Legal Guide On How To Start A Company In India

Starting a business is a challenging task, especially when it comes to a versatile country like India. It is more than just dealing with place, purchase and sale, it involves several legal methods to form an integral foundation of the business for a long run. India might have 63rd rank in ease of doing business ratio but there are numerous legal procedures to be followed while starting a company. It is necessary to fulfil all the obligated legal procedures while starting a business to keep the business running successfully without any obstacles in its way.

  1. Prepare partners contract

Businesses generally start with partners agreeing on oral understandings. Often not everyone has the proper legal knowledge of required terms and conditions that is why an agreement must be made in written. A written agreement serves as an evidence to all the agreed terms. In an oral agreement it is not very likely that everyone involved will understand in the same context and for a smooth working of the business in future it is necessary that everyone must have same consensus. A good contract between founders must include the following terms:

  • Proper decision-making system for the business
  • Roles and Responsibilities of individual partners in working of a business
  • Share capital and other financial attributes of business by individual partners
  • Ownership structure of the busines
  • Dealing with shares of new founders and partners who have resigned or deceased
  • Terms and conditions for dissolution of partnership
  • Terms and conditions for addition of new partners
  • Protection of partners in minority
  • Registration of Company Name

Name of a company holds its essence. Choosing a perfect name is an essential procedure as the name is what a company will be known as in its future. Before following the process for registration of the name it is necessary to first check if the names are appropriate according to directions of naming a company along with limitations on naming a company given in Companies Act, 2013 and Companies Incorporation Rules, 2014. Once the names are chosen you can proceed to registration. Registration of name should be made by the registrar of the company of the state. The ministry of corporate affairs under Companies Act 2013 has made Registration process easier and simpler, it usually takes around 7 days and costs around ₹500. One needs to mention at least 4 names in the application according to the preference and the name should not collide with the name of an existing company. “private Ltd.” should be mentioned at the end of the name of a private company and ‘Limited’ if the company is public.

  • Attaining a Director Identification Number (DIN)

Director Identification Number (DIN) is an 8-digit unique Identification Number allotted to an individual who is appointed as a director of a company or who wants to be a director of a company. Directors are appointed by the shareholders. DIN is used to maintain a database of all directors by central government, it is mentioned under director’s signature in all the official documents. DIN has a lifetime validity and one director can only have one DIN but he can be a director of 2 or more companies. An application for allotment of DIN for a new company shall be made only through SPICe eform. One can apply for DIN at http://www.mca.gov.in/ and find the forms under DIN services.

  • Attaining a Digital Signature Certificate

Digital Signature is a signature for electronic procedures. It is used in order to ensure security of the document along with its authenticity. Digital Signature Certificate is issued by Certifying Authorities (CAs). Taxpayer’s name, public key, name of Certification Authority issuing the signature, expiration date of the public key, the digital signature and its serial number are required for the application. Digital Signature has a validity of one year and two years, and it can be renewed upon expiration. One can apply for Digital Signature Certificate at http://www.mca.gov.in/ and find the forms under DSC Services.

  • Stamping of Company Documents

Stamping of company document constitutes of stamping of Memorandum of Association (MOA) and Article of Association (AOA). MOA and AOA are most important documents for incorporation of a company. Stamped MOA and AOA should be submitted to Registrar of Company (ROC) after stamping along with required forms and documents also it should be submitted along with the unsigned copies of both MOA and AOA. Memorandum of Association is like a constitution for the company which contains all its fundamental clauses. Article of Association defines a company’s roles and contains all the rules, rights, internal workings and management of a company. Stamping of documents takes around a day and costs around ₹1300.

