Posts in category: Company registration

Some Major Differences Between LLP & Partnership Firms

November 28, 2023

by Admin Company registration

In this blog, let us examine the primary distinction between limited liability partnership(LLP) and partnership firms , which will help you evaluate the appropriateness of each structure for your company in terms of ownership, management, liability, and essential compliances.

When launching a business, the selection of the appropriate organizational framework ought to be your first priority. The owners’ legal and financial liabilities, as well as the ease with which they can conduct business in the market, are directly related to the structure that they choose for their company.

The Limited Liability Partnership (LLP) and Partnership Firms are two of the most common types of business structures used in India. There are many different types of business structures accessible in India. Both of these structures allow two or more people to form a business together; nevertheless, there are substantial variations between them in terms of ownership, liability, and essential compliances.

This article will help you determine the business structure that is most appropriate for your requirements by comparing and contrasting limited liability partnerships (LLPs) and partnerships (also known as general partnerships).

The typical form of a partnership firm is one in which two or more individuals come together to run a business and share its earnings and liabilities according to terms and conditions that have been voluntarily agreed upon by all parties involved.

On the other hand, a Limited Liability Partnership (LLP) is a more recent form that combines the adaptability of a conventional partnership with the restricted liability of a corporation to produce a hybrid that is superior in terms of its organizational makeup. In order to get a better understanding of the considerable differences that exist between LLPs and Partnership Firms, let’s delve a little more into the concepts that underlie both of them.

What exactly is LLP?

In accordance with the LLP Act of 2008, a Limited Liability Partnership, sometimes known as an LLP, can be created and registered. The registration grants the company its own unique legal identity, which enables it to function as a separate entity from its partners and enables it to conduct business.

The LLP Agreement has a predetermined ratio that details how the partners would divide the firm’s capital, profits, and liabilities. The partners have agreed to abide by this ratio. In addition, their liabilities are restricted or limited to a predetermined amount, which is typically correlated with the proportion of their capital that they contribute. Following are some of the most important aspects of LLP that should help you better comprehend it.

Principal Characteristics of LLP:

The Limited Liability Partnership Act of 2008 serves as the governing law for limited liability partnerships (LLPs). It supplies the necessary legal framework for their establishment, incorporation, governance, and dissolution at the appropriate times.

In India, limited liability partnerships (LLPs) are obliged to undergo compulsory registration as a legal requirement. Because of this, running an unregistered limited liability partnership (LLP) is not just unethical but also against the law.

A Limited Liability Partnership (LLP) has a different legal personality from its partners because it is a registered entity. This means that an LLP is able to possess assets, engage into contracts, sue or be sued in its own name, and bring legal actions in its own name. The ownership and management of the company can be structured in a variety of ways because of this feature’s adaptability.

Limited Liability: A limited liability partnership (LLP) offers its members the protection of limited liability, which means that the partners’ individual assets are not put at risk in the event of any financial losses or legal problems. To the extent that each partner has contributed to the LLP, that sum is the maximum that can be held liable by that partner.

Sharing of Profits and Liabilities: A limited liability partnership (LLP) is a type of partnership structure that enables two or more people to create a business together and share in both the profits and the liabilities of that business. In contrast to working for a corporation, in which one must adhere to a set of regulations, business partners have the freedom to run their venture in accordance with their individual interests.

There is no upper restriction on the number of partners that can be added to an LLP during the normal course of business, but the limited liability partnership (LLP) must have at least two partners before it can be established.

Designated Partners: A limited liability partnership (LLP) is required to have at least two designated partners. These partners are accountable for meeting the LLP’s compliance standards and exercising overall management authority over the LLP. It is required that at least one of the designated partners resides in India.

The phrase “minimum capital requirement” does not apply to limited liability partnerships (LLP), as there is none. Each partner is free to contribute whatever amount of capital they believe is appropriate.

Because an LLP is a product of the law, it has what is known as a “perpetual existence.” This implies that it will continue to exist even if one or more of its partners decide to leave the business or pass away. Only through going through the proper legal channels can the LLP be dissolved.

What exactly is a partnership business?

Traditional forms of partnership enterprises that are active in India are referred to as “Partnership Firms.” These are formed on the basis of a Partnership Deed that is signed by all of the members in the partnership. The registration of partnership firms is voluntary and is carried out by the state government of the jurisdiction in which the firm’s registered office is situated.

