Company & LLP Incorporation |
A company or a limited liability partnership firm can be registered with the Registrar of Companies, Ministry of Corporate Affairs by filing various forms and documents, together with the payment of the prescribed registration fee. We provide end to end services with regard to incorporation of companies and LLPs in India.
Company Incorporation
A company can be incorporated as One person company (OPC) or a private limited company or a public limited company. With Government’s initiative on ease of doing business the time line to register a company has reduced from 15-20 workings days to 7 working days. This includes time required to prepare documents for registration.
Benefits of working through company registration: A company is a separate legal entity and its working and functions are well defined in the bye laws of the company. A company is separately responsible to its various stakehoders like Government, Shareholders, employees, customers and vendors. To raise capital company form of structure helps as lenders are ensured that the financing will be spent for the purpose for which it is raised.
OPC
Section 2(62) of the Companies Act, 2013 (“Act”) defines OPC as a company which has only one person as a member.
Legal Nature of OPC
OPC can be registered only as a private company which means that all the provisions applicable to private company will be applicable to an OPC, unless otherwise expressly excluded in the Act or rules made thereunder.
| OPC | Sole Proprietorship |
|---|---|
| OPC completely separate entity. | No distinction between owner and the businees. |
| Liability of shareholder limited. | Sole Liability. |
| Taxed in the same manner as private companies; higher tax implications. Distribution of dividend may attract dividend distribution tax. | Lesser Tax Implications. |
| Must file annual returns, etc. like other private companies and get its accounts audited every year. | Need to get its accounts audited u/s 44AB of IT Act, 1961, once turn over crosses certain threshold. |
Section 3(1)(c) of the Act provides that the words ‘One Person Company’ must be mentioned below the name of the company in bracket wherever it appears.
Any naturally born Indian who is also a resident of India (i.e. have stayed in India for at least 182 days during the immediately preceding FY). However, one of such person cannot form more than one OPC.
Though a One Person Company allows a lone Entrepreneur to operate a corporate entity with limited liability protection, a OPC does have a few limitations. For instance, every One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the company - who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of Companies. Therefore, it is important for the Entrepreneur to carefully consider the features of a One Person Company prior to incorporation.
Single Promoter: The only type of company that can be promoted and started by a single promoter with limited liability protection.
Easy transferability: The ownership can be transferred by altering the shareholding, directorship and nominee director information.
Borrowing credibility: Company structure is preferred over other business structure like proprietorship or LLPs.
Identity and Address proof Director and Nominee Director: PAN Card, Passport, Driving License, Aadhar Card, Bank Statement or Electricity Bill. The document must not be more than 2 months old in case of bank statement and electricity bill. Both must be Indian Nationals.
Proof for Registered Office in India:Lease Deed, Rent agreement and electricity bill or property tax document. NOC from land lord for use of premised for the said purpose.
Signed Incorporation Document: Digital Signature (DSC) Application in hard copy and other documents in signed and uploaded in soft copy
- 2 DSC
- 1 DIN
- 1 RUN Name Approval
- incorporation certificate
- MOA and AOA
- PAN and TAN
Private Limited Company
A private limited company is a company which is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them.Shares of Private Limited Company cannot be publicly traded.
- Members: To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
- Limited Liability: The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
- Perpetual succession: The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to perpetual succession of the company. The life of the company keeps on existing forever.
- Index of members: A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
- A number of directors: When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
- Paid up capital: It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.
- Prospectus: Prospectus is a detailed statement of the company affairs which is issued by a company for its public. However, in the case of private limited company, there is no such need to issue a prospectus because in this public is not invited to subscribe for the shares of the company.
- Minimum subscription: It is the amount receive by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In case of private limited company shares can be allotted to the public without receiving the minimum subscription.
- Name: It is mandatory for all the private companies to use the word private limited after its name.
The requirements for private limited company registration are:
- Members: A minimum number of two and a maximum number of 200 members or shareholders are required as per the companies’ act 2013 before registration of the company.
