How to start a new business in India?
How to start a new business in India?
(Legal Requirement and Documentations)
Proprietorship Firm: - Proprietorship firms are business entity that are owned, managed and controlled by the single person and person known as Proprietor of the firm. There is no concept of separate legal entity under Proprietorship firm. Thus liability of proprietor is unlimited in proprietorship firm. A sole proprietorship firm does not need any specific registration, but the owner is advised to get some essential registrations for better operational functioning of the firm.
Following are the registration required for the proprietorship firm:
Ø
Goods and Services Tax (GST) Registration
Ø
Shop and Establishment Act License
Ø
MSME Registration
Partnership Firm:- The partnership is the most common form of business structure in India which is most favourable amongst medium-sized businesses. However partnership registration is not mandatory in India but getting it registered provides the legal existence to it and makes it easier to convert it later into other entities such as LLP and Company.
Partnership Firms in India are governed by the Indian Partnership Act, 1932. As per Section 4 of the Indian Partnership Act: - “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”.
Thus as per the above
definition, there are 5 elements which constitute of a partnership namely:
(1) There must be a
contract;
(2) There must be two or
more persons;
(3) who agree to carry
on a business;
(4) with the object of
sharing profits and
(5) the business must be carried on by all or any of them acting for all.
Limited Liability Partnership (LLP):- Limited Liability partnership firm means a firm registered under The Limited Liability Partnership Act, 2008. [Section 2(n)]
LLP
is an alternative corporate business form that gives the benefits of limited
liability of a company and the flexibility of a partnership. Thus, it is
a hybrid form of Private Limited and Partnership firm. LLP shall be a body
corporate and a legal entity separate from its partners.
It will have perpetual succession. The mutual rights and duties of the
partners within a LLP are governed by an agreement, known as “limited liability
partnership agreement” defined under Section 2(o) of the Limited Liability
Partnership Act, 2008.
One Person Company: - This is the new form of business entity which is firstly introduced in Companies Act, 2013.
As per the provisions of Section 2(62) of the Companies Act, 2013 “One Person Company” means of a Company which has only one person as a member;
OPC can be registered only as a Private Limited 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.
Only a natural person who is an Indian citizen and resident in India-
Ø shall be eligible to incorporate a One Person Company;
Ø shall be a nominee for the sole member of a One Person Company.
The term “resident in India” means a person who has stayed in India for a period of not less than 182 days immediately preceding one calendar year.
Private Limited Company: - As per the Provisions of Section 2(68) of
the Companies Act, 2013, "Private Company" means a company
having a minimum paid-up share capital as may be prescribed, and which by
its articles —
(i) restricts
the right to transfer its shares;
(ii) except in
case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one
or more shares in a company jointly, they shall, for the purposes of this
clause, be treated as a single member:
Provided further that—
(A) persons who
are in the employment of the company; and
(B) persons who,
having been formerly in the employment of the company, were members of the
company while in that employment and have continued to be members after the
employment ceased, shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company;
Public Company: - Public Company is define under Section
2(71) of the Companies Act, 2013 as –
"Public Company" means a company
which—
(a)
is not a private company; and
(b) has
a minimum paid-up share capital as may be prescribed
Provided that a company which is a subsidiary of a company, not being
a private company, shall be deemed to be public company for the purposes of
this Act even where such subsidiary company continues to be a private company
in its articles ;
Common documents for the formation of
Proprietorship Firm, LLP, Partnership Firm, One Person Company, Private Limited
and Public Company (Limited Company):- Following are common documents required for the formation of mentioned
entities:
ü KYC Documents of Proprietor in the case of Proprietorship Firm (PAN, Aadhar,
Mobile No, Email Id, Passport Size Photograph, Latest Copy of Bank Statement)
ü KYC Documents of atleast 2 Partners in the
case of Partnership Firm (PAN,
Aadhar, Mobile No, Email Id, Passport Size Photograph, Latest Copy of Bank
Statement)
ü KYC Documents of atleast 2 Designated
Partners in the case of LLPs (PAN,
Aadhar, Mobile No, Email Id, Passport Size Photograph, Latest Copy of Bank
Statement)
ü KYC Documents of atleast 2 Members and/or 2
Directors in the case of Private Limited
Company (PAN, Aadhar, Mobile No, Email Id, Passport Size Photograph, Latest
Copy of Bank Statement)
ü KYC Documents of atleast 7 Members and 3
Directors in the case of Public Limited
Company (PAN, Aadhar, Mobile No, Email Id, Passport Size Photograph, Latest
Copy of Bank Statement)
Documents for the proof the registered
office of entities:
ü Utility Bill (Electricity Bill or Gas Bill
or Water Supply Bill)
ü Rent Agreement (if Property is Rented)
ü Non Objection Certificate from the owner of
Property
Author:- Author of this Article is CS Vinay Pandey
About CS Vinay Pandey:- CS Vinay Pandey is Associate Member of Institute of Company Secretaries of India and Law Graduate from VBSPU, Jaunpur. He is Co-Founder of Professional Study Point and faculty of Financial Management Paper of CS Professional Programme.
CS Vinay Pandey
(Company Secretary & Writer)
(CS, LLB, B.Com)
cs.vinaypandey@gmail.com
Mob/Whatsapp: 9911473074
Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at cs.vinaypandey@gmail.com
Amazing information and well-written post.
ReplyDeletelearn more about startup a new business: LLP Registration in Agra
The benefits of owning a business can't be reaped by a sole proprietorship as it grows. Consequently, the proprietorship must be converted into a limited company. By converting to a company, all the benefits of a company can be gained, like limited liability, higher capital, etc.
ReplyDeleteTo learn more,
Visit Sole Proprietorship to Private Limited Company
The Registrar of Companies (ROC) will review the E-forms and any accompanying documentation when the company files the paperwork to convert from a private limited company to a one-person corporation(OPC). The Registrar will issue a certificate to the effect of conversion of a private limited company into a one person company if satisfied that the company has fulfilled with approved requirements (OPC).
ReplyDeleteIn public company limited, shares are offered to the general public and can be purchased and traded on a stock exchange. As the name suggests, public limited companies offer company shares for trade.
ReplyDeleteThe decision of the partners as to whether or not to register the partnership firm is up to them; it is not required. However, if a partnership registration is not completed, it cannot receive legal benefits; for this reason, it is usually desirable to register it.
ReplyDelete