The Industrial revolution has paved way to the emergence of big multi-national corporations in the country. How can we define a company? According to Section 3 (1)(i) of the Companies Act, 1956 a company is one that is formed and registered under the Companies Act. The company is a separate legal entity from its members, has its own rights and duties and has the potential of perpetual succession. Incorporation and Registration are the first steps in setting up a business entity. Although these terms are used interchangeably, they have different connotations.
Incorporation is the process in which a business legally comes into existence. The business becomes a separate legal entity distinct from its owners.
Why Incorporate?
- Creation of a Separate Entity: Once incorporated, the company identifies itself as a separate entity distinct from its founders, directors and stakeholders. Property can be bought, sold and owned in the company’s name and the company can sue and be sued in its name.
- Raise Capital: Once incorporated, companies can raise capital from the public by selling their stock or by taking a bank loan or raising other forms of credit. The company can get listed on the stock exchange making it easier for it to raise capital.
- Limited Liability: The liability of the stakeholders of a corporation is capped. This protects the business owners from losing their personal assets in case the company is sued.
- Ownership is transferable
- More lenient tax restrictions
Registration, in strict parlance, means to obtain a license to be legally able to conduct business. Business Registration does not provide any protection of personal assets. However, incorporation and registration of a business entity happen simultaneously. Once the company is incorporated it is registered under the Companies Act 2013. Companies can incorporate in one state and then register to do business in several states.
The following are the steps involved in Incorporating a new company
- Select a Company Name. A preference of six names can be given after checking for the name availability on the website of Ministry of Corporate Affairs. A fee of Rs. 500 has to be paid for getting the company’s name approved.
- Once the name is approved the applicant who is initiating the process can apply for registering the company.
- Draft the memorandum and articles of association, get the same vetted and print it.
- The Memorandum and articles of association should be stamped with appropriate stamp duty.
- They should be signed by at least 2 subscribers who should fill in their details like name, occupation, address, and the number of shares subscribed.
- The applicant must fill Form 1(Declaration of Compliance), Form 18 (Notice of Situation of Registered Office of the Company) and Form 32 (Details of Directors, Managers, Secretary). The above e-forms along with the digital signature must be uploaded, the registration fees must be paid and the physical copies of the Memorandum and Articles of Association must be sent to the Registrar of Companies.
- Businesses must acquire a Permanent Account Number (PAN) and Tax Account Number (TAN)
Once the above formalities are completed a Certificate of Incorporation is issued by the Registrar of Companies.
Once the company gets the Certificate of Incorporation it is registered and begins to function as a distinct legal entity capable of exercising all the functions of an incorporated company and having perpetual succession.
Still have doubts about registering a company? Looking for trustworthy and quick company registration services in Delhi? Contact us at +91 8527853048 or email us on info@fincomienzo.com
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