- Directors: A minimum number of two directors is required for registering the private limited company. Each of the directors should have DIN i.e. director identification number which is given by the ministry of corporate affairs. One of the directors must be a resident of India which means he/she should have stayed in India for not less than 182 days in a previous calendar year.
- Name: It is one of the major components for a private limited company. The name of the company contains three parts i.e. the name, the activity and private limited company. It is necessary for all private company to use the word private limited company at the end of its company name. Every company has to send 5-6 names for approval to the registrar of the company and all the names should be unique and expressive. The name for approval should not resemble with any other companies name. So choosing the right company name is an important component is it will stay with the company throughout its life.
- Registered office address: While going for the registration of the company, the owner should provide the temporary address of the company until it does not get register. However when the company has been registered then its permanent address of its registered office should be suited with the registrar of the company. The Registered office of the company is where companies main affairs are been conducted and where all the documents are placed.
OWNERSHIP: In a private company, shares can be sold or transferred to other people by the choice of the owner. Shares of such company are owned by founders, management or a group of private investors. Thus there will be less number of shareholders. This means less complexity and confusion in decision making and management.
LEGAL FORMALITIES: Legal formalities are sometimes very expensive and time-consuming, aren’t they? If you’re planning to start a public company, you better be prepared because there is a long list of legal formalities for forming a public company. Private companies have comparatively shorter list.
DISCLOSING INFORMATION: A public company is required to disclose their financial reports to public every quarter, as it will affect public investment; private companies are not subjected to any such compulsion.
MANAGEMENT AND DECISION MAKING: Management and decision making becomes more complex and confusing in public companies as more number of shareholders are to be consulted. This complex procedure is eliminated in private company as the number of shareholders is less.
FOCUS OF MANAGEMENT: Managers of Public Company are focused on increasing the value of shares, whereas managers of the private company are more flexible in the short term and long term business decisions.
STOCK MARKET PRESSURE: Private companies are not pressurized by the stock market and you don’t have to worry about shareholder expectations and interference as long as they work within the law. Shareholders in public companies are focused on current earnings and they exert pressure on the company to increase earnings.
LONG TERM PLANNING: Managers of public companies are pressurized to increase earnings in the short term in order to increase the value of their stock. Private companies can focus on long-term earnings as such pressure is eliminated.
MINIMUM SHARE CAPITAL: You will be needing a lot of money for a public company. A public company requires minimum share capital of Rs. 5,00,000. For a private company, the earlier minimum number of share capital was Rs. 1,00,000, but now there is no such minimum compulsion. Therefore there is no pressure of fund requirements.
CONFIDENTIAL: It is obviously not appropriate, for competitors to know about your business secrets. Confidential information such as executive compensation, legal settlements, and other essential information cannot be kept reserved in public companies. Such information is more secure in a private company.
Identity Proof of Directors and Shareholders: PAN for Indian Nationals and Ntarized passport copy for Foreign Nationals
Address Proof of Directors and Shareholders: Passport, Driving License, Aadhar Card, Bank Statement or Electricity Bill. The document must not be more than 2 months old in case of bank statement and electricity bill.
Proof for Registered Office in India: Lease Deed, Rent agreement and electricity bill or property tax document. NOC from land lord for use of premised for the said purpose.
Signed Incorporation Document: Digital Signature (DSC) Application in hard copy and other documents in signed and uploaded in soft copy
- 3 DSC
- 2 DIN
- 1 RUN Name Approval
- incorporation certificate
- MOA and AOA
- PAN and TAN
Public Limited Company
A limited company grants limited liability to its owners and management. Being a public company allows a firm to sell shares to investors this is benificial in raising capital. A minimum of three Directors are required for establishing a Public Limited Company and it has more stringent regulatory requirements compared to a Private Limited Company.
Public Limited Companies are those types of companies where minimum number of members is seven and there is no cap on the maximum number of members. A public limited company has most of the characteristics of a private limited company. A public limited company has all the advantages of private limited company and the ability to have any number of members, ease in transfer of shareholding and more transparency. Identifying marks of a public limited company are name, number of members, shares, formation, management, directors and meetings, etc.
Separate Legal Entity: A company is a legal entity and a juristic person established under the Act. Therefore a company form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts.
