How to incorporate a company or start a business in India


If you are looking for information on how to start a company or a business in India, read further. In this post, I will discuss various formalities involved in registering and incorporating a business in India.

Many people interchangeably use the terms "company", "business", "firm" etc. But when it comes to incorporating, each of these means different entities. In general, when someone want to start a business in India, they ask "how to start a company in India". But the "starting a company" means something more than just "starting a business".

It is a common misunderstanding that any business can be called a Company. A business can be called a Company in India only if it is incorporated according to the 1956 Companies Act in India.

"Company" is one of different types of business entities in India.

There are several types of business entities in India:

1. Proprietorship
2. Partnership Firm
3. Limited Liability Partnership
4. Company



Most people who want to start a new business do not want to start it as a company. Rather, they want to incorporate their business as a Proprietorship, Partnership firm or a Limited Liability Partnership, none of which can be called as a company. You may read about the different types of business entities in India.

Advantages of LLP over Partnership firms and companies


LLPs have many advantages over Partnership forms and Companies. One of the biggest advantages is, it is less complex than running a company, gives most benefits of companies, have more formal existence like a company and protect the personal assets of partners from the business liabilities. You can read more about the advatanges of LLP over partnership firms in India.

How to incorporate a business or company in India



Step 1: Identify the business entity type

The first step in incorporating a business in India is, choose what kind of business entity you want to register. You need to choose from proprietorship, Partnership firm, LLP or Company. If you are running a local business with local clients, you may go for a Proprietorship or Partnership firm. But be careful that the partners are personally liable for any business liabilities. If you are looking for a big business with lot of clients and expect investments from capital investors etc, you may want to register it as a Company. For most other cases, LLP is the recommended business entity type.

Step 2: Apply PAN card for partners

In most cases, all partners are required to have a PAN card before they can become a partner of an LLP or Company. There are few exceptions for foreign nationals and few other cases. It is a good idea to have a PAN card ready for you since it is almost impossible to do various bank transactions and other business without a PAN card.

Step 3: Choose a name for your business

If you are incorporating an LLP or a Company, you must reserve a name for your business and should get approval from the "Ministry of Corporate Affairs". There are several guidelines for choosing a name for your business. One important criteria is, you cannot choose name of an existing business. Learn more about check availability of name for LLP or Company in India.

Step 4: Choose a registered office for the business

Any registered business should have a registered office in India. The registered office can be same as the residence of one of the partners or a rental home. In case of residential address, you will need to produce a No Objection letter from the resident of the house.


Related Articles

How much it will cost to register an LLP or incoporate a business in India?

Are you looking for information on how much it will cost to incorporate a company in India? We recently registered an LLP in Bangalore, India. In this post I will share my experience on registering an LLP in India and talk about various costs involved in incorporating a business in Bangalore, Karnataka.

Different types of Business entities in India

Are you planning to start a business in India? I this blog, I am sharing what I learnt during my business registration process in India. I will cover different types of business entities possible in India.

More articles: Start a company in India Incorporate in India LLP in India Partnership Firms in India

Comments

Guest Author: Ashutosh Joshi16 Jan 2012

This is informative but i also came across one more website http://blog.abhyankarcs.com which gives detailed steps on Company Registration in India. Personally found it useful.

Guest Author: abhishek22 Feb 2012

does your registered house or office fall under liability of the firm in LLP or it is excluded ??

Guest Author: Bhavesh Savla24 Feb 2012

Hi.
You have missed out on the last two steps. These are:

1. Once you get the name availablity, u need to proceed with the final incorporation forms. In case of a pvt. ltd. company, it is Form 1, Form 18 and Form 32. and in case of a LLP, it is form 2, Form 3 and Form 4.

CA. Bhavesh Savla
bhavesh@cabks.in



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