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IN INDIA

MAKE IN INDIA

February 2015
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Introduction
1. Business Organisations / Company
2. Proprietorship
3. Company
4. Common Terminology
5. One Person Company (OPC)
6. Private Limited
7. Public Limited
8. Other Companies
9. Partnerships
10. Limited Liabilty Partnerships (LLP)

Registration Process
11. Terminology
12. Non Resident Indians (NRIs)
13. Considerations for Entrepreneurs
14. Cost
15. Frequently Asked Questions

Author
Paras Mehra
INTRODUCTION

We, on a daily basis interact with many entrepreneurs, inspire with

many ideas of theirs, and the kind of imagination they carry is really
awesome. But, in almost every case, we notice that they all lack the
legal part or even the basic knowledge about the legal environment.
Due to this, they sometimes end up either paying huge penalties or
paying to the professional who takes advantage of their lack of
knowledge about the subject.

Guide to Registering Companies in India is the initiative of

Quickcompany.in to pour the basic knowledge about the forms of
business, registering companies and also about the legal environment
in which they will work in future.

Paras Mehra
paras@quickcompany.in
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1. Business Organisations / Company

Every business whether registered or unregistered works under a form.
The form of the business organisation creates a severe impact on the
business and its prots.

The 2 most common types of business organisations / companies is as

follows

COMPANY

PROPRIETORSHIP PARTNERSHIP

We have noticed that startups tend to choose their company type in a rush
(generally, a Private Limited Company) which not only costs more, but
also keeps them away from many legal benets.

Choosing the right business organisation for you depends on your needs
and requirements. While there is not set formula to do so, this guide aims
to help you put in the right direction.

Choosing a business form is like choosing a vehicle for your

journey. You must choose the form seriously, because it will
provide you ease in the long run, not to mention the added
legal benets

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1.1 Forms of Business Organisations

FORMS OF BUSINESSES

COMPANY

PROPRIETORSHIP PARTNERSHIP

PRIVATE COMPANY PUBLIC COMPANY

ONE PERSON COMPANY

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2. Proprietorship
The sole proprietorship is the simplest business form under which one
can operate a business. The sole proprietorship is not a legal entity. It
simply refers to a person who owns the business and is personally
responsible for its debts.

A sole proprietorship can operate under the name of its owner or it can do
business under a ctitious name, such as TransCorp Enterprises. The
ctitious name is simply a trade name--it does not create a legal entity
separate from the sole proprietor owner and also there may be chances
that someone might steal your trade name because it is unregistered.

The sole proprietorship is a popular business form due to its simplicity,

ease of setup, and nominal cost. A sole proprietor need only register his or
her name and secure local licenses, and the sole proprietor is ready for
business.

In case the sole proprietor or, even one of the employees is involved in a
business-related accident in which someone is injured or killed. The
resulting negligence case can be brought against the sole proprietor
owner and against her personal assets, such as her bank account, her
retirement accounts, and even her home.

Consider the preceding paragraphs carefully before selecting

a sole proprietorship as your business form. Accidents do
happen, andbusinesses go out of business all the time. Any
sole proprietorship that suers such an unfortunate
circumstance is likely to quickly become a nightmare for its
owner

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2.1 Advantages of a Proprietorship

Owners can establish a sole proprietorship instantly, easily and
inexpensively
Proprietorships carry little, if any, ongoing formalities
Owners may freely mix business or personal assets, bank account,
personal retirement accounts, and even property (housing etc.)

2.2 Disadvantages of a Proprietorship

Owners are subject to unlimited personal liability for the debts, losses
and liabilities of the business
Owners cannot raise capital by selling an interest in the business.
Sole proprietorships rarely survive the death or incapacity of their
owners and so do not retain value.

2.3 When to register a Proprietorship

You may already be operating a sole proprietorship. Sole proprietorship is
generally formed only when you are just about begin your business. Later
on, generally business converts themselves into other complex forms

After introduction of One Person Company (OPC) in 2013, it is

not recommended to form a sole proprietorship. Although
convenient, it comes with a big risk of unlimited liability.

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3 Company
Company is a simple form of business that can handle the complexity of
the modern needs. It is basically like a person, it has its own identity,
dierent from the owners. Once created, it has a perpetual (ever lasting)
life even if the founder of the companies die, it will have no impact on the
company. A company has almost all the legal rights of an individual,
except for the right to vote and certain others.