Owning property: A company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No shareholder can make any claim upon the property of the company so long as the company is a going concern.
Easy Transferability: Shares of a company limited by shares are transferable by a shareholder to any other person. Filing and signing a share transfer form and handing over the buyer of the shares along with share certificate can easily transfer shares.
Borrowing Capacity: A company enjoys better avenues for borrowing of funds. It can issue debentures, secured as well as unsecured and can also accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.
Identity Proof of Directors and Shareholders: PAN for Indian Nationals and Ntarized passport copy for Foreign Nationals
Address Proof of Directors and Shareholders: Passport, Driving License, Aadhar Card, Bank Statement or Electricity Bill. The document must not be more than 2 months old in case of bank statement and electricity bill.
Proof for Registered Office in India: Lease Deed, Rent agreement and electricity bill or property tax document. NOC from land lord for use of premised for the said purpose.
Signed Incorporation Document: Digital Signature (DSC) Application in hard copy and other documents in signed and uploaded in soft copy
- 8 DSC
- 3 DIN
- 1 RUN Name Approval
- incorporation certificate
- MOA and AOA
- PAN and TAN
Limited Liability Partnership (LLP)
Limited Liability Partnership (LLP) is a type of legal entity that was introduced in the year 2010 as a hybrid between a company and partnership firm. The MCA has completely revamped the process for company registration in the year 2018. Similarly, the process for LLP registration is also expected to be simplified and centralised. In this article, we look at the current requirement for LLP registration in India.
Separate legal entity: An LLP is a separate legal entity. This means that it has assets in its own name and can sue and be sued. Furthermore, one partner is not responsible or liable for another partner’s misconduct or negligence.
No owner/manager distinction: An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, VCs do not invest in the LLP structure.
Flexible agreement: The partners are free to draft the agreement as they please, with regard to their rights and duties.
Limited liability: The liability of the partners is limited to the extent of his/her contribution to the LLP. Unless fraud has been detected, the personal assets of the partner are protected from any liability of the LLP.
Fewer compliance requirements: An LLP is much easier and cheaper to run than a private limited company as there are just three compliances per year. On the other hand, a private limited company has a lot of compliances to fulfil and conduct an audit of its books.
Audit not required: A LLP does not require audit if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution. Therefore, LLPs are ideal for startups and small businesses that are just starting their operations and want to have minimal regulatory compliance related formalities.
Easy to wind-up: Not only is it easy to start, it’s also easier to wind-up an LLP, as compared to a private limited company. While it still takes two to three months to complete this process, it can take over a year to close a private limited company.
Identity Proof of Partners: PAN for Indian Nationals and Notarized passport copy for Foreign Nationals
Address Proof of Partners: Passport, Driving License, Aadhar Card, Bank Statement or Electricity Bill. The document must not be more than 2 months old in case of bank statement and electricity bill.
Proof for Registered Office in India: Lease Deed, Rent agreement and electricity bill or property tax document. NOC from land lord for use of premised for the said purpose.
Signed Incorporation Document: Digital Signature (DSC) Application in hard copy and other documents in signed and uploaded in soft copy
- LLP registration with DSC
- DPIN
- Name Approval
- LLP deed drafting
- PAN and TAN
Secretarial Services |
Once the company is incorporated there are certain compliance required to be followed. The requirements depend on the structure of the entity: Some of the compliance requirememnts are mentioned below:
- Appointment of directors and auditors
- Holding board meeting and shareholders’ meeting
- Maintenance of Statutory Registers
- Drafting of minutes of board and general meetings
- Report by Board of Directors: Every Company has to prepare a board report in which details of the state of the company, operations during the year, net profit, dividend declaration and its compliance with a set of financial, accounting and corporate social responsibility standards contains.
- Filling of Financial Statements or Financial Results: Every Company is required to file its Financial Statements within 30 days of its Annual General Meeting with Registrar of Company in E-FORM AOC-4 available at mca.gov.in which shall be digitally signed by at least one Director and is required to be certified by A Company Secretary in Practice/Chartered Accountant in Practice/ Cost Accountant in Practice if the Company is not a Small Company.