  • Incorporation of Company Certificate

Certificate of incorporation is issued by Registrar of Companies (ROC), it brings the company into existence from the date it is issued. To obtain Incorporation of Company Certificate one must need to submit following documents; DSC – Digital Signature Certificate, Form – 1 for Incorporation of Company in India, Form-32 for particulars of managers, secretary, and proposed directors, Director Identification Number of all proposed company directors, Original copy of the formal letter which is published by ROC about company name availability and Form- 18 for address or situation of the proposed company. Certificate of Incorporation is issued after the ROC inspects all the documents, MOA and AOA submitted. It takes one to two weeks after the submission of MOA and AOA to ROC. A private company can start the business as soon as they get certificate of incorporation while the public company has to wait till commencement of business certificate. 

  • Creating a Company Seal

Creating a company seal is not an obligated legal procedure for a private company. It is necessary for issuing shares, debentures, certificates and documents under the company name. Creation of company seals cost depends upon the number of words on the seal and number of seals issued.

  • Obtaining required licenses and registrations  
  • Permanent Account Number (PAN): 

PAN card is issued so that Income Tax Authorities could keep track of all the financial attributes of the business. It helps in accessing a company’s tax abilities. For the application of PAN, it is required to fill Form 49A. Application for PAN can be filled online and the physical PAN card can be sent to the registered address through post.

  • Tax Account Number (TAN):

TAN is a 10-digit alphanumeric code issued by Income Tax department for the companies in order to withhold the taxes and deduction of taxes or collection of taxes at source such as salaries, interest, dividend…etc. Application for TAN can be made online as well as offline. It costs as less as ₹50. One can apply for TAN by submitting Form 49B online or offline.

  • GST Registration:

GST (Goods and Service Tax) is an indirect tax for supply of goods and services. It is mandatory for every company dealing with goods and services with an annual turnover of 40/50 lakhs to have GST registration. GST registration usually takes 2-6 working days and costs around ₹1500. GST registration can be made online at https://gst-india.org/ .

  • Profession Tax Certificate

Profession tax is a state level tax imposed on the income earned on the way of trade or profession. It is mandatory for every employer to have profession tax certificate. One should apply for it at their respective state authority. To apply for Profession tax certificate, one is required to submit Form 1 to the state profession tax office.

  • Employees’ Provident Fund Registration 

Employees’ Provident Fund Registration is used to receive an Establishment Code Number (ECN) for the company. Every employer has an obligation to provide details of the establishment to the Employees’ Provident Fund Organisation. This will only be required only if the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 are applicable on the company. One can apply online on https://services.india.gov.in/. It requires all the necessary details such as PAN number, name of the establishment, contact details, address details…etc. 

  • Employees’ Insurance (ESIC)

ESIC stands for Employees State Insurance Corporation. ESIC registration is needed to provide insurance for social protection to employees. It provides Protection and certain benefits to Employees in case of sickness, maternity and employment injury and to make provisions for related matters. The ESI Act, (1948) applies to Non-seasonal factories using power and employing ten (10) or more persons and Non-seasonal and non-power using factories and establishments employing twenty (20) or more persons 

Some licenses are specific and it depends on the type of Industry in which the establishment operates.

  • Import and Export Code (IEC) Registration

Import and export code as the name suggests is for the establishment that deals with import an export of goods. It is a 10-digit number issued by Director General of Foreign Trade, Department of Commerce, Government of India. Registration of IEC can be done online at https://iec-nic.com/. Documents required will be Address Proof, Banker Certificate/Cancelled cheque, and PAN card. 

  • Value Added Tax (VAT) Registration

VAT is a tax imposed by central government upon the sales of goods and services provided to final consumers like a franchise of a store. VAT registration is mandatory for establishments involved in manufacturing or sales of goods and services. Registration can be done online on the respective state government website.

  • Food Safety and Standards Authority of India (FSSAI) Registration

FSSAI license is required for companies dealing with food manufacturers, storage, transporters, distributors, etc. It is a government body that deals with ensuring the safety of food products in India. It inspects the safety and standards of food manufactured in the company and then provides licence. Basic aim of FSSAI is to oversight public health in India. FSSAI registration is a one-day process and it can be done online through the FSSAI website https://www.foodlicensing.org/.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

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The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

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In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

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