Company is a customised form of business that can handle the complexity

of the modern needs.

As per the norms, there should be at least one director who should be a
resident of India. Every company name ends up with the word limited
which means that the company has limited
liability.

3.1 Types of Companies in India

ONE PERSON PRIVATE PUBLIC

COMPANY COMPANY COMPANY

Only one person At least 2 persons At least 7 persons

is needed are needed are needed

Minimum Capital Minimum Capital Minimum Capital

one Lakh one Lakh ve Lakh

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4. Common Terminlogy
SHARES
are a unit of ownership. If a company has 10,000 shares, it means that the
ownership has been divided into 10,000 units. The more number of
shares the person holds, the more the hold of the share owner.

DIRECTORS
manage the aairs of the company. Company is a separate legal entity but
it cannot function itself, it needs someone to do job on its behalf, the
persons who do this job are called directors.

SHAREHOLDERS
are the people who invest money/time/skill into the business. Any person
who owns shares is called a share holder. Shareholders do not necessarily
govern the company, nor are they allowed to interfere in the business until
unless the directors are failed to do their job.

SHAREHOLDING AGREEMENTS
are contracts which are established between the shareholders to agree
upon certain terms between the business organisation

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5. One Person Company (OPC)

OPC can be regarded as a rened form of proprietorship. Only one person
is required to form the OPC and enjoys all the benets of a normal limited
liability company.

OPC is classic substitute for sole proprietorship business. Unlike sole

proprietorship, OPC has limited liability and also enjoys the status of
separate legal entity.

5.1 Advantages of OPC

OPC has benets of limited liability and also enjoys a separate status
from its owners
Unlike a private limited company, there are very few rules govern the
OPC and therefore oers more exibility
Legal Cost of running a business is quite low

5.2 Disdvantages of OPC

OPC is considered for small business, OPC will have to be converted
into private limited company if turnover crosses the upper limit of 2
crores
Owners cannot sell their stake to raise the funds.

When to register a One Person Company?

If you are a single founder and planning to start a business or
your are already running a business as a proprietor, then OPC
is actually an ideal choice for you. Also, owner can anytime
convert OPC into private limited at ease

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6 Private Limited
Private company is the most preferred form of business. Private company
can be form by two persons. Private company is the ultimate form of
business, because in this form, owners can do any type of complex
business transaction as they like. For e.g. they can issue ESOPs, raise
capital by selling stakes etc.

According to Entrepreneur.com, it has been noticed that valuation of

business increases by 4 to 5 times, if the startup has been incorporated as
a Private Limited Company

6.1 Advantages of a Private Limited Company

Finance is easily available for the private limited company
Owners can raise investments by selling their stake
Limited liability, separate legal existence, trusted form of business, also
most preferred form

6.2 Disdvantages of a Private Limited Company

Private limited company is governed by the many rules and
regulations, therefore oers less exibility.
Legal cost of running a business is quite high as compared to other
forms
If legal compliances are not handled properly, then it can lead to
penalties

When to register a Private Limited Company?

If you are two people, willing to start a business, and also plans
to raise the funds in future, then private limited company is the
best option for you. If you dont plan to raise funds, but you
wants to have a strong foundation, then also private limited
company is recommended

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7 Public Limited
Public limited Company is the biggest and the most powerful form of
business in India.

According to Entrepreneur.com, Public limited companies gives the trust

that you are doing something big and also they have noted that the
valuation of business increases by 10 to 15 times.

It needs at least seven persons to form the company. Public company can
go to public for funds. It can raise any type of nance; can enjoy any type of
legal relaxation. Public companies in India are only permitted to list their
shares in the stock markets.

7.1 Advantages of a Public Limited Company

Enjoys its large status from every corner nationally and internationally,
due to which business value increases manifolds
It can also accept money as public deposits from the general public.
It also enjoys every benets that a private company, LLP or any other
form enjoys.

7.2 Disdvantages of a Public Limited Company

Costly aair and also a time consuming process.
Hefty compliances, because governed by various rules and
regulations.

When to register a Public Limited Company?

If you are really planning something big or you have actually
running a big business and also you wants to expand it, public
limited company is the best option for you. Also, some of the
transactions are restricted to private limited companies,
therefore public limited company will be required for those
transaction like accepting deposits, Forming NIDHI Company
etc.

