It is as critical as any other business-related operation to select the correct structure for the company. The appropriate structure will enable your company to function effectively and achieve the business goals you need. In India, as part of required legal enforcement, every business needs to register itself. Let’s seek to comprehend the types of business structures in India before we know how to start a company. Here you will get Complete guide on Company Registration:
Different types of Company Registration in India:
Let’s try to understand the kinds of business models in India that are available. There’s a list of most of them here:
One Person Company (OPC)
An OPC, officially launched in 2013, is the safest solution to start a business if only one supporter or owner exists. It helps a single proprietor to continue his job and to be included in the corporate structure.
Limited Liability Partnership (LLP)
As an independent legal party, the partner’s obligations in an LLP are limited up to their negotiated contribution.
Private Limited Company (PLC)
A corporation is deemed to be a different legal entity from the creators in the eyes of the law. It has shareholders (stakeholders) and managers (corporation officers). Each person is known as an employee of the organization.
Public Limited Company (PLC)
A PLC is a members’ organization that is organized under law of company. It has a unique legal nature and its members’ liability is confined to the shares they own. You may select which business structure best fits your business requirements and record your business accordingly.
A qualitative list of the typical business structures that are available in India is given here.
|Type of company||Good for||Tax advantages||Legal compliances|
|Limited Liability Partnership||Service-oriented companies or enterprises with low capital needs||Advantage on devaluation||ROC returns for company tax returns to be filed to be filed|
|One Person Company||Sole owners who wish to restrict their liability||First, three years tax holiday under Startup India Higher depreciation benefits No dividend distribution tax. No dividend distribution tax||The company returns to be filed for compliance with Restricted ROC|
|Private Limited Company||Businesses with good turnover||Tax vacation for the first three years under Startup India Higher depreciation benefits||Business tax returns to be submitted ROC returns to be submitted An audit is expected too.|
|Public Limited Company||High-turnover firms||Exemptions from taxation under||Enterprise tax returns to be filed. Compulsory Audits|
Why is it mandatory to select the right business structure?
As the income tax returns would rely on it, it is essential to choose your business structure correctly. Note that each business structure has different standards of enforcement that will need to be acquired during the registration of your business. For instance, only an income tax return needs to be filed by a sole proprietor. A business may, however, prepare an income tax return as well as annual statements with the company registrar. Company registration is essential for so many reasons.
The account books of a corporation are to be audited regularly on a mandatory basis. To comply with such legal compliance, it is worthwhile to invest money on auditors, accountants and tax filing experts. Therefore, when considering company registration, it is necessary to choose the correct business structure. An entrepreneur must have a good view of the kind of legal enforcement he or she is prepared to deal with.
Although some market structures are more investor-friendly, investors will still prefer an established and legal business structure to others. An investor, for instance, may hesitate to offer a sole proprietor money. On the other hand, investors would feel more comfortable investing if a successful business concept is sponsored by a known legal framework (like LLP, Company, etc.).
How to choose a business structure while applying for Company Registration in India?
Before finally deciding on a business structure, let’s take a closer look at some critical questions every entrepreneur must question himself.
1. How many owners/partners is your organization going to have?
A-One Person Company will be perfect for you if you are a single person who owns the entire upfront outlay needed for the company. And from the other hand, a Limited Liability Partnership ( LLP) or Private Limited Company would serve you better if your firm has two or more shareholders and is actively pursuing support from other parties.
2. Should your original investment decide your business structure selection?
The response to that question is, yes, it would have been smart to go in for a Sole Proprietor or a HUF or a Partnership if you want to invest less at first. But, if you are confident that the setup and enforcement costs can be recovered, you can opt for a One Person Company, LLP or a Private Limited Company.
3. Willingness to bear the company’s entire responsibility
Company structures have unregulated responsibility, such as sole proprietor, HUF, and partnership firm. This assumes that all the money will be recovered from the participants or associates in the profit-sharing ratio in the event of any default on loans. In these situations, the risk of personal property is high. In comparison, there is a limited liability provision for corporations and LLPs. This implies that the responsibility of its members is limited to the amount of the donation they make or to the value of the shares owned by each member.
4. Income Tax Rates Available for corporations
Standard slab rates are the income tax rates applicable to a sole proprietorship and a HUF. In the event of a sole proprietorship, the company revenue is clubbed with the other revenue of the individual. But a tax rate of 30 per cent is available for other groups such as associations and companies.
5. Plans to get cash from investors.
As mentioned earlier, when the business structure is undocumented, it is hard to get investments. In terms of investment, organizations like LLP and Private Limited Company are respected. Make sure that you select the correct structure and seek the assistance of a professional to enroll under proper supervision.
Benefits of Company Registration in India
There are several benefits to company registration. A registered office of the company makes it real and increases the reputation of the business.
- Serves to protect against personal duty and other risks and losses.
- Builds goodwill and helps to draw more customers
- Gives bank credits to stable investors and wise move with ease.
- Gives compensation for the task of securing the company’s properties
- More extraordinary dedication to riches and greater prosperity
How to do Company Registration in India?
The registration of companies in India is now a simple four-step operation. If you are wondering how to start up a business, go through this. Here is what you will need to obtain:
- A Digital Signature Certificate (DSC)
- A Director Identification Number (DIN)
- Registration on the MCA Portal or New company registration
- Certificate of Incorporation
Documents required for Company Registration
In India, without appropriate identity and address proof, registration of a private limited company cannot be accomplished. For the establishment of the company’s directors and stakeholders, evidence of identity and address should be appropriate.
For online company registration in India, the organization must have a registered office in India. To validate entry to a registered office, the latest copy of an energy bill or water bill must be submitted.
The repair bill or the sale deed or a letter from the landlord with his or her approval to utilize the office as the principal office of the corporation is approved in addition to the rental contract. The name and address proof of all share capital directors and subscribers must be submitted.