Starting a small company in India is an exciting venture for many business owners. The process involves several steps, from choosing the right business structure to completing the legal formalities for registration. Understanding the nuances of registering a small company can pave the way for a smooth and successful business operation. This article serves as a detailed guide to assist you in going through the process of company registration for small companies in India.
What is a Small Company?
In India, a “small company” is a specific category under the Companies Act, 2013. It is based on certain criteria, primarily focusing on the company’s annual turnover and paid-up share capital.
So, according to the Act, what is a small company? A small company (excluding a public company) is one that has a paid-up share capital of not more than 50 lakh rupees or such higher amount as may be prescribed which shall not be more than 10 crore rupees, and an annual turnover of not exceeding 2 crore rupees or such higher amount as may be prescribed which shall not be more than 100 crore rupees. This definition helps in identifying businesses that qualify for various benefits and exemptions provided by the government to support small-scale businesses in India.
Step-by-Step Guide to Company Registration
1. Decide on a Business Structure
The first step in registering a company in India is to decide on the right business structure. Small businesses often opt for a Private Limited Company, Limited Liability Partnership (LLP), or One Person Company (OPC) due to their flexibility and benefits. Each structure has its needs, benefits, and drawbacks, so it’s important to choose one that aligns with your business goals and operational scale.
2. Obtain a Digital Signature Certificate (DSC)
The registration process is entirely online, and you need to file all the documents electronically. Hence, obtaining a Digital Signature Certificate (DSC) for the directors or partners of the company is mandatory. The DSC is used to verify the authenticity of the electronically submitted documents.
3. Secure Director Identification Number (DIN)
Every director of a company in India needs to have a unique identification number, known as the Director Identification Number (DIN). You need to file the application for DIN online, it requires basic identification documents.
4. Name Approval
Choosing a unique name for your company is crucial, as it should not match or closely resemble the name of an existing company. The name approval process is done through the RUN (Reserve Unique Name) service on the Ministry of Corporate Affairs (MCA) portal. It’s advisable to have one or two alternative names ready in case the preferred name is not available.
5. File for Incorporation
After name approval, the next step is to file the incorporation application along with the necessary documents, such as the Memorandum of Association (MoA), Articles of Association (AoA), and details of directors and shareholders, on the MCA portal. The application for incorporation is Form SPICe+.
6. Obtain PAN and TAN
Upon successful incorporation, the company automatically gets a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). These numbers are essential for tax registrations and compliance.
7. Register for Goods and Services Tax (GST)
If your company is involved in the buying or selling of goods and services, then registering for GST may be necessary. This is based on your business activities and the turnover threshold set by the GST law.
8. Opening a Bank Account
The final step is to open a bank account in the name of the company. This requires the incorporation certificate, PAN, and other company documents. A company bank account is essential for conducting business transactions.
Conclusion
Thus, Registering a small company in India is a straightforward process, provided you follow the steps meticulously and comply with the legal requirements. The Government of India has streamlined the process to encourage entrepreneurship and ease of doing business. Taking advantage of the various schemes and exemptions available for small companies can significantly benefit your business. However, it’s also recommended to seek professional advice or consult the Ministry of Corporate Affairs’ website for detailed information and updates.