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8. Other Companies
NON BANKING FINANCIAL COMPANIES (NBFC)
The companies whose main objective is to provide loan and accept
deposits from the public are generally known as NBFCs. These types of
companies are required to be registered with the Reserve Bank of India
(RBI).

NIDHI COMPANIES
companies which can accept deposits from members only and can
provide loan to members only are known as Nidhi Companies. Only Public
limited companies can be formed as Nidhi Companies.

NGO
are special categories of companies registered under section 8 of
Companies Act, 2013. NGO are the organizations which are formed for
nonprot making. NGOs need to be registered with the income tax
authorities.

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9. Partnerships
A business organization in which two or more individuals manage and
operate the business. Both owners are equally and personally liable for
the debts from the business. Partnerships are easy to form. There is no
minimum capital requirement. Only two people are needed to
incorporate the partnership.

FEATURES
Atleast two peoples are needed
Registered Partnership deeds
No minimum capital requirements
In case terms are not decided, then it shall be governed by Indian
Partnership Act

9.1 Advantages of a Partnership

Very simple to form and less time consuming
Very less legal governance, hence highly exible
Very minimal cost of running a business

9.2 Disadvantages of a Partnership

Unlimited liability, personal assets are not safe
No separate legal existence

When to register a Partnership?

Partnerships are basically like proprietorship with an only
dierence that it involves two persons. If you are two or more
persons wants to start the business early and you have no
plans for raising funds from public then you can register
partnerships

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10. Limited Liability Partnerships (LLP)

LIMITED LIABILITY PARTNERSHIP (LLP) was introduced in the year 2008.
Partnerships when given the feature of limited liability, the LIMITED
LIABILITY PARTNERSHIPS came into picture. LLP is a separate legal entity
and which can be formed in India by minimum of two persons with a
motive of earning prot.

The registration process is very much similar to that of company, only LLP
agreement is also to be led in the case of the former.

10.1 Advantages of a LLP

Enjoys exibility like partnerships and limited liability like private
company
Separate legal existence, i.e. separated from its members
Very minimal compliances unlike private companies

10.2 Disadvantages of a LLP

Cannot raise funds by selling the interest
Foreign Direct investment is not allowed

When to register a LLP?

LLP enjoys the benets of private limited company and
traditional partnerships, therefore, because of increasing
compliances in private limited company, it is recommended
for start-ups to incorporate LLP if they are not planning to raise
investments in future

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COMPANY REGISTRATION PROCESS

Due to extensive bureaucracies in India, registering a company is

unnecessary complex and it discourages entrepreneurship. Until the
laws and processes change, our aim is to simplify the services as much
as possible.
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11 Terminology

11.1 Digital Signature (DSC)

it can be understand as a signature which is done electronically. We all do
Manual signatures by Pen, but we cannot sign on computers, therefore, to
sign any electronic document we need a digital signature. Digital
signatures are also protected with the PIN. It
generally takes 1-2 days with a cost Rs.800 to Rs.1500

11.2 Director Identication Number (DIN)

unique Identication Number allotted to an individual who is an existing
director of a company or intends to be appointed as director of a
company.

Simply put, DIN is a unique number allotted to every individual.

DIN generally takes 2 hours to 1 day. DIN can be applied for online at the
Mca website. The cost of DIN is Rs.500.

DIN is an eight digit number allotted to every director. No person can

become a director without a DIN

11.3 Name Approval

Every company has unique name. No company can be registered with a
name which is resembling with a existing company name. Every name
should reect the proposed objective (business) of the company. For
example: " Mr.X wants to start a entertainment company, so the right
name could be

ABC (First Word) Entertainment (Objective) Private Limited

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11.4 Memorandum of Association (MOA) &

Articles of Association (AOA)
Every company needs to have MOA and AOA. MOA states the companys
proposed objective for which company is being incorporated. No
company can go beyond its MOA.

In simple words, the proposed business of the company will be written in

the documents which is called MOA.

AOA states the companys legal policies for its operations. Every company
is governed by the companies act and hence, it has to work according to
the rules. These rules are to be drafted in a document which is called AOA.
They are to be drafted and to be led to the ROC.

