Published by Hector Lopez
Guidelines for naming a company
Some of the directions of naming a company based on the Companies Act 2013, and Companies Incorporation Rules 2014 are:
"The Company who deals with financial activities need to have a name related to financial aspects.
Few names need the approval of Central Government that holds Union, Prime Minister, Statutory, Scheme, National, Small Scale and Federal.
All of the Company established as a Nidhi can include the words Nidhi Limited at the end of the company name.
The name should be in resonance with the principal object of the company.
Name which includes the word Insurance, Venture Capital, Bank and Mutual Fund need to get regulatory compliance from the regulatory bodies like SEBI, IRDA and RBI.
You can change the name only after three years."
Limitations on naming a company "Generic names which have the places name or other general names are not allowed. For instance, names like solar power, corporate technology, Karnataka business is not allowed.
A proposed name should not violate the emblems, trademarks or include offensive words.
A name cannot imply a foreign embassy or foreign government.
The name cannot be used if it's similar to a limited liability partnership name.
The proposed name is identical to the company name dissolved as the liquidation results.
The Government Company can only utilise the term State in its name. Few instances are Karnataka State Tourism Development Limited, Karnataka State Construction Corporation Limited, etc."
Once you decide the name of the company, the next step is to incorporate the company. The Ministry of Corporate Affairs (MCA), under the Companies Act 2013 has made the new company registration process very simple and efficient. You can get your company registered within seven days. The process is so seamless that you can get the registration done without even going to the government offices!
Different business structures
As a founder, you should be clear about the name and type of your startup. To register to incorporate your entity under a specific business type, you should be aware of the technicalities of each type.
You will have to choose from - sole proprietorship, private limited, public limited, partnership and limited liability partnership.
Before deciding the business type, have a clarity on the kind of business you are into, your goals and objectives since each of these types come with their own legal implications.
According to Section 3 of companies, a company is a legal entity registered and formed under the 1956 Companies Act.
Types of Business Structures in India
There are five main types of companies you can register in India:
Sole proprietorship
One-person company
Partnership company
Limited liability company
Private limited company
Sole Proprietorship
The sole proprietorship is the easiest form of company registration in India. One person manages sole ownership, i.e., a sole proprietor. If you are looking to have full control of your business, this option serves ideal.
Advantages:
No government registration required
No compliance to be fulfilled
No government regulatory paperwork
All profits earned are yours
You do not require double taxation
Pay income tax returns only on your income
Before you register, you need to have the following documents:
Aadhaar card
PAN card
Bank account
Registered office proof (rental agreement or utility bills will do)
Once you have these, you can approach any chartered accountant for a registration certificate and you are good to go.
One-Person Company
A new type of business structure called One Person Company (OPC) was introduced by the Indian government in 2013. Until 2013, a single person could not incorporate a company, you needed to have a minimum of two directors to do that.
Benefits:
Lesser compliance compared to a private limited
Limited liability for directors (meaning the owner’s personal assets wont be at risk in the event of an unfortunate event)
Legal Recognition
Makes it easier to get loans from banks
Complete control of the company
Easy to manage
Registration:
Obtain Digital Signature Certificate (DSC)
Obtain Director Identification Number (DIN)
Apply for Name Approval Documents required:
Memorandum of Association (MoA)
Articles of Association (AoA)
Proof of registered office
Affidavit and consent of director
A declaration that all compliance have been made
File all forms with Ministry of Corporate Affairs (MCA)
Collect your certificate of Incorporation
Partnership Firm
If you decide to have partners in your business, the easiest way to go ahead with is to create a partnership firm. All you need is a partnership deed which is an agreement between the partners. This agreement will contain all the duties and obligations between the partners and how profit will be shared.
Info and documents that need to be included:
Name and address of all the partners
Name and address of the partnership firm
Starting date of the firm
Capital each partner has invested
Profit share ratio among partners
Salaries/commissions to be paid out to partners
Rights of each partner
Duties and obligations of each partner
Other clauses which are mutually agreed upon
Benefits:
Easy and convenient to form
Risk is shared between partners
No need to submit annual returns to the MCA
Statuary Audit is not mandatory
Easy to wind up Flexibility
Limited Liability Company
Limited Liability Company(LLC) takes advantage of other business structures corporation, partnerships, and sole proprietorship. Limited Liability Company is entitled as flexible business structures, and LLC separates personal and business liabilities. Every owner will have their tax liabilities shared.
Key advantages:
The paperwork in LLC is much lesser as compared to other registrations. This makes LLC more flexible and easier to form.
LLCs keep their members safe from the liabilities like personal debts and legal hearings. It also provides tax flexibility where the income, expenditures, and profits become the part of owner’s tax returns.
In LLCs, one does not have to necessarily follow a business structure to run one’s organisation.
Profit sharing is also flexible in LLCs.
Setting Up LLC's
Apply for DPIN (Designated Partner Identification Number) by filling the form online. Acquire your Digital Signature Certificate and register it on MCA portal.
Get the approval for your LLC name from the Ministry of Corporate Affairs.
After approval, fill the incorporation form to register the LLC and obtain the LLC agreement.
Private Limited Company
A Private Limited Company aka LTD is a type of company that has a minimum of two and a maximum of 200 members. As the name suggests, it cannot raise the funds from the public, which means the company cannot publicly issue the shares. There is no paid-up capital required now to set up an LTD.
Benefits:
The liability of the company’s owner with respect to the company’s debt is only limited to his/her shares.
The shares of the company are easily transferable to the other person.
The company can issue debentures and can receive funds from public platforms, thus making it easier to raise the money.
There are more tax benefits in LTDs and the percentage of applied tax is also lesser as compared to other types of company registrations.
Setting Up a PLC
Obtain Directors Identification Number(DIN), which is a unique code that requires you to have a PAN card, Aadhaar card, bank statement, phone and electricity bill
After that, a name registration application needs to be filed.
Now, you need to draft MOA and AOA. MOA states the objects of the company while AOA specifies the rules and regulations of the company.
Now file the application through SPICE-E form on MCA’s website and obtain PAN and TAN applications.
How to Register a Company - Procedures and Documents
Here are some of the procedures for registration of the company under companies’ act 2013. There are four critical steps to be followed on how to register a company in India.
Obtaining DSC (Digital Signature Certificate)
Obtaining DIN (Director Identification Number)
Filling a New User Registration or eForm
Incorporating the company
Obtaining a DSC
The first step is to apply for the DSC of the directors also derived as Digital Signature Certificate. DSC is e-signature which enables you to complete the online company registration process in India. It takes two days to obtain DSC after submitting the documents.
This is an authentic and secure way to submit a document electronically. Similarly, all filings done by the LLP and companies under the government program of MCA21 are needed to be filed utilizing the digital signatures by the person who is authorized to sign the documents.
Obtaining the DIN (Director Identification Number)
The second step is to acquire an identification number. Obtaining a DIN is mandatory according to the amendment act of 2006. Every intending and existing directors need to acquire DIN. To get this, file a DIN e-form. The form can be taken from the official State of Ministry of Corporate Affairs.
Once receiving the generated DIN, they should let know about their organization about DIN. The director can let them know about their company using DIN 2 form. The company should then intimate the ROC (Registrar of Corporate) regarding all DIN of the directors via DIN-3 form.
In the case of any changes in DIN or if there is anything to be updated like personal details, address, etc., then the director needs to initiate the changes to be done through the e-Form DIN- 4 forms.
Filling a new user registration or e-Form This part is about having an MCA portal or registered user account for e-Form filing, for different transactions, for online fee payment as business and registered user. Creating an account is free.
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