Simple Steps to Form a Company in India

Simple Steps to Form a Company in India

Have you ever thought of doing business in India? It is one of the best places to set base of your investment. One of the things that guarantees return on capital is the ever vibrant economy in India. In the recent past, the economic growth of India has registered a tremendous growth. This is due to the fact that they are exporters and importers of a number of products and services in the world.

If you are planning or thinking of opening a business and incorporating it in to a company, India should be the best option for you. Another golden characteristic in India is the culture of business in the region, it extraordinary, there is always available labor to support your investment and business agenda.

The law establishing companies in India was initially the Companies Act 1956. However, over time the Act has undergone amendment not only to meet the government’s revenue collection, but also to make it easier for both local investors and foreigners. The new Act is now renamed as the Companies Act of India 2013 that contains 29 chapters and 470 clauses.

The 2013 Act of parliament of India sets the basis of the rules and regulations of company formations in the Indian legal boundaries. Among the regulations is how a company can be dissolved, the responsibilities of the directors, responsibility of the company as well as the neutral benefits of shareholders.

The Companies Act of Indian is designed in a manner that there are structures based on tax obligations. It is important to study the various structures before settling on any one of them.  The choice of the company structure is central to the determination of the performance and the efficient operation of the company.

According to the Indian Legal system, every company must comply with the relevant simple Acts of Parliament by following the due process of registration upon formation. Upon approval of the process of the company and business registration by the Indian laws. The applicants are to be furnished with the following documents.

This is an indication that you are free and allowed to operate business as per the objective clause in the articles of association within India. The simple documents to be given include; Certificate of Incorporation, Registration in (MCA) Ministry of Corporate Affairs Portal, Director Identification Number (DIN), and a Digital Signature Certificate (DSC). The most common business setups in India are as follows;

  1. Limited Liability Partnership Act
  2. Public Limited Company
  3. Private Limited Company

1. Formation of Public Limited Company in India

Every region has its definition of an entity. According to the tenets of the Indian legal system, a public limited company is that which has limited liability and presents the public an opportunity to have a stake of the company in the form of shares.

In simple terms, any person either individually or as a company can acquire shares via an IPO or through the stock exchange. One of the main requirements of a public limited company formation by the Indian law is mandatory to publish its books of accounts after the end of every fiscal year as defined by the law. For one to start a PLC in India the following are key considerations;

  • An application of the name has to be initiated before the process of registration begins
  • A presentation f the reasons and objective of the company formation
  • Minimum of three directors with no maximum number of directors
  • A PLC in India has to have a minimum paid-up capital of Rs 5 Lakh or as prescribed under the law
  • Minimum of 7 shareholders for its initial incorporation
  • Proof of physical address and location
  • Duly obtained the digital signature of one of the directors
  • Payment of the prescribed fees to the Ministry of corporate affairs

Documentation for the Approval of a PLC in India

  • Copies of valid Identity cards of the listed shareholders and directors during the formation stage
  • Addresses of the shareholders and directors with residential details
  • Utility bills of the intended company
  • A No Objection Certificate from the landlord providing facility where the company office will be located
  • (DIN) of the listed directors (Directors Identification Number)
  • (DSC) Digital Signature Certificate of the present and mentioned company directors
  • Memorandum of Association (MOA)
  • Articles of Association (AOA)

2. Private Limited Company Incorporation-India

This can be created by one or more persons in India as per law forming companies in India. A memorandum is the most basic requirement of the formation stage and presented to the registrar in the prescribed legal format.

In the same manner as prescribed by the Act of Companies in India, an Article of association is mandatory.  However, the legal system of India has already prepared Articles of association that works universally within its borders. The following has to be done by parties or persons forming a company.

  • Selecting the name of the company
  • Listing of the promoters of the company
  • Presenting the name of the company secretary
  • Company registration documents as well as the certificate of shares if any

Documents Required for the Authentication of a Private Limited Company in India

The following documentation is necessary for the incorporation of a company in India;

  • Photos of the listed directors of the company
  • An up to date office agreement
  • Signature samples
  • Addresses of the directors
  • Copies of photos of the director ID
  • A declaration of the directors and their involvement with other companies
  • Revenue and Tax department approval

3. Limited liability Partnership Formation in India

This yet another form of company in the design of a partnership business, the commercial law and Act forming businesses in India allow a minimum of two (2) persons coming together as partners to create an LLP. One of the partners has to be a resident of India. The characteristics of an LLP in India are as stated below;

  • The is no limit or maximum requirement of initial capital outlay
  • There are few legal formalities as compared to a PLC and an LLC formation
  • The creation costs are moderately lower
  • Each partner is liable to the maximum capital contributed
  • It enjoys a separate legal entity just like the rest of the companies formed under the law

Some of the documents required of the partners to produce before the operation of the LLC and for it to be approved successfully. The documents will include;

  • Identification documents of the partners
  • Passport photos of the partners
  • Proof of address of the partners
  • Place of residence of the partners forming the LLC
  • Passport copies of foreign partners

You will also need to obtain proof of a registered office apartment for the LLP and a Digital Signature Certification (DSC).

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