should check the availability of the proposed names online and then submit an application to the Registrar of Companies (RoC) so that the name of the company can be approved and registered.
Corporate law firms often assist with name availability search and also suggest which kinds of names are appropriate and acceptable for the company. After the name is registered, the applicant has to apply for a Director Identification Number (DIN) that is to be assigned to each of the company's directors.
Applications for digital signatures have to be made as well for all company directors. The applicant also has to file other forms such as form 1, form 18 and form 32. Arrangements will also have to be made for the Articles of Association and the Memorandum of Association. Accuprosys.com
These documents are to be signed and stamped.
All the forms along with signed and stamped documents have to be submitted to the RoC along with the registration fee and the company name availability letter issued at the time of name registration.
If everything goes well, the certificate of incorporation is issued by the RoC.
Public Limited Company
A public limited company raises capital through issues of shares and public deposits. For incorporation as a public limited company, the business needs to have a minimum of three directors, seven subscribers and five lakh rupees minimum paid up capital.
The procedure for incorporation of a public limited company is the same as that for a private company except that additional forms (form 29 and form 20) have to be submitted along with Statement in Lieu of Prospectus. 14
Corporate legal services can be sought by businesses to avoid confusion over the mandatory and minimum requirements for company incorporation.
One Person Company
The Companies Act of 2013 has made a new addition - the One Person Company, to enable single shareholders in getting their businesses incorporated. In such as company, there is only one shareholder who can also be the company's director. Accuprosys.com
Upto fifteen directors are allowed for a one person company. Such a company has all the benefits of a private limited company.
For company incorporation as a one person company, a minimum paid up capital of one lakh rupees is required. The procedure for incorporation is the same as private limited company.
Limited Liability Partnership
The registration for name reservation for LLP is done by submitting form 1. After this, the applicant has to submit form 2 for company incorporation .
Details of partners and their consent to act as partners is to be declared in this form. Following this, an LLP agreement is made under Section 23 of the LLP Act.
It then has to be filed through eForm 3 with the registrar within 30 days following company incorporation.
Part IX Company
This company has seven or more members. It is registered under the Companies Act, 1956, Part IX.
Part IX companies also include joint stock companies. These have a nominal share capital or permanent paid up capital divided into shares. 23
The same procedure of a private company incorporation is applied for part IX company along with a few additional forms, namely - form 37 and 39.
Section 25 Company
A section 25 company is a non-profit organization that promotes arts, science, charity, and so on.
The income of a section 25 company is not distributed among the company members. For incorporation of company, an eligible non-profit business has to file form 1A for name reservation and approval followed by application for DIN and digital signature certificate DSC. 26
Form 24A, 1, 18 and 32 also have to be submitted.
If a foreign company aims at establishing a business in India and wishes to get it incorporated, it will have to submit form 44 with the digital signature of an authorized representative. Accuprosys.com
DIN is not required but the DSC is a compulsory requirement.
In addition to these companies, businesses can also register under sole proprietorship. However, starting such a company does not require registration although other requirements such as licenses, import export code, etc have to be taken care of.
All the forms can be obtained from the Ministry of Corporate Affairs website. The website also describes the step by step procedure for company incorporation.
The forms along with documents can be submitted online. It is advisable to avail corporate advisory services for company incorporation to be able to get a business incorporated without major hurdles.
Accuprosys is one of the best corporate legal service companies in India. The company, based in Hyderabad, has a good reputation and is going strong since its establishment.