If one of the partners who signed the partnership deed passes away or leaves the business, the partnership deed is rendered invalid, which means that the company can no longer exist in its current form. You will have a better understanding of Partnership Firms after reading the important elements that are listed below.

Principal Characteristics of a Partnership Business:

Sharing of Profits among Partners: A Partnership Firm is a sort of company structure in which two or more individuals come together to start a firm with the goal of producing profits. This type of business can be owned by a single individual or by a group of individuals. They have previously decided upon the ratio that would be used to divide up the earnings and losses of the company, and it has been set in stone. The Partnership Agreement that all of the partners have signed should include a section describing the profit sharing ratio.

Partnership Firms are controlled by a partnership agreement that has been drafted by the firm’s partners and signed by all of the firm’s partners. The partnership agreement details all of the terms and circumstances that have been agreed upon by the partners, such as the rights, duties, and responsibilities of each partner, as well as the ratio of profit-sharing and the length of time for which the partnership will be in effect.

limitless Liability: The partners in a Partnership Firm have limitless liability, which means that their personal assets are at risk in the event of any losses or legal issues. This is the case since the partners in a Partnership Firm have unlimited liability. Every partner in the Partnership Firm is individually responsible for paying off the Partnership Firm’s debts and other responsibilities.

Registration Is Voluntary Unlike Limited Liability Partnerships (LLP), in which registration is compulsory by law, a Partnership can choose whether or not to register. This reveals that in India, it is possible to run Partnership firms in either a registered or unregistered capacity.

May or may not Have Its Own Separate Legal Identity: A Partnership Firm, as opposed to a Limited Liability Partnership (LLP), which is a product of law, is formed on the basis of a Partnership Agreement. Therefore, a partnership firm does not have its own distinct legal personality; as a result, it is unable to buy property, enter into contracts, or bring or defend legal actions in its own name.

Forming a Partnership Firm Is generally Simple: Forming a partnership firm is generally simple and does not involve the completion of many legal compliances. Simply creating a partnership deed and registering it with the appropriate authority is all that is required to establish it as a legal entity.

Partnership Act: The Indian Partnership Act of 1932, which provides the legal framework for partnership firms’ incorporation, governance, and dissolution, is the governing law for partnership firms and is referred to as the “Partnership Act.”

Number of Partners: Prior to the foundation of a Partnership Firm, there must be a minimum of two partners in the business. However, after it has been established, the company can take on an additional 20 partners in the normal course of business.

Conclusion

It is crucial to have a solid understanding of the differences between a Limited Liability Partnership (LLP) and a Partnership Firm before making an educated selection regarding the type of business structure to choose. While partnership firms have been common for several decades, limited liability partnerships (LLPs) offer several benefits, including eternal existence and protection from limited liability.

When trying to decide which course of action is going to be best for their company, business owners should discuss their options with a legal or financial advisor. When it comes down to it, making the proper choice for your company’s organisational structure depends on a number of different considerations, and business owners ought to give careful consideration to both the advantages and disadvantages of each option before settling on one.

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Types of Business Structures in India

November 27, 2023

by Admin Company registration

In this blog Let’s make an effort to have an understanding of the different kinds of business structures that are accessible in India:

Proprietorship Firm

A proprietorship firm can be established and managed by a single person. Only one person runs the business, and it is ideal for small business owners with low investments. The sole owner will have complete authority over the company, and while they will have access to all of the company’s income, they will also be responsible for bearing all of the company’s losses.

Partnership Firm

When more than one individual decides to work together in business, they are said to have formed a partnership. The profits that are made by the company are distributed among the partners of the firm in an equal manner. They are also going to be responsible for bearing the firm’s losses. The partnership firm is regulated under the Partnership Act, 1932. It is perfect for small firms that have a low initial investment and are handled by two or more people.

One-person company

If there is just going to be one promoter or owner of the firm, starting it off with an one person company, which only became available in 2013, is the most effective way to do it. It makes it possible for a solo owner to continue his work while also becoming a part of the corporate structure. The Companies Act of 2013 has granted it registration as a company. It is ideal for small businesses who want to raise capital.

Limited Liability Partnership (LLP)

The responsibilities of participants in a limited liability partnership (LLP), which is a separate legal entity, are restricted to the amount that they have agreed to contribute. An LLP is established under the Limited Liability Act, 2008 with the Registrar of Companies (ROC). It possesses characteristics that are shared by both partnership firms and corporations. It is an excellent choice for businesses that are started by partners who seek limited liability and fits that description perfectly.

