In an era of startups and growing online businesses, we need to be aware of the procedures and documents required to register our business online. This is crucial to climbing the ladder swiftly with all the other companies ready so we no longer have to stall our dreams. According to the Ministry of Corporate Affairs, around 12,33,768 private limited companies were registered by March 2021 , resulting in a massive rise in the business growth segment in India. Starting an online business in 2021 is easier than ever. With all consultancies and even government registration businesses online, help is available in plenty and the information vessel is vast. We want to help you with the requisite online private company registration process and documentation to be ready any time you want to start your business online.
1. What are Private Limited Companies?
Private limited companies are business entities where the shareholder circle is amongst the company’s original owners and these shares are withheld from the public. The company owns the stock and shares but these shares will be limited to the company’s shareholders only. Private companies initially have their ups and downs in the share market. But eventually, with seed funding or Unicorn startup valuation, the companies adapt to the IPO bandwagon and turn public which could help them in monetary terms of funds through bond offerings and public shareholders.
2. Types of Private Limited Companies
- Sole Proprietorships – In this case, the complete ownership of a company falls under an individual owner. The assets, financial burden and legal entity fall under one individual who has registered a solo company. While this may give no reign on your freedom to run the company on your terms, there could be a risk factor during the fund’s process as the entire liability of a company falls upon one individual only. This is when people look for similar-minded people to collaborate with and form a Partnership. In this case, the unlimited liability of a company falls onto two shoulders instead of one.
- LLC’s (Limited Liability Companies) – This is a form of ownership with multiple owners for a single business entity and the liability is shared equally. This benefits all the owners for their single license in a more significant business, including flow-through entities. The financial profits are directly deposited to the owners with limited liability.
- S Corporation and C Corporation – These entities are taxed under the Internal revenue code, resulting in their name structure. When the S corporation meets specific requirements of the Internal Revenue Service, the benefits provided are exemption of taxes from any loss, deduction, credits etc. The loss is directly deducted from the shareholder account without any taxes. This type of private corporation has 100 or fewer shareholders in its entity. C corporation helps business owners divide their personal assets from professional ones so that their losses in the market are limited.. Therefore, they would be charged on a shareholder basis only.
3. Advantages of Privatisation
- Keeping it in the family – Huge families own the most extensive private limited companies which helps the business personally and professionally. The confidential data need not be shared with the public and the board members can control the ownership internally by working on a dual-class structure for the business to function in a smooth manner.
- No Disclosure to the Public – Once a company goes public, there is no room for privacy and they are liable for the public shares. Hence, they would be required to submit regular quarterly reports, monthly reports, tax filings etc. In a private limited company, the sole shareholder is the only liable individual.
- IPO Holding – The Initial Public Offering (IPO) is a costly affair with the public and would require numerous filings, documentation and time. In a private sector, both time and money belong to the original owners resulting in no personal losses.
4. How To Register a Private Company Registatrion Online?
The company registration process of private limited companies online could get quite hectic and repetitive, especially when we do not get it right in the first place. Many online agencies and consultancies would charge you minimal amount and time to ensure your company goes online. The Ministry of Corporate Affairs has a website citing its services and fares for the online registration process. Here’s an explanation of the documents required and other necessary information so you do not have to worry about them.
STEP 1 – Apply for Digital Signature Certificate (DSC) This is a provision of The Information Technology Act, 2000 to ensure the security and authenticity of the documents submitted on an electronic platform. The digital signatures are a permanent security measure enabled for the safety of your business. Applications for the signature request can be sent to the certifying authorities with the required documents and self-attested copies. These documents need not be KYC -based; they can be attested by a certificate issued by the bank database or the bank manager.
STEP 2 – How to Apply for Director Identification Number (DIN) Sections 266A to 266G of Companies (Amendment) Act, 2006 introduced the concept of DIN. The owner should get their DIN within a specific time period. The DIN application can be filled out in three forms depending on the circumstances.
- First-time Application: All first-time applications for the proposed Director post should be filled out in the SPICe form only. The person would have to attach Address and Identity proof and upon approval, the SPICe form is submitted for further processing.
- DIR-3 Form: Upon applying for a Director post of an existing company, the applicant must fill the DIR-3 form and upload the supporting documents on the Ministry of Corporate Affairs website with the filing fee.
- DIR-6 Form: Upon any changes in the current SPICe/DIR-3 Form, you can apply for this e form, utilize the Digital signature obtained from the MCA, and then upload it.
STEP 3 – Application for Name Availability What is in a name? Quite a lot. Every company has its distinct trademark for its recognition in the industry. It wouldn’t be viable to the business until it is marked under the Ministry of Corporate Affairs account. The MCA has introduced SPICe + forms under its scheme to provide transparency to trademark names of companies for its legal badge and protection from other businesses. Two names could be submitted for reservation and if rejected, another name could be submitted for retrial. After the approval, a period of 20 days would be given to register the name permanently for your business.
