This article talks about different entity options to register a business in India, starting from advantages to regulations to costs are detailed out. Majorly, there are 5 types of entities that can be registered while starting up a new business, these are defined in Companies Act, 2013:
- Sole Proprietorship
- Partnership Firm
- One Person Company
- Limited Liability Partnership
- Private Limited Company
Sole Proprietorship
A sole proprietorship is a business that is owned and managed by a single person. It is very popular among the unorganized sector, particularly small traders and merchants. There is no such thing called registration, Proprietorship recognized by other registration. Liability of the proprietor is unlimited and the firm cannot have continuous existence. It should ideally only be considered by small merchants and traders
Important registrations:
- Professional Tax Registration
- GST Registration
Partnership Firm
A simple partnership firm is similar to sole proprietorship for all practical purposes. A partnership firm also requires all the registrations required by sole proprietorship firms. Partnership firms can be either registered with the registrar or remain unregistered. A pan card has to be obtained from the firm and the liability of the partners is unlimited whereas the firm cannot have continuous existence.
Important registrations:
- Professional Tax Registration
- GST Registration
One Person Company (OPC)
OPC is a recently introduced improvement on sole proprietorship firm registration. This gives the promoter an invaluable advantage of limited liability & the company can have continuous existence. OPC has to be incorporated through Ministry of Corporate Affairs. Not even an audited annual returns need to be submitted to MCA. The company can nominate any other person as a director without executive powers. The service charge for this service ranges from Rs. 5000/- to Rs 12000/-
Limited Liability Partnership (LLP)
LLP introduced in 2008, which is an improvement over the general partnership. This gives promoters an invaluable advantage of limited liability & the company can have continuous existence. The company has to be incorporated through Ministry of Corporate Affairs. Not even an audited annual returns need to be submitted to MCA. The service charge for this service ranges from Rs. 6000/- to Rs 14000/-
Private Limited Company
It is the most popular legal structure for business and allows outside funding and also employee stock options. More stringent compliance measures to be followed, hence more credibility. The company needs to appoint an auditor and the audited financial statements are to be submitted to MCA annually. The company is eligible to issue debentures and convertible debentures. The service charge ranges from Rs.7000/- to Rs.15500/-
Company incorporation is streamlined with the introduction of INC-29:
From May-2015, company incorporation can be divided into 2 broad steps
- Obtaining Digital Signature Certificate
- Preparing and submitting INC-29
Government Fees for various types of companies
- One Person Company Rs.6850/-
- Limited Liability Partnership Rs.3167/-
- Private Limited Company Rs.7800/-
Documents Required for INC-29
- Director Identification Number (DIN)
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Affidavit and declaration by first Subscribers and Directors.
- Proof for Registered Office Address. Rental Agreement / Sale Deed.
- Copies of a utility bill of the registered office address that are not older than 2 months.
- If the proposed company name is a filed or registered trademark, then NOC from the trademark applicant or owner must be attached.
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