Private Limited Company

In the eyes of the law, a public limited company (PLC) is treated as an independent legal entity from its founders. The company’s directors are in charge of managing the business operations of the company. The investors in the company are known as shareholders, and they have a stake in the business. A PLC is registered under the Companies Act, 2013 with the ROC. It is an excellent choice for companies of a medium to large size who need to raise funds.

Public Limited Company

In accordance with the Companies Act of 2013, a company is considered to be a Public Limited Company if it has seven members or more. The board of directors is in charge of managing the company’s day-to-day operations. It has its own independent legal existence, and the members’ responsibility is restricted to the amount of shares they own in the company. It is ideal for medium to big businesses who wish to raise capital from the public.

You can choose the business structure that suits your business needs and accordingly register your business.

Why is it important to choose the right business structure?

Because of its impact on your income tax returns, it is critical to give careful consideration to the organisational structure of your company. When you are registering your company, it is important to keep in mind that different types of business structures have varying degrees of compliance requirements that must be satisfied. For instance, a sole owner is required to file only one form of tax return each year. However, a corporation is required to submit an income tax return in addition to the annual filings that are required to be filed with the Registrar of Companies.

Every year, the financial records of a business need to be subjected to a required audit. Spending money on auditors, accountants, and tax filing specialists is necessary in order to maintain compliance with these legal requirements. When contemplating the registration of a company, it is crucial to get the corporate structure right so as to avoid legal complications. An entrepreneur absolutely needs to have a crystal clear notion of the kinds of legal compliances he or she is willing to cope with before starting a business.

Investors will almost always choose a business structure that is both acknowledged and legal, despite the fact that some business models are more investor-friendly than others. For example, an investor may hesitate to give money to a sole proprietor. On the other hand, investors will feel more at ease placing an investment in a successful business concept that is supported by a well-known legal structure (such as a limited liability partnership, company, etc.).

How do you decide on a company structure before submitting an application for company registration in India?

Let’s take a look at some of the most crucial questions that every entrepreneur needs to ask himself before making a final decision on the type of business structure to use for a company.

How many individuals will be able to call themselves proprietors or partners in your company?

If you are a lone individual who is in possession of the total initial investment necessary for the firm, a One Person Company would be the most suitable business structure for you. On the other hand, if your business has two or more owners and is actively seeking investment from other parties a Limited Liability Partnership (LLP) or Private Limited Company would suit you best.

Should the amount of money you put in at the beginning have any bearing on how your company will be organised?

It is recommended that you establish your business as a sole proprietorship, HUF, or partnership if you wish to start out with fewer financial obligations. However, if you are confident that you will be able to recoup the money spent on formation and regulatory compliance, you can consider forming a One-Person Company, a Limited Liability Partnership (LLP), or a Private Limited Company.

Willingness to take full responsibility for all of the business’s losses

There is no cap on legal responsibility for business entities such as sole proprietorships, HUFs, and partnership firms. This means, in case of any default in loans, the entire money will be recovered from the members or partners in profit sharing ratio. The risk to personal assets is high in these cases.

Companies and limited liability partnerships (LLPs) contain something called a limited liability clause. This indicates that the responsibility of the organization’s members is limited to the amount of contribution made by each individual member or the value of the shares held by each individual member.

Business Income Tax Rates That Are Currently In Effect

The standard slab rates are used for computing the amount of income tax that must be paid by a sole proprietorship and a HUF. In the case of a sole proprietorship, the business income is clubbed with the individual’s other income. On the other hand, the tax rate of thirty percent is applied to other entities such as partnership businesses and companies.

Strategies for obtaining funding from various investors

When the structure of your company is not registered with the appropriate authorities, obtaining funding might be challenging. When it comes to financial transactions and investments, reputable organisations such as LLPs and PLCs are utilised. Be sure to pick the appropriate organisational structure, and get the assistance of a knowledgeable person if you want to register under the right direction.

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Things To Keep In Mind Before Registering a Company In Chennai

November 22, 2023

by Admin Company registration

Private limited businesses and public limited corporations are both legal business structures that can be registered in India. There is also the possibility of registering them as limited liability partnerships or sole proprietorships. Creating a private limited company in India is largely considered to be one of the most effective ways to launch a new venture there.

