Starting a Company: Legal Formalities & Compliance Requirements

Starting a Company: Legal Formalities & Compliance Requirements. Starting a company in India is a process that includes a number of legal procedures, regulatory clearances, and compliance measures. This guide will give an overall view of the entire process.

Step 1: Choose the Business Structure

The appropriate business structure is a function of such factors as liability, taxation, ownership, and compliance requirements. The usual structures in India are:

1. Sole Proprietorship

One-owner firm with less compliance, regulated by the Shops & Establishment Act (state-wise).

2. Partnership Firm

Regulated by the Indian Partnership Act, 1932. Registration is voluntary but advisable.

3. Limited Liability Partnership (LLP)

Separate legal entity regulated by the LLP Act, 2008, involving LLP Agreement filing.

4. Private Limited Company (Pvt Ltd)

Distinct legal entity, used for scalability and raising funds. Regulated under the Companies Act, 2013.

5. Public Limited Company

For large enterprises, with a minimum of seven shareholders and SEBI compliant.

Recommended for Startups: A Private Limited Company is the most popular structure because of limited liability, easy raising of funds, and enhanced credibility.

Step 2: Registering the Company

For Private Limited Company or LLP

1. Get Digital Signature Certificate (DSC):

– Needed for electronic submission to the Ministry of Corporate Affairs (MCA).
– Issued by Certifying Authorities under the Information Technology Act, 2000.

2. Get Director Identification Number (DIN):

– Mandatory under Section 153 of the Companies Act, 2013.

3. Name Reservation (RUN Application):

– Registered with MCA to guarantee distinctiveness under Rule 8 of the Companies (Incorporation) Rules, 2014.

4. Prepare Memorandum of Association (MoA) & Articles of Association (AoA):

– Establishes the objectives and regulations of the company under the Companies Act, 2013.

5. File SPICe+ Form for Incorporation:

– Comprises PAN, TAN, and EPFO/ESIC registration.

6. Obtain Certificate of Incorporation (COI):

– Released by the Registrar of Companies (RoC), guaranteeing legal existence.

Step 3: Vital Registrations and Licenses

1. Permanent Account Number (PAN) & Tax Deduction Account Number (TAN):

– Required under the Income Tax Act, 1961.

2. Goods and Services Tax (GST) Registration:

– Compulsory under the GST Act, 2017 for companies over specified turnover levels.

3. Professional Tax Registration:

– Applicable in Maharashtra, Karnataka, and West Bengal states.

4. Shops & Establishment Act Registration:

– Governed at the state level for organizations with physical premises.

5. Employees’ Provident Fund (EPF) & Employees’ State Insurance (ESI):

– Required for companies with 20+ workers under the EPF Act, 1952 and ESI Act, 1948.

6. Industry-Specific Licenses:

– FSSAI License (for food industry) under the FSS Act, 2006.
– Import Export Code (IEC) for export-import operations under the Foreign Trade Policy.
– MSME Registration for small and medium enterprises under the MSME Development Act, 2006.

Step 4: Open a Business Bank Account

Post-incorporation, open a current account in the name of the company. Documents required are:
– Certificate of Incorporation
– PAN and TAN
– MoA and AoA (for companies)
– Board resolution (for companies and LLPs)

Step 5: Post-Incorporation Compliance

1. Registrar of Companies (RoC) Filings:

– Annual financial statements and returns under the Companies Act, 2013.
– Director KYC through DIR-3 KYC form.

2. Income Tax Filings:

– Annual tax returns under the Income Tax Act, 1961.
– Tax audit if turnover crosses specified limits.

3. GST Compliance:

– Monthly/quarterly GST returns and annual GST returns.
– Generation of e-way bill for transportation of goods.

4. Board Meetings & AGM:

– Quarterly board meetings under Section 173 of the Companies Act, 2013.
– Annual General Meeting (AGM) within six months from the end of the financial year.

5. Accounting & Auditing:

– Appointment of an auditor by the companies within 30 days of incorporation.
– Statutory audit under the Companies Act, 2013.
– LLPs with turnover exceeding ₹40 lakh or contribution exceeding ₹25 lakh are to be audited.

Additional Considerations

1. Start-up India Registration:

– Provides tax relief, self-certification, and funding opportunities under the Startup India scheme.

2. Trademark Registration:

– Safeguards brand identity under the Trademarks Act, 1999.

3. Data Protection & Compliance:

– Compliance with IT Act, 2000 and future Data Protection Laws.

4. Contract Drafting & Agreements:

– Shareholders’ agreement, employment contracts, and vendor agreements for legal security.

Conclusion

Companionship in India necessitates meticulous planning, compliance with legal formalities, and sustained compliance. Using a professional like a company secretary or legal consultant guarantees hassle-free registration and compliance with all legal formalities.

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