The choice is very simple if you’re looking to get your company funded-go for the private limited (Pvt Ltd) structure. By and large, investors and venture capitalists prefer to fund private limited companies. The other two company types- Limited Liability Partnership (LLP) and One Person Company (OPC)-work best for anyone who is looking to run their business without external funding and wish to have effective control over all the operations.
We will be happy to Guide you on best form of business for you and All the registrations required.
Below are the different forms of Business entities under which you can register.
What are the types of business structures in India?
Let’s try and understand the types of business structures available in India. Here is a list of some of them:
1. One Person Company (OPC)
An OPC is ideal for anyone who runs a business by his or her own self, wishes to have effective control over all operations of the business and work in a corporate framework. Any entrepreneur who wants to form the company with limited liability should register for OPC.
An OPC can be registered with a minimum capital of just Rs 1 lakh. But if the paid-up capital exceeds Rs 50 lakh, then the OPC has to be converted to a private limited company. The same holds true when the OPC’s average turnover for 3 consecutive years exceeds Rs 2 crore.
As is the case with registering a private limited company, OPC registration has also been made an online process by the Ministry of Corporate Affairs.
If OPC fits your needs best, get the registration process started.
2. Limited Liability Partnership (LLP)
Anyone running a business with partners can go for the LLP registration. An LLP works best for startups and small businesses that are run by partners and want to have the nominal regulatory compliance.
A limited liability partnership allows the partners to be protected from any negative issues that arise because of the other partners. An LLP limits the liability of the partners to as much is their contribution to the company. An LLP incorporation is also cheaper and easier to get.
An LLP is usually a smart choice for freelancers who wish to give their bootstrapping business a proper company structure from a legal perspective. An LLP will work as long as the partners don’t require external funding and when they do, the LLP can be quickly turned into a private limited company.
3. Private Limited Company
The private limited legal structure is most commonly used for the incorporation of a company. It is preferred because this structure keeps the liability of the members limited to their share in the capital. A private limited company is ideal for anyone who is looking to raise capital from external sources and/or give ESOPs to employees.
A private limited company has to be registered with the Registrar of Companies (ROC). Upon completion of the registration process, a Certificate of Incorporation (COI) is issued. The Ministry of Corporate Affairs (MCA) has introduced a fast-track registration process that enables company registration via a single form. The registration process is done online and all documents are required to be submitted in electronic format.
Registering for a private limited company means the company becomes regulatory-compliant. This makes the company attractive to venture capitalists and private equity funds. Even bank loans are easier to get for private limited companies. From the perspective of the directors in a private limited company, their personal property would not be used to repay the company’s debt.
4. Public Limited Company
A PLC is a voluntary association of members which is incorporated under company law. It has a separate legal existence and the liability of its members are limited to shares they hold.
You can choose what business structure suits your business needs best and accordingly register your business.
OTHER STATUTORY REGISTRATIONS
GST is the biggest tax reform in India, tremendously improving ease of doing business and increasing the taxpayer base in India by bringing in millions of small businesses in India. By abolishing and subsuming multiple taxes into a single system, tax complexities would be reduced while tax base is increased substantially. Under the new GST regime, all entities involved in buying or selling goods or providing services or both are required to register for GST. Entities without GST registration would not be allowed to collect GST from a customer or claim input tax credit of GST paid or could be penalised. Further, registration under GST is mandatory once an entity crosses the minimum threshold turnover of starts a new business that is expected to cross the prescribed turnover.
As per the GST Council, entities in special category states with an annual turnover of Rs.10 lakhs and above would be required to register under GST. All other entities in rest of India would be required to register for GST if annual turnover exceeds Rs.20 lakhs. There are also various other criteria's, that could make an entity liable for obtaining GST registration - irrespective of annual sales turnover. Entities required to register for GST as per regulations must file for GST application within 30 days from the date on which the entity became liable for registration under GST.
TAN or Tax Deduction and Collection Number (TAN) is mandatory 10 digit alpha number required to be obtained by all persons who are responsible for Tax Deduction at Source (TDS) or Tax Collection at Source (TCS) on behalf of the Government. Tax deducted at source (TDS) ensures that the Government's collection of tax is propounded and the responsibility for paying tax is diversified. The person deducting the tax at source is required to deposit the tax deducted to the credit of Central Government - quoting the TAN number. Individuals who are salaried are not required to obtain TAN or deduct tax at source. However, a proprietorship business and other entities (i.e., Private Limited Company, LLP, etc.,) must deduct tax at source while making certain payment like salary, payments to contractor or subcontractors, payment of rent exceeding Rs.1,80,000 per year, etc. On deducting tax at source, the entity registered for TAN will issue a TDS Certificate as proof of collection of tax.
To obtain TAN, application must be made for allotment of TAN in Form 49B along with the required supporting documents. Based on the application, the TAN will be allotted to the entity and the entity must quote the TAN in all TDS/TCS returns, TDS/TCS payment challans and all TDS/TCS Certificates.
Employees Provident Fund (EPF) is a scheme controlled by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is regulated under the umbrella of Employees’ Provident Fund Organisation (EPFO). PF registration is applicable for all establishment which employs 20 or more persons. PF registration can also be obtained voluntarily by establishments having less than 20 employee.
The PF contribution paid by the employer is 6% of (basic salary + dearness allowance + retaining allowance). An equal contribution is payable by the employee. In case of establishments which engage less than 20 employees or meet certain other conditions, as per the EPFO rules, the contribution rate for both employee and the employer is restricted to 10%. For most employees working in the private sector, it’s the basic salary on which the contribution is calculated.
It is obligatory that employees’ drawing less than Rs 15,000 per month, to become members of the EPF. As per the guidelines in EPF, employee, whose ‘basic pay’ is more than Rs. 15,000 per month, at the time of joining, is not required to make PF contributions. Nevertheless, an employee who is drawing a pay of more than Rs 15,000 can still become a member and make PF contributions, with the consent of the Employer.
Employees State Insurance(ESI) is a self-financing social security and health insurance scheme for Indian workers. For all employees earning INR 21000 or less per month as wages, the employer contributes 4.75 percentage and employee contributes 1.75 percentage, total share 6.5 percentage. This fund is managed by the ESI Corporation (ESI) according to rules and regulations stipulated therein the ESI Act 1948, which oversees the provision of medical and cash benefits to the employees and their family through its large network of branch offices, dispensaries and hospitals throughout India. ESI is an autonomous corporation under Ministry of Labour and Employment, Government of India. But most of the dispensaries and hospitals are run by concerned state governments.
Employees registered under the ESI enjoy a range of benefits under the scheme. Employee enjoy medical attendance and treatment for the person