11.5 Incrorporation Certicate

This certicate is a proof that your company has been incorporated.

11.6 Certicate of commencement

This step has been recently introduced in case of private companies also.
To obtain this, shareholders/subscribers/ owners has to deposit the
minimum amount of capital (One lakh in case of OPC and private
company, FIVE lakhs in case of Public limited companies) into the bank
account of the company.

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Individual Two or More persons

One Person Company Limited Liability Partnership

Private Company

Public Limited Company

DSC Apply for DIN/DPIN for the

of the Directors/Partners Directors / Partners

Name approval ling

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12. Non Resident Indians (NRIs)

Basic Information
NRI are citizen of India, i.e. they hold the valid Indian passport but are
residing outside India, and however, if the NRI gets the citizenship of other
country, then he will have to surrender his Indian passport and then he
will be treated as foreign national i.e. Nonresident (NR).

Sometimes, persons also holds dual citizenship, this is only possible if the
home country allows the same, in India it is allowed under Overseas
Citizen of India scheme. A Person is OCI, if he holds two citizenships
subject to other guidlines issued in this respect.\

Basics about investment

Investments in India are governed by the Foreign Direct Investment (FDI)
policy and FEMA Regulations. FDI policy contains set of rules which are to
be followed while investing in India and it is sector specic, i.e. there are
dierent rules for dierent sector. It provides two entry routes to invest in
India.

Automatic Route: It means that a person can invest in India, without

taking any approval subject to the limit specied.
Approval Route: It means investment can be made only with the prior
approval from the Reserve Bank of India (RBI). There are many forms of
business like Private Company, Partnership etc. However, a NRI cannot
freely invest in any form. Entry routes dier according to the form you
take to invest

In case of NRI, every document (refer document required

page) should be duly notarised by the Indian embassy in the
resident country of the NRI and original should be sent by a
courier.

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13. Special points for Enterpreneurs

We have analyed various start ups , their idea's and their knowledge about
the legal, so we would like to share some of the important points that
would be helpful for you in building your own startup.

1. Always choose company as your form of business, as it will be provide

you a strong legal base and also you will be open to funding and choosing
private limited company certainly adds value to the business.

2. While incorporating company, always have shareholding agreements

with the existing shareholders/promoters. This will help you setting out
terms more clearly and it will protect you against any malicious intentions
and wrong doing of others.

3. Now a days, it is a trend to have pool of shares in the beginning and then
to be issue at a later stage of business and the pool may be managed
either singly or jointly by promotor(s). However, initially, in India it is
prohibited to have pool of shares (however it may done after
incorporation) and Indian laws also do not permit the company to issue
ESOPs (shares from pool after a vesting period) shares to promoter(s).

4. Usually startups, mostly relates to online or E-commerce business. and

they almost every time wants their company name to be same as their
domain name. But remember, it is not mandatory to have company name
same as your domain name. You may have your brand name and
company name dierent, like FlipKart.com etc.

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14. Cost
with QuickCompany, you only pay for the services you use. All our services
have an honest and transparent cost structure.

If you have a case where an existing CA dropped you and left your
company registration incomplete, we can pick up from where he left and
on top we will not charge your for the work already completed.

OPC PVT LTD LLP

ONE PERSON COMPANY PRIVATE LIMITED LIMITED LIABILITY PARTNERSHIP

REGISTER NOW REGISTER NOW REGISTER NOW

DIN FOR 1 DIRECTOR DIN FOR 2 DIRECTORS DIN FOR 1 DIRECTOR

DSC FOR 1 DSC FOR 2 DSC FOR 1
NAME APPROVAL NAME APPROVAL NAME APPROVAL
MOA / AOA MOA / AOA LLP AGREEMENT
REGISTRATION REGISTRATION REGISTRATION
CERTIFICATE CERTIFICATE CERTIFICATE
COMPANY PAN CARD COMPANY PAN CARD COMPANY PAN CARD

Quickcompany also oers incorporation services for other

types of companies like public limited company, nidhi
companies, NBFC etc. We also oers you services after
incorporation

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15. Frequently asked questions

Q. I am a salaried employee works in a MNC, can I incorporate company
in my name? Can I become the director of the company?
A. You can incorporate a company and also you can become the owner of
the company. You can become a director only if your company permits
you to. Usually people Form Company in their name and appoint any of
their family members as a director.