When you’ve made the decision to launch a company, the first and most essential thing you’ll need to do is select a legal structure that’s appropriate for company registration. The structure that you select will have an effect on a number of aspects of your company, including the name of your company, your obligations to other businesses, and the manner in which you file your taxes and statutory fees.

Advantages of Getting Your Company Registered in Chennai

We could launch our company from anywhere in the nation. On the other hand, the procedure for submitting an application to register a private or public limited company in India is exactly the same throughout the entire country. To submit an application for company registration, one must fill out the SPICE+ form, which can be found on the MCA website.

Numerous benefits come with registering a company in Chennai, such as the formation of a firm. The following are some of the ways in which it can benefit your company:

It is going to be handled as if it were its own independent legal body.
A larger number of customers might be enticed to work with the company;
The business will work to raise consumers’ knowledge of its brand;
Body structure of the corporation could be utilised to expand operations internationally.
Dealing more effectively with manufacturers, industries, vendors, and customers;
A company can file claims in its own name and can even be sued in its own capacity. The name of the business owner will not be mentioned.
When one enters a commercial setting, it becomes much simpler to differentiate oneself from the other people there.
Ensures a better level of both the contribution of capital and the stability of the organisation.
It makes it simpler to acquire bank funding and investment from respectable investors.
It expands the range of possibilities for development and expansion.

In order to register a private limited company in Chennai, there are certain requirements that must be met.

There must be a minimum of two participants

In order for a private limited corporation to function, there must be at least two members and directors.

Company must be registered in India, and there can be a maximum of 15 directors for a single company. If the shareholders are foreign nationals , then they are needed to submit their passports along with other forms of identification. Nevertheless, if the shareholders at a company’s annual meeting approve of a special resolution, the board of directors can vote to increase the number of directors to more than 15.

Unique Appellation

The suggested name for the company should not be the same as or too similar to the name of any other firm that is already operating, and the business’s name should be unique. You need to examine the trademark registration as well to make sure that the name is not identical to any trademark that is already registered or that is in the process of being registered in India.

The name of the company must not infringe against any provision of any intellectual property law that is currently in effect in India. It is imperative that the name not go against India’s Copyright Act or Trade Marks Law in any way. It is also important to remember that the name complies with the Emblems and Names (Prevention of Improper Use) Act of 1950. This is something that should be kept in mind at all times.

Investment in Fixed Assets

There is no required minimum amount of capital establishing a corporation, and costs should be evaluated according to the requirements of the firm. However, the amount of the company’s authorised capital that was mentioned during the time it was incorporated is used to calculate the fees that must be paid to the government.

Location Of Registration

For the purpose of the registered office, a commercial space is not required. Even property that is rented out might serve as a registered office if authorization is obtained from the landlord.

Process of Registering a Company

Approval of the Company Name

The submission of an application for a name reservation is the initial step towards registering a corporation. One must submit an application for a name reservation through the SPICE PART A in order to have their request considered. When applying for a name reservation, an individual is required to ensure that the proposed name does not sound similar to that of any already-established businesses. In addition, the proposed name shouldn’t have any trademarks or naming rights registered for it. Checking whether or not a company’s desired name is available can be done on the MCA website.

Submit An Application For A Certificate Of Digital Signature

The next step in the process of registering a corporation with the Digital Signature Commission (DSC) is to submit an application for a digital signature certificate. A digital signature certificate, often known as a DSC, is a document that may be used to validate data and is legally binding. The digital signature certificate is typically utilised in order to put one’s signature on electronic documents. In light of this, do not forget to make an application for a Digital Signature Certificate from a certifying body that is registered.

The Submission of the MOA and AOA

The applicant for business registration is required to submit both the memorandum of association and the articles of association through an online filing system. The submission of these documents will bring about legal certainty on the establishment of the company. In order to successfully complete this procedure, you will need to access the Ministry of Corporate Affairs Portal.

Applications for both PAN and TAN

After the applicant has finished filling out all of the necessary documents, they should think about applying for a PAN and TAN number.

Certificate of Incorporation

Following the completion of the processes that came before it, the MCA and ROC will conduct an evaluation of the application. The applicant will be granted a certificate of incorporation if there are no issues discovered during the review process. The corporation receives its legal standing from the government through a document called the certificate of incorporation.

