Once you have decided to register your company in India, choosing the right business structure can be a bit tricky. Whether to go for a partnership firm or a Limited Liability Partnership (LLP) firm? What if you are open to the idea of Venture Capital funding in future but your business structure doesn’t attract investments?
All these questions are very important and need to be addressed before one makes the final call. In this article, you will learn about
- The types of Business Structures in India
- Choosing the right business structure for your business
- Things you need to register your company in India
Read More: How to register a company in USA?
How to register a company in India?
Types of Business Structures in India
Basically, there are 4 Business structures you can choose from.
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One Person Company (OPC) where there exists only one promoter or owner.
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Limited Liability Partnership (LLP) which takes the benefit of partnership firm and a limited company.
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Private Limited Company which has shareholders (stakeholders) and directors.
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Public Limited Company which is an association of members which is incorporated under company law.
Choosing the right business structure for your business
Now that you have learnt about the various business structures in India, the next important step is to decide which business structure fulfills your requirements. You might be thinking that you don’t need a Private Limited Company but an LLP will be enough. Depending on your future plans this may or may not be a good idea.
When should I go for One Person Company or OPC?
If you are a sole owner and want to limit your liability.
Are there any advantages in registering OPC?
You will get Tax holiday for the first 3 years under government schemes and Higher benefits on depreciation. Moreover, there will not be any tax on dividend return.
What about filing returns?
Business tax returns need to be filed.
When should I go for Limited Liability Partnership or LLP?
If you have low investment needs in the future, consider going for LLP. However, if you are planning to expand in the future through investments, this might not be a good choice.
Are there any advantages in registering a company as an LLP?
You have benefits on depreciation. The biggest benefit is that partners are limited to their contributions and thus their liability is limited.
What more should I consider before I go for LLP?
LLP is a relatively new phenomenon in India. Several businesses have complained that dissolving an LLP has become a concern for them and converting an LLP to a private limited company is near to impossible.
When should I go for Private Limited Limited Company?
If you are expecting a large turnover and you also are open to the idea of seeking investments in the future either through VCs or established institutions. Especially, if you are a Startup, investors will only when be interested in your venture are a private limited company.
What are some other advantages of registering as Private Limited Company/
By registering your company as a Private limited company you also get Tax holiday for first 3 years under Startup India scheme. Also, you get more benefits on depreciation.
What about compliance?
You need to file Business tax returns and ROC returns. Moreover, an audit is mandatory and you also need to have mandatory board meetings.
When should I go for Public Limited Company?
If your turn over is substantially higher.
What about compliance?
You have to file Business tax returns mandatorily. Also, there is a provision of a mandatory audit.
Things you will acquire once you register a company in India
You can register on the MCA Portal online.
A Digital Signature Certificate(DSC)
Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. Few Examples of physical certificates are drivers’ licenses, passports or membership cards. Certificates serve as proof of identity of an individual for a certain purpose; for example, a driver’s license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove one’s identity, to access information or services on the Internet or to sign certain documents digitally.(Source mca.gov.in)
A Director Identification Number (DIN)
DIN is a unique Identification Number allotted to an individual who is appointed as a director of a company, upon making an application in form DIR-3 pursuant to section 153 & 154 of the Companies Act, 2013(Source mca.gov.in)
Certificate of Incorporation
It’s the certificate issued by the government showing its legal name and date of incorporation.
