Like in any other countries across the world, starting a company in India also requires a lot of planning and activities before one can establish an organization successfully. Besides integration of a company there are many other official procedures required in starting a company in India.
There are five types of business entities obtainable in India:
- Private Limited Company
- Public Limited Company
- Unlimited Company
- Sole Proprietorship
Difference between Private Limited Company and Public Limited Company
A Private Limited Company is restricted by shares with maximum 50 shareholders and minimum 2 shareholders. In this type of a legal entity public is not allowed for the subscription of shares or debentures with constraint on the transfer of shares. Moreover, the firm is also not entitled to make or allow payment from Public. The accountability of each shareholder is restricted to the extent of the due sum of the shares' face value and the premium thereon in context of the shares owned by him. However, the accountability of a Director / Manager of such a Company can be unrestricted at times.
Which business entity is suitable?
The preference of starting a company in India chiefly depends on respective situations. As compared to a Public Limited Company, Private Limited Company have minimal agreement constraints. Private Limited Company is the best choice when there is no need of elevating investments through a public issue and the proprietorship is projected to be strictly owned by restricted number of persons.
Methods for acquiring name consent for the proposed firm
To acquire name consent for the proposed company Form No. 1A is required to be submitted with the Registrar of Companies (ROC) of the state mentioning the address of the Registered Office of the projected Company along with the signature of one of the promoters.
The particulars to be acknowledged in the said application are:
- Four optional names for the proposed company. (The name should be indicative of the main purpose of the company. Explanation for the proposed name is required to be mentioned in the application)
- Names and addresses of the promoters (For a public company it should be minimum 7 and for private company it should be 2).
- Certified Capital of the projected company.
- Chief items of the proposed company.
- Names of other group firms.
After the name consent letter is received from the ROC, the next step is to draft the MOA and AOA. The MOA states the chief, auxiliary and other items of the proposed firm while the AOA incorporates the guidelines for the standard conduct of the proposed firm. It also mentions the certified share capital of the projected firm and the names of its permanent directors.
Both the MOA and AOA need to be stamped along with the payment of the stamp duty which depends on the certified share capital.
Documents required to be completed for starting a company in India
The following credentials are required to be signed before they are presented to the ROC:
- MOA and AOA - These documents should be filled by the promoters themselves and in the presence of an observer mentioning their full name, father's name, occupation, residential address, number of shares subscribed for, etc.
- Form No. 1 - Form No. 1 is an announcement which needs to be performed on a non- legal stamp paper of Rs 20 by any one of the directors of the projected firm or Attorneys or Advocates, etc. mentioning that all the obligations of the integration have been observed.
- Form No. 18 - This form is required to be filled by any one of the directors of the company notifying the address of the registered office of the proposed firm to the ROC.
- Form No. 29 - This is an approval acquired from all the proposed directors of the suggested firm to operate as directors of the proposed company. This form is not applicable in case of a private firm.
- Form No. 32 - This is a form affirming the details of selection of the proposed board of directors from the date of integration of the suggested company and is signed by one of the acting directors.
Supplementary steps for starting a company in India (in case of a Public Limited Company)
- Approval of Directors to operate as such in Form No.29.
- Coordinate for payment of application and allowance money by Directors on shares subscribed or decided to be subscribed.
- In schedule-iv of the Companies Act, submit the Statement in Lieu of Prospectus with the ROC
- Submit an avowal in Form-20 duly signed by one of the Directors.
- Acquire the Certificate of Commencement of Business.
On the fulfillment of legal formalities such as legal meeting, legal report, etc with the ROC, the ROC issues letter for initiation of business of the company. Thereafter, the Public Limited Company can commence its business operations whereas the Private Company can begin its undertaking immediately on inclusion.
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