Process to Setup a Company in India

Setting up Business in India by Indian Nationals

When starting a business, one must decide what form of business entity to be established. An Indian National can set up business in India by incorporating either:

  • Private Limited Company
  • One Person Company
  • Public Company

All companies operating in India are governed by the Companies Act, 2013 and are required to register with the Registrar of Companies (RoC), a department under the Ministry of Corporate Affairs. Starting a business by incorporating a Private Limited Company is very convenient, popular, and successful these days. A private limited company has the following features:

  • Member: A minimum of two (2) members are required to setup a private limited company in India.
  • Director: A minimum of two (2) directors are required to setup a private limited company in India, with at least one (1) director being a resident of India (resident of India means the person has stayed in India for at least 182 days in the previous year).
  • Minimum Liability: The liability of the members is limited to the extent of amount unpaid on the shares held by them.
  • Transferability of shares: The transferability of shares of a private limited company is restricted under the Companies Act, 2013. However the share can be transferred with mutual consents of members of the company.
  • Taxation: The tax rate on the private limited company is 25% as compared to 30% on a limited liability partnership

Procedure/Requirement to setup Private Limited Company by Indian Nationals in India

Below mentioned are the requirements to setup a private limited company in India by Indian Nationals:

  • Proposed Name and Main Object: The very first step in the incorporation of a company is the name reservation. So, for name reservation, two (2) names in order of preference should be given. Once the name is approved by the Registrar of Companies (RoC), it will be Valid for twenty (20) days from the date of approval. The name should be unique and should not be identical with the name of existing company and Trademark. The main object to be carried out by the proposed company should be given.
  • Digital Signature Certificate: DSC is the digital equivalent (i.e electronic format) of physical or paper certificates. It can be presented electronically to prove one’s identity or to sign certain documents digitally. The DSC of the proposed director is mandatory because the incorporation forms require the DSC to be affixed.
  • Subscriber and Director: A minimum of two (2) members are required to setup a private limited company in India. They may either be individual or body corporate. The details of the subscribers are required to be given. A minimum of two (2) directors are required to setup a private limited company in India with at least one director being a resident of India (resident of India means the person who stays in India for at least 182 days in the previous year).
  • Capital Requirement: There is no capital requirement for incorporating a private limited company. A company can be incorporated with INR 1.
  • Memorandum of Association (MOA): The MOA is the Constitution of the company. It defines the scope and purpose for which the company has been formed. The MOA is divided into six clauses which are as follows:
  • Name Clause
  • Registered Office Clause
  • Object Clause
  • Liability Clause
  • Capital Clause
  • Subscriber Clause
  • Article of Association (AOA): The AOA of the company contains the regulations for the management of the company. Generally, it contains the details relating to capital, meetings, director, accounts, audit, etc. It set out the right, duties, and liabilities of the members of the company.
  • Director Identification Number (DIN): DIN is a Unique Identification Number allotted to an individual who is appointed as a director of the company. At the time of incorporation of the company, an application for allotment of DIN shall be made only through incorporation form (i.e SPICe+). However, through SPICe+ a maximum of three (3) directors are allowed for allotment of DIN.
  • Registered Office: The Company must have a registered office from the date of incorporation.
  • Incorporation: After filling the incorporation form with the Registrar of Companies (RoC) along with proper attachments, the RoC will issue the Certificate of Incorporation (COI) to the company. A COI substantiates that the company has been formed.

Documents/Attachments required at the time of Incorporation

Below mentioned are the document/attachments required to be attached with the incorporation form at the time of filling it with the Registrar of Companies (RoC):

  • Proof of Identity & Residential Address of Subscribers/Directors:

a) Identity proof: Any one of the following –

  • Voter’s identity card
  • Passport (it is mandatory in case of foreign nationals)
  • Driving License

b) Residential proof: Any one of the following –

  • Bank Statement
  • Electricity Bill
  • Telephone/Mobile Bill

Note: Residential proof should not be older than 2 months.

  • Consent of Directors: The person who wants to become Director of the proposed company is required to give consent to act as such in Form DIR-2. The Form DIR-2 contains the particulars such as name, father’s name, address, contact number, e-mail, PAN, etc. of the Director.
  • Proof of Registered Address of the Company: The following documents are required to be given as proof of registered office address of the company either at the time of incorporation or within thirty (30) days from the date of incorporation of the company:
  1. NOC (No Objection Certificate) from the owner of the property allowing the company to use the premise as its registered office.
  2. Address proof such as electricity bill, gas bill, water bill, rent agreement, etc. having the name of the owner and address of the premise.

Note: The address proof (bill) should not be older than 2 months.

  • Other attachments: The other attachments include a copy of PAN, Passport size photo of subscribers/directors, etc.