Documents That Need To Be Provided In Order To Register A Company

Directors’ PAN cards or passport copies (for NRIs and foreign nationals)
2 photographs of the directors of the company in passport format ID evidence for the directors, such as Aadhaar cards or voter identification cards.
A copy of the lease or any relevant papers regarding the property, along with proof of address.
NOC from the landlord regarding the company’s electricity or water bill in the event that the office is rented
When dealing with personal property, a copy of the property deed or the sale document is required.
It is necessary for foreign nationals to produce a copy of their passport that has been notarized.
It is imperative that only valid papers be presented. The documentation that serves as proof of residency, such as a bank statement or an electric bill, can’t be older than two months at the very most.
Evidence of the Registered Office

The process of registering a company in India is critical for the success of any kind of business, whether it be a limited private company or a public limited company. Additionally, it fulfils the same function in LLPs and one-person firms. Customers of Kompany services are provided with the option to register any form of company at a fee that is within their budget.

The professionals at Kompany services are available around the clock to provide their clients with the highest quality assistance. Under the guidance of competent legal counsel, you are able to register your business. You will have access to the finest services at your beck and call.

In India, one of the most common kinds of corporate registration is for a private limited company, which is also one of the most common kinds of legal structure for businesses. Private limited companies are the most common entity choice for registration among new firms and prospective enterprises. Because it makes it simpler to secure funding from outside sources.

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Documents Required for Company Registration

November 20, 2023

by Admin Company registration

A Checklist of the Documents Needed for the Registration of a Company in India

The key prerequisite for beginning a business in India is to have the necessary documentation for incorporation. Without submitting these documents along with the application to register a company with the ROC, the application will be considered incomplete. The ROC registration of a company is essential. Below you will find a list with descriptions of each of the documents that are necessary for the registration of a company in India. Before going to the ROC to get your company registered, you need to make sure that these paperwork have been prepared and drafted.

Records of the Company’s Founders and Directors

The “Know Your Customer” documents of the firm’s promoters are part of the initial set of documents that must be submitted in order to register a company in India. The earliest shareholders and directors of a company are called “promoters.” Promoters are those who are involved in the founding of the firm and have some stake in the company’s operations. All of these promoters will be required to produce scanned copies of the following documents, along with a self-attested copy of each one:

PAN Card
Aadhar card
As a form of identification, Indian promoters can present either their driver’s licence, their voter identification card, or their passport. Passports are required in the case of foreign promoters.
For the purpose of providing evidence of their address, promoters may present any utility bill or bank statement in their name that bears their address. The proof of address can’t be older than two months at the most.
Digital Signature–Class 3 Digital Signature of the Authorised Director to Sign the Application for Company Registration in the Case of a Digital Signature.

Records from the Company’s Registered Office

The documents pertaining to the Registered Office are the next piece of paperwork that must be submitted in order to successfully register a company in India. The address of an office that will serve as a business’s registered office must be provided when the firm is incorporated. This address is recognised throughout all available public records as the correspondence or communication address for the company. During the process of incorporation, you are required to submit the following documents relating to the Registered Office:

Proof of Registered Office Address – For this reason, you can produce any utility bill in the Company’s name that includes the registered office address. It is required that the Address Proof be no more than two months old.
No Objection Certificate- A No Objection Certificate is required to be granted by the owner of the office property, and it must be in a downloadable format that has been prescribed.

The Company’s Constitution and Related Documents

Finally, in order to register a corporation in India, there are specific legal documents that need to be created in the appropriate format. We have an experienced team in order to provide companies with assistance in this area. These papers, which are written on stamp paper with the required value, are used to create the company’s legal identity and are filed away. In addition, they have to be signed by all of the shareholders in the company in the presence of a public notary, as well as two other witnesses. The notary should affix their stamp to the documents so that they can be validated further. The following is a list of the documents that make up a company’s constitution:

Memorandum of Association: A company’s memorandum of association is also referred to as its “charter” because it contains the most essential legal basic facts for the company. It is broken up into numerous clauses so that these particulars can each be highlighted in their own right. The memorandums of both a private limited and public limited company each contain six provisions, whereas the memorandum of a one-person company contains seven clauses. To facilitate a better grasp of the situation, each of these clauses is presented in full below.

Name Clause: Mentions the name that has been approved for use by the corporation in its entirety.

The Registered Office Clause specifies the state in which the company’s official headquarters are located.

The object clause provides information on the major business activity or activities carried out by the company. The goal of a company must be in compliance with Section 8 of the Companies Act in order for the firm to be considered a section 8 company.