Q. I would also like to know as you have your oce in Delhi and Gurgaon
and we put up in Bangalore, is it possible for you to form a new
company for me as we are located in dierent place?
A. Yes, we can incorporate your company anywhere in the country with
ease and with best of the services that we oer to our every valuable
customer.

Q. Do you also provide support after incorporation?

A. Yes, we do provide every possible support that our customer requires.

Q. If my signature on PAN\passport is dierent than current will it be

accepted (I have applied for change in Signature in PAN, waiting to get
the new PAN Card)
A. Yes that can be accepted, there is a form called specimen signature, so
you can sign your current signature there and then they will be accepted.

Q. We have checked our name on your portal, it is showing that name is

available, then what are the chances that we will get the same name?
A. If our portals show that the name is available, then there are good
chances that the name will be available, however, there may be chances
that MCA might not approve the name.

Q. Does your charges also include registration for VAT, Sales Tax or Extra
charges for that?
A. No, it does not include. Charges only include company registration.

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Q. I want to start a small business selling packed desi ghee in big bazaar
and other malls and online under a brand name. Please suggest what
legal licenses and rm registration formalities required and will u be
able to take care all these?
A. First of all, you need a business organization to work under, you may
choose like one person company (if you are a single person, this is a best
option for you, because it involves least cost and least compliances. Yes
we provide a single solution to all our customers, and we will take care of
all your responsibilities.

Q. I am in service industry and want to open in my wife's name. What

required a bank account (type?) pan card(?) or what other document.
Would I be able to put my home address in my company address?
A. Yes, you can open in your wife name, the documents required to open
an OPC can be seen from the documents required section of this guide
and the total cost involve in the process. Yes you can use your
home address as your corporate address.

Q. Should I go for sole proprietorship for tax benet? Or OPC? Is there

any legal license also required starting food business (ghee) and would
you also help in this regard?
A. In our view, you must not go for sole proprietorship rather you should
opt for One Person Company (OPC). OPC is a new concept and it is actually
a wonderful substitute for proprietorship. No, initially you don't need any
license, but when you will cross the 10 lakh revenue, and then you will
have to apply for VAT registration (we will provide you with the solution)

Q. My website domain is www.abcaxyz.com, can I get the company

registered with the same name? Or will there is any problem if the
domain name is dierent from the company name?
A. If the specic name is available then you might get the name.
However, it will have no eect if you get the company name dierent
from the domain name. Companies like lenskart.com has there domain
name dierent from the company name. Your domain name is your brand
name; you can get it secure by applying for a trademark.

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Q. Can Pvt Ltd raise money from crowd funding sites for particular
projects since no funding from Public is mentioned in your doc?
A. You can raise any private funding including seed funding, but you
cannot raise funds from public through Public oer.

Q. Your document says No investments allowed in OPC, Means?

A. In OPC, investment is not allowed, as there cannot be two shareholders.
OPC can raise loan funds, but cannot raise investments including seed
funding etc.

Q. Doc requirement says PAN+Registered address proof (Registered

sale deed), but for residence proof it requires ElecBill,Tele Bill,Mobile
Bill,Bank Statement. if I want to use my Residence as Oce then what?
only Sale deed will do?
A. No both will be required

Q. What is the means of 1 lakh capital? Does it requires in the form of

CASH or it can be adjusted by Assets that I will bring in like (Laptop,
Modem, Softwares etc)
A. 1 lakh capital means the minimum capital that you are required to bring
into the business. After incorporation, you will have to bring 1 lakh into the
bank account of the company, which you can use it for business purpose.
It is like moving the money from one pocket to another.

You can bring it in kind as well, but it is always advisable to bring

money in account rst and then adjust it against the assets you bring.

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Acknowledgement
We at Quickcompany are committed to excellence of service and
promoting entrepreneurship in India.

We have an honest and transparent pricing structure, where you know

before hand exactly what you are paying and the services ocered..
Further, we provide you with a Guarantee of 100% Satisfaction.

Thanks and Regards

QuickCompany.in

MAKE IN INDIA

Address paras@quickcompany.in
91SpringBoard, Plot 23 agam@quickcompany.in
Maruti Industrial Area,
Sector 18, Gurgaon, Haryana 122015 96546 22792, 95406 18336

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