Company Registration – How to Register a

Company in India
How to Register a Company in India? Registering your company under the right business structure is an important
decision. Find out the prose and cons of different structures.
Updated on May 29, 2019 - 05:55:13 PM

Registering your company under the right business structure is an important decision. Find out the pros
and cons of the different business structures.
What are the types of business structures in India?
Why is it important to choose the right business structure?
How to choose a business structure while applying for company registration in India?
How to Register a Company in India?

Picking the right company structure for your business is as important as any other business-related activity. The right
business structure will allow your enterprise to operate efficiently and meet your required business targets. In India,
every business must register themselves as part of the mandatory legal compliance. Before we learn how to register
a company, let’s try and understand the types of business structures in India.

What are the types of business structures in

India?
Let’s try and understand the types of business structures available in India. Here is a list of some of them:

1. One Person Company (OPC)

Recently introduced in the year 2013, an OPC is the best way to start a company if there exists only one promoter or
owner. It enables a sole-proprietor to carry on his work and still be part of the corporate framework.

2. Limited Liability Partnership (LLP)

A separate legal entity, in an LLP the liabilities of partners are only limited only to their agreed contribution.

3. Private Limited Company (PLC)

A company in the eyes of the law is regarded as a separate legal entity from its founders It has shareholders
(stakeholders) and directors (company officers). Each individual is regarded as an employee of the company.

4. Public Limited Company (PLC)

A PLC is a voluntary association of members which is incorporated under company law. It has a separate legal
existence and the liability of its members are limited to shares they hold.
You can choose what business structure suits your business needs best and accordingly register your business.
Here is a comparative list of the popular business structures in India.

Company Ideal for Tax advantages Legal compliances

type

Limited Service-oriented Benefit on depreciation Business tax returns to

Liability businesses or be filed ROC returns to
Partnership businesses that have be filed
low investment needs

One Sole owners looking to Tax holiday for first 3 years under Business returns to be
Person limit their liability Startup India Higher benefits on filed Limited ROC
Company depreciation No tax on dividend compliance
distribution

Private Businesses that have Tax holiday for first 3 years under Business tax returns to
Limited a high turnover Startup India Higher benefits on be filed ROC returns to
Company depreciation be filed An audit is
mandatory

Public Businesses with a Tax exemptions under Business tax returns to

Limited high turnover be filed.Mandatory
Company Audits

Other forms of business structures include Sole proprietorship, Hindu Undivided Family, and Partnership firms.
Please bear in mind, these structures do not come under the ambit of company law.

Why is it important to choose the right business

structure?
It is important to choose your business structure carefully as your Income Tax Returns will depend on it. While
registering your enterprise, remember that each business structure has different levels of compliances that need to
be met with. For example, a sole proprietor has to file only an income tax return. However, a company has to file an
income tax return as well as annual returns with the registrar of companies.
A company’s books of accounts are to be mandatorily audited every year. Abiding by these legal compliances
requires spending money on auditors, accountants and tax filing experts. Therefore, it is important to select the right
business structure when thinking of company registration. An entrepreneur must have a clear idea of the kind of the
legal compliances he/she is willing to deal with.
While some business structures are relatively investor-friendly than others, investors will always prefer a recognised
and legal business structure. For example, an investor may hesitate to give money to a sole proprietor. On the other
hand, if a good business idea is backed by a recognised legal structure (like LLP, Company, etc) the investors will be
more comfortable making an investment.
How to choose a business structure while
applying for company registration in India?
Let’s take a look at some important questions every entrepreneur must ask himself before he/she finally decide upon
a business structure.
i. How many owners/partners will your business have?
If you are a single person who owns the entire initial investment required for the business, a One Person Company
would be ideal for you. On the other hand, if your business has two or more owners and is actively seeking
investment from other parties a Limited Liability Partnership (LLP) or Private Limited Company would suit you best.
ii. Should your initial investment determine your choice of business structure?
The answer to that question is – Yes if you want to spend less initially, it would be wise to go in for a Sole Proprietor,
or a HUF or a Partnership. But, if you are sure that you will be able to recover the setup and compliance costs, you
can opt for a One Person Company, LLP or a Private Limited Company
iii. Willingness to bear the entire liability of the business
Business structures like sole proprietor, HUF, and partnership firm have unlimited liability. This means, in case of any
default in loans, the entire money will be recovered from the members or partners in profit sharing ratio. The risk to
personal assets is high in these cases.
Whereas, Companies and LLPs have a limited liability clause. This means that the liability of its members is
restricted to the amount of contribution made by them or the value of shares each member holds.
iv. Income Tax Rates Applicable to businesses
The income tax rates applicable to a sole proprietorship and a HUF are the normal slab rates. In case of a sole
proprietorship, the business income is clubbed with the individual’s other income.
But in the case of other entities like partnership and company a tax rate of 30% is applicable.
v. Plans of getting money from investors
As mentioned earlier, it is difficult to get investments when your business structure is unregistered. Entities like LLP
and Private Limited Company are trusted when it comes to investment. Make sure you choose the right structure,
seek the help of an expert so that you register under proper guidance.

4. How to Register a Company in India?

Registering a company in India is now a simple 4-step process. Here is what you’ll need to acquire:
i. A Digital Signature Certificate(DSC)
ii. A Director Identification Number (DIN)
iii. Registration on the MCA Portal or New user registration
iv. Certificate of Incorporation
With this, we have covered the basics of how to register a company. If you still need help registering your company,
don’t stress over it, and let our team of experts guide you.