Clause Regarding Liability: This clause discusses the liability of the corporation, which is:

Capital Clause: The information regarding the Authorised and Subscribed Capital of the Company can be found in this clause.

Nominee Clause, is applicable only in the case of a one-person company. It provides information about the Shareholder’s Nominee, who would take his place in the event of his passing or departure from the company.

The company’s internal management is governed by a set of rules and regulations that are outlined in the company’s articles of association. These regulations are unique to each company, and their establishment is left up to the company’s top management personnel. Some of the major laws include the procedure for admitting a new shareholder, the grounds for removing an existing shareholder, the manner in which shares can be transferred and transmitted, the convertibility of shares, the procedure for winding up the company, and other similar rules.

Declarations and Other Documents

During the process of incorporating a company, in addition to the documents listed above, certain forms and declarations must also be presented. The following is a list of the forms and documents that need to be completed:

INC 9 – INC 9 is a declaration that is given by the shareholders and first directors of the company, affirming that they have not been convicted of any legal offence in the past, have not been found guilty of breach of duty or violation of the Companies Act, and that the documents and information submitted with the company registration form are true to the best of their knowledge. INC 9 is a declaration that is given by the shareholders and first directors of the company.

INC 14 – INC 14 is a declaration that is given by a practising professional, which may be an advocate, chartered accountant, cost accountant, or company secretary, certifying that all of the provisions, rules, and regulations of the Companies Act and Company (Incorporation) Rules have been complied with during the process of drafting the MOA and AOA for the company, as well as submitting the application for incorporation. INC 14 is required in order to incorporate a company in India.

The DIR 2 form is the document that individuals who wish to be appointed as directors of a corporation use to provide their approval to having that position created. In order to tell the ROC that the approval of the directors has been obtained prior to their definitive appointment in the business, the form is required to be presented alongside the application for company registration.

Conclusion

It is impossible to overestimate the significance of the documents that are necessary for the formation of a company in India. These documents, which serve as the connecting link between your objectives as an entrepreneur and your obligation to conform to the law, pave the way for a successful and legally compliant foundation of a firm. You are prepared to start the process of company formation with ease and accuracy if you have a full understanding of the numerous documents that are required for business registration. These documents include promoters’ KYC, proofs of registered office, company constitution, and declarations. Do not be reluctant to seek our support in the event that you run into any problems!

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Essential Guidelines That Every Indian Startups Should Be Aware Of

November 10, 2023

by Admin Company registration

Before starting a new company, an entrepreneur needs to have knowledge about a variety of different aspects of running a firm. One of these components is the law that governs the land. A company’s legislation, including those pertaining to shops and commercial enterprises, professional tax, provident fund, the Goods and Services Tax (GST), and the customs Act, may be applicable to a corporation.

You must decide which laws apply to your sort of business and ensure that the company complies with them in order to avoid potential legal complications. Not all of them will be applicable to all businesses; therefore, you must determine which laws apply to your type of business. Let’s have a look at the legal requirements that must be met before starting a new company in India.

Identifying the Appropriate Kind of Business to Operate

The first thing you need to do is figure out what kind of business entity you want to register as. The answer to this question will change depending on the type of the company, the long-term goal, as well as other aspects including scale and financial constraints. You have the choice of founding a ‘partnership firm,’ a ‘Limited Liability partnership,’ a ‘private Limited company,’ a ‘one person company,’ or even a sole proprietorship.’ All of these names refer to different business structures.

The visibility of a firm, its ability to endure, and its ability to turn a profit are all significantly influenced by the business vehicle that one decides to use. Your long-term objectives and priorities will, as a consequence, play a significant role in determining the brand that you go with. Every type of company is subject to its own unique set of regulations, which must be complied with while bearing in mind the many legal frameworks already in place.

Laws

There is a requirement that a firm have a registered office. There are a total of 28 states and 8 union territories in India; if you choose to register your company in any one of these states, you are required to comply with any and all state regulations that might be relevant to your company.

Different states have different versions of the Shops and Commercial Establishment Act, the Employee Professional Tax Act, the Stamp Act, and labour rules. For instance, the amount of stamp duty that must be paid in order to establish a partnership firm in the state of Kerala will be different from the amount that must be paid in the states of Karnataka and Tamil Nadu.

Legislation pertaining to intellectual property (IP)

The patent, trademark, and copyright for your company are extremely important. Every company is one of a kind, and its leadership is comprised of individuals who do not think alike or produce the same kind of goods. It is of the utmost importance to protect your brand, patent your invention, and get copyright for your content. It is absolutely necessary to submit claims for the appropriate patent, trademark, and copyright. Theft can be avoided as a result of this measure.

