Benefits of Company Registration in India

As mentioned above, there are many benefits of Company Registration over other business models. Some of the many advantages of Company Registration with the Registrar of Companies are as follows:

• Separate Legal Entity

A company duly registered is considered an artificial person and has a separate legal entity, which is distinct and wholly different from its members. A company can own assets in its name, incur liability, sue, and be sued in its own name. 

• Limited Liability of Members

The liability of the company’s members is limited and extends only to the face value of shares of the company owned by them. This means that if the company is in debt, the responsibility of members to repay that debt extends only to the value of shares held by them and shall not extend to their personal assets.

• Perpetual Existence

Since a company has a distinct legal identity which is separate from its members, it can exist in perpetuity even after the members leave the company. Once incorporated, a company shall continue to survive until it is wound up, irrespective of whether the death or insanity or insolvency or retirement of the founding members or directors or shareholders of the company.

• No Minimum Capital Requirement

There is no minimum paid-up capital required to incorporate a private limited company. A company’s capital structure is flexible and can be altered at any time to receive more funds when needed. It can raise funds either through debentures or through venture capitalists or angel investors.

• Exemptions for Certain Companies

Based on the business model of the company, the Central Government grants certain exemptions to companies which are operating for charitable purposes. NGOs and other not-for-profit organizations registering as Section 8 companies receive many tax benefits and exemptions.

• Higher Market Credibility

A company duly incorporated as per the MCA norms has higher credibility in the marketplace as this ensures that the entity has followed and shall be required to follow specific compliances, making it more trustworthy than other entities. Moreover, suppliers, vendors or investors or other businesses can quickly obtain basic information about the company from the MCA website. This builds confidence in the brand name and enhances the goodwill of the company among entities looking to conduct business with it.

How to Choose an Idea Company Structure before applying for Company Registration in India?

Following are some important points every entrepreneur must know before applying for Company Registration in India:

• If an individual who owns the entire initial investment required for the Company, an OPC would be good for you. On the other side, if your business has 2 or more owners and is actively looking for investment from other parties an LLP or Private Limited Company would suit you best.
• Business Structures such as HUF, Partnership Firm & Sole Proprietor have unlimited liability, that means, in case of any default in loans, the entire money will be recovered from the partners or members in profit sharing ratio.
• If you want to spend less initially, it would be better to go for HUF, Sole Proprietor, and Partnership Firm. But, if you are sure that you will be able to recover the setup & compliance costs, you can simply opt for a Private Limited Company, One Person Company (OPC) or LLP (Limited Liability Partnership).
• The Income Tax rates application to HUF and Sole Proprietorship are the normal slab rates. In case of a Sole Proprietorship, the business income is clubbed with the individual’s other income. But in the vase of entities like Partnership Firms & Companies a tax rate of 30% is applicable.
• It is very difficult to get investments when your business structure is unregistered. Entities such as LLP & Private Limited Company are trusted when it comes to investment. Ensure you choose the correct Structure seek the help of an expert so that you register under proper guidance.

Comparative List of Different Company Structures in India

Have a look at the following table that explicitly differentiates various business structures based on different parameters:

Requirements for Incorporating a Company in India

There are specific requirements which entities need to meet before they can be incorporated as a company, and they are as follows:

• Directors

To be incorporated as a company, it should have a minimum of two directors for a private limited company and a minimum of three directors when it is a public company. It is also required that at least one of the directors has been residing in India for at least a period of 182 days. There must be a minimum of 2 shareholders, while the maximum number of shareholders of a private company can extend up to 200, while there is no upper limit on the number of shareholders in a public company.

• Digital Signature Certificate or DSC Requirement

Shareholders, proposed directors, and other authorized signatories of a company are required to acquire a Digital Signature Certificate or DSC from a certification agency which has been approved by the Controller of Certification Agencies. DSCs are necessary to attest forms and duly submit them on the MCA website during the registration process. It is also imperative to have a valid DSC to apply for a Director Identification Number.

• Director Identification Number or DIN Requirement

Every proposed director of a company is required to have a Director Identification Number or DIN. The DIN can be applied for by filling out Form DIR-3 on the MCA website along with the SPICe+ Form. The Form is to be submitted with valid identity proof, and address proof of the director and the Form must be signed by a chartered accountant.

• Name of the Company

It is imperative to decide on a unique and distinct name for one’s company when applying for registration of the company on the MCA website.