- Filling of Annual Return: It is mandatory for every company to file its Annual Return with Registrar of Companies within 60 days of Annual General Meeting in E-FORM MGT-7 available at mca.gov.in which shall be digitally signed by at least one Director and is required to be certified by A Company Secretary in Practice if the Company is not a Small Company.
Recently, Government strike off more than 2 Lakh companies and disqualified more than 3 Lakh directors for non-compliance of various provisions of Companies Act. Such type of historic action came at the time when government came to know about the various techniques used by corporate entity to evade taxes.
Legal documents, deeds and agreements are to be drafted with the utmost care and with a comprehensive understanding of the laws that govern the said legal document. With over 15 years of experience in the area of corporate law and other allied services, the team at Mapasu Consulting Services is proficient in drafting various legal documents, deeds and agreements as may be required. Our team comprises of Company Secretaries who possess the requisite expertise and knowledge to provide clients with a wide array of secretarial services.
Compliance under STPI |
Software Technology Parks of India (STPI), is a society set up by the Ministry of Information Technology, Government of India in 1991, with the objective of encouraging, promoting and boosting the Software Exports from India.
Entities engaged in the development and export of software may obtain registration under the Software Technology Parks of India so as to be entitled to the many benefits conferred by the STPI on its members through the various schemes formulated therein. Further, members of the STPI are to furnish periodic reports to the STPI authorities.
Periodic Compliance Services:
- Statutory Reports for STP Units.
- Statutory Compilance for STP Units.
Statutory Reports for STP Units
- Monthly Progress Reports (MPR) & Quarterly Progress Reports (QPR): All units are required to submit Monthly Progress Reports & Quarterly Progress Reports by the 7th of a month on completion of previous month and by the 10th of a month on completion of previous quarter respectively, in the prescibed format . It is a mandatory requirement and units which are irregular in submitting MPRs & QPRs can be denied services of STPI.
- Annual Performance Reports (APR): Annual performance report should be submitted as per the prescribed format.
Statutory compliance for STP units
Accounts
Distinct Identity: If any industrial enterprise is operating simultaneously as a domestic unit as well as an EHTP/STP unit, it shall have two distinct identities with two separate accounts, including separate bank accounts. However it is not necessary for it to be a separate legal entity, but it should be possible to distinguish the imports and exports or supplies affected by the EHTP/STP units from those made by the other units of the enterprise.
Maintain the accounts as under:
- Maintenance of Sales Invoices.
- Maintenances of Fixed Asset Registers.
- Maintenance of Foreign Inward Remittance Certificate file (FIRC) & Bank RealizationCertificate (BRC) file in which the original of the FIRCs and BRCs are kept.
- Maintenance of contract file, where the copies of contracts received from buyers are maintained.
Banking
The units may have as many bank accounts as it wishes to but shall have to designate a single branch of the bank with whom all export documents will be submitted. In brief, the work of handling of all shipping documents & realization of export proceeds will have to be entrusted to this bank branch that has been designated.
We provide assistance in obtaining registration under the STPI and also meeting the periodic compliances on behalf of the entities so registered under STPI.
Compliance under Labour Laws |
Several labour laws have been enacted in India to protect the interests of workmen employed in business organizations. Entities to whom such labour laws apply are required to meet certain compliances as indicated in the respective labour laws. A few such laws include, amongst others -
- The Contract Labour ( R & A) Act 1970 & Rules
- Employee’s Provident Fund Act
- Employees’ State Insurance Act
- Industrial Employment Standing Order’s Act; if applicable
- Professional Tax Act (in applicable States)
- Maternity Benefit Act, 1961
- Payment of Gratuity Act, 1972
- The Payment of Bonus Act, 1965
- The Workmen's Compensation Act 1923
- Minimum Wages Act
- Payment of Wages Act, 1936
- Equal Remuneration Act
- State Labour Welfare Fund Act
- Shops and Establishments Act, 1961
Our team comprises of experts proficient in labour laws and shall provide comprehensive services, including advisory, to meet such compliances.