Tax Compliance Regulations

You are required to pay taxes regardless of whether or not you like paying them. As a consequence of this, it is essential to have a solid understanding of the taxes that pertain to your organisation and to make timely payments of those taxes. It is also very important to be aware that certain tax requirements will only apply to your company if it is beyond a certain threshold; if this is the case, you will not be compelled to make payments even though they are required.

For instance, in certain situations, the Goods and Services Tax (GST) is only levied if the yearly turnover of the company is more than Rs 20 lakhs. If you obey the law, you won’t have to pay taxes when you don’t have to, and you won’t have to pay penalties for not paying taxes on time when you do have to pay them. This will save you money.

Bookkeeping

You will be able to better examine the costs associated with each division of the firm and improve the overall performance of the business if you keep your books of accounts updated on a monthly or other regular basis. When the necessary financial data is accessible at the appropriate time, it can be of assistance in making crucial decisions that, if successful, can increase profitability and reduce expenses.

The company will also be required to comply with governing authorities such as SEBI, RBI, IRDA, ICAI, and ICSI, amongst others, depending on whether or not such bodies regulate the commercial activity that the company engages in.

You can get assistance with all of the legal aspects of launching a business from Kompany Services. Please give us a call if you have any questions or would like to register your business in India.

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The Benefits & Drawbacks of Establishing a Private Limited Company

November 7, 2023

by Admin Company registration

Members of a private limited company are only responsible for their share of the business’s debts if the company goes bankrupt. A private limited company is a type of company that is owned and managed by a group of shareholders. The number of investors in a private limited company is typically capped at anywhere between two and two hundred. Because they are not traded on a public market, the company’s shares cannot be sold or transferred without the agreement of the company’s current shareholders.

As they come with a variety of advantages, Private Limited Companies are typically the entity of choice for new entrepreneurs and owners of small businesses. On the other hand, private limited companies are accountable for further regulatory duties. The formation of a private limited corporation will be explored, along with its advantages and disadvantages, in this blog.

Advantages of a private limited company

A Private Limited Company, sometimes known as a PLC, is a well-known form of business concept that offers its owners a variety of advantages. The formation of a private limited company has a number of advantages, some of which are listed below:

The fact that a Private Limited Company shields its owners from legal responsibility is among the most significant benefits offered by this type of business structure. This ensures that the assets of the shareholders are not put in jeopardy in the event that the firm is found to have legal or financial obligations.
Because it has its own legal personality, a Private Company is able to acquire assets, enter into contracts, bring legal actions in its own name, and be the target of legal actions brought against it.
A Private Limited Company has its own distinct legal existence; the loss of a shareholder due to death or leave does not have an impact on the ongoing operations of the company, in contrast to the situation with a sole proprietorship or partnership.
Better access to capital: A Private Limited Company has the ability to quickly raise capital by selling shares to different types of investors. This can help the company extend its operations, invest in new projects, and grow its business all at the same time.
Credibility: A Private Limited Company is frequently seen as being more credible and professional compared to other business formats, which can assist in attracting superior staff, customers, and investors.
Tax benefits: Private Limited Companies are eligible for a wide range of tax advantages and incentives, including lower tax rates, deductions for business expenses, and exclusions from certain forms of income. Private Limited Companies can also deduct some business expenses from their taxable income.
Limited compliance requirements: In comparison to public limited companies, private limited companies are required to comply with a lower number of regulatory responsibilities, which can help reduce the administrative burden and costs incurred by the company.
Control over ownership: Shareholders in a Private Limited firm have control over the ownership of the firm, which means they have the ability to decide who can buy and sell shares of the company.

In general, a Private restricted Company affords its owners a number of advantages, some of which are protection from restricted liability, a distinct legal identity, enhanced access to financial resources, and favourable tax treatment.