STEP 4 – Form SPICe+ (INC-32) The stakeholders can check the availability of company names on the MCA website. They must comply with the rules and regulations of Section 4(2) & (3) of the Companies Act, 2013 by not using any forbidden words mentioned in the Act. This is a new form introduced by the government to register company names. This E form would help you fill out the rest of DSC, DIN PAN and other utility details necessary for the company’s registration to maintain a seamless online onboarding process.
STEP 5 – File the eMoA and eAoA to register the private limited company The Electronic Memorandum of Association represents the company’s main objective, its goals and promises for the future, along with its signature. The Electronic Article of Association gives the company the power to assemble its board of directors and staff and regulate its code of conduct.
STEP 6 – Apply for the PAN and TAN of the company Once the SPICe forms are submitted to the MCA, the Income Tax Department approves it after which it is sent along with the Certificate of Incorporation, PAN and TAN details. All these forms and processes are registered online through the Ministry of Corporate Affairs website and do not require any physical process. A company’s new trademark can be processed using the online registration mode for private companies through the government site. You need to register your account with the Ministry of Corporate Affairs for a smooth registration experience.
5. Benefits to Startups
The government provides various incentives and exemptions under the Startup India scheme. As a business, you might register your business as a startup to take multiple benefits, a few of which are,
- Tax exemption for the first three years.
- High-value investments made by incubators and angel investors are also exempted from tax.
- Startups can register themselves by filling up a single form using Startup India Mobile Application. The app also supports a single window for compliances, clearance of approvals, etc.
- The startups can apply for different government tenders and are exempted from the “prior experience/turnover” criteria applicable to other companies.
- A startup can exit from the business within 90 days of registration hassle-free.
As per the Startup India Action Plan, issued by the Department for Promotion of Industry and Internal Trade, a business would be considered as a startup if,
- It is incorporated or registered in India as a private limited company, partnership firm, or limited liability company up to a period of 10 years from the date of incorporation.
- Since its incorporation, it does not have a turnover of more than INR 100 crores in any financial year.
- The business is working towards creating innovation, development or improvement of products, processes, or services. Or,
- It is a scalable business having a high potential of generating employment or wealth.
6. Registration and Licenses Required
Before registering your company, you need to determine the different licenses required to start a business in India. It depends on the type of company, number of employees, sector, place of incorporation, and more. A list of licenses generally needed to register a business is mentioned below,
- Registration Certificate
- GST Registration
- Udyog Aadhar Registration
- FSSAI Central License
- FSSAI State License
- FSSAI State Registration
- Import Export Certificate
- Shop and Establishment Act License, etc
7. Foreign Direct Investment and External Commercial Borrowings
Indian companies can apply for foreign direct investments and external commercial borrowings from overseas investors. Therefore, you must give it a thought if your business needs investments from overseas, and also research on how to apply for one.
The government also provides various exemptions and relaxations to startups to raise overseas investors’ funds. Additionally, startups are allowed to issue convertible notes (a debt instrument), which can be repaid at the holder’s option or converted into equity shares within five years of issuing the notes.
8. Registering for Intellectual Property
All businesses must register their business ideas, name, logo, products, services etc., as intellectual property. It prevents your competitors or other companies from using them without your permission or without giving proper credits.
There are three types of Intellectual properties which are,
A copyright protects an individual’s expression and creativity, a trademark protects a sign or logo used to differentiate an entity, and a patent protects an invention made by a person from being used or sold.
With the help of this article, you might have recognised the things you need to keep in mind before registering your business. However, to ensure that the company registration process goes smoothly, it is advisable to seek out the help of an experienced business attorney.
9. Frequently Asked Questions on Company Registatrion
- Where should I look for an official online registration process?
The Ministry of Corporate Affairs is your site for registering any company within the government guidelines. All the forms needed for the registration such as DSC, DIN and SPICe forms are available on the website and the information is available in a clear format.
- What is the difference between SPICe and SPICe+ forms?
SPICe is the acronym for Simplified Performa for Incorporating Company electronically. This form was introduced under the Companies Act 2013, easing business formation and company registration. This is an electronic form for filling out multiple detailed forms online. SPICe+ is an integrated web form formed under the Ease of Doing Business Initiative and offers ten services in the same format as an upgrade to SPICe. The SPICe+ forms are to be utilised for the current year as they provide services from three governments and make the process easier.
- Are all the services available online?
Yes, all the services are available on the website and you do not have to be physically present.
- What are the price structures for online services from the government?
All the price structures are available in the Fee & Payment section of the MCA website. The MCA offers Electronic Consultation services as well in times of need.
- What are the forms required for the online registration of a company?
The forms needed are DSC, DIN, PAN, TAN, SPICe and Name Reservation. All the form details are available in the above article and the sources for their retrieval have been mentioned too.
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