The drawbacks associated with establishing a Private limited company

Private limited companies, while their numerous positive attributes, are not without their share of disadvantages. The formation of a private limited company comes with a number of significant difficulties, including the following:

Private limited corporations, in contrast to public limited companies, are not permitted to sell shares to the general public, it is significantly more challenging for private limited companies to raise significant amounts of capital.
Private limited corporations are subject to a range of legal and regulatory obligations, including yearly filings and other reporting obligations. These obligations are designed to ensure that the organisation complies with all applicable laws and regulations. If these legal responsibilities are not met, there is the possibility of incurring fines and other penalties.
Limited capacity to transfer ownership: As shares in a private limited company cannot be bought or sold at will, it is challenging for existing shareholders to leave the company and challenging for new investors to become involved.
As directors of a private limited company, directors are held to a higher standard of personal accountability than shareholders are for the business’s debts and obligations.
Private limited firms may not be able to give the same incentives and benefits to their employees as larger organizations that are publicly traded, it may be more challenging for private limited companies to entice and keep the best employees.
Lack of transparency: Investors have a more difficult time analysing the performance of private limited firms and the prospects for those companies since private limited companies are not required to provide as much financial information as is required of public limited companies.

Related Info

One Person Company registration vs Private limited company registration in India

November 2, 2023

by Admin Company registration

One Person Company registration is a relatively new concept in India, and its purpose is to encourage the formation of commercial firms that are owned and operated by a single individual. It takes at least two people to form a partnership in order to form some types of corporations, such as a limited liability partnership, a private limited company, or a limited company. One Person Companies, on the other hand, enable a solitary person to have ownership of and responsibility for running the company. Those who are interested in beginning an unregistered proprietorship can consider forming a One Person Company as a potential alternative. In this blog, we will contrast the beginning and management of a One Person Company in India with those of a Private Limited Company.

Fees Associated With Signing Up

The fees associated with registering a One Person Company are significantly lower than those associated with registering a Private Limited Company.

Minimum Number of Shareholders Needed to Incorporate

Two people are required in order to legally constitute a “One Person Company.” The director of the one-person company and the nominee director of the company. In the event that the Director is unable to carry out his duties, it is the responsibility of the Nominee Director to oversee the operation of the Company. It takes a minimum of two people to successfully incorporate a Private Limited Company.

Executive Committee of Directors

Due to the fact that a single individual is capable of running the operations of a One Person Company, there is no such thing as a board of directors in such an organisation. The ideas of holding an annual general meeting and board meetings are likewise inappropriate for a company that consists of just one person. A board of directors for a limited liability company can have anything from two to seven members, with the lowest number being two and the maximum being seven.

Holdings of Shares

One person is able to hold all of the shares in a One Person Company (also known as an SPC). A private limited business needs to have at least two shareholders in order to function. As a consequence of this, it is impossible for a single person to have all of the shares in a private limited business.

Nationals of a Foreign Country or NRIs

To establish a One Person Company, one must meet both the citizenship and nationality requirements of India. NRIs and foreign nationals both have the ability to create and operate their own private limited companies. There are a variety of industries that welcome 100 percent foreign direct investment from private limited companies.

Essential Conditions for Compliance

There is not much of a difference between the compliance standards for a One Person Company and those of a Private Limited company. Both One Person Companies and Private Limited Companies are obligated to submit their yearly returns to the Ministry of Corporate Affairs as well as their income tax returns to the Income Tax Department. This obligation applies to both types of businesses. In addition, each year, One Person Companies and Private Limited Companies are required to have an audit conducted on their financial records.

Restrictions or Boundaries

If the annual sales turnover of a One Person Company is greater than Rs. 2.00 crores or if the paid-up capital of the One Person Company is greater than Rs. 50 lakhs, the One Person Company is required by law to be changed into a Private Limited Company. There is no obligation for mandatory conversion under any circumstances, and a private limited corporation is exempt from such restrictions and constraints.

After the Company Was Founded

One Person Company is a new business structure that was recently implemented in India. There are still some government departments and banks that have not upgraded their computer systems, documents, or procedures in order to deal with one-person businesses. After the creation of a one-person company, you can have trouble getting some licences or registering your business because of this.

The Private Limited Company has been around for several decades and is currently the most common form of business structure in India. As a result, the procedure of getting various licences and registrations after the establishment of a private limited company would be straightforward and uncomplicated.

Conclusion

The nature of a One Person Company and a Limited Liability Company (LLC) is extremely similar on many fronts, including the cost of incorporation, the number of people required to incorporate, and compliance requirements. One Person business, on the other hand, has a great deal of additional restrictions on foreign promoter participation, required conversion to private limited business, and so on. Therefore, in order for the notion of a one-person company to gain traction in India, we at Kompany Services advise that entrepreneurs create a private limited company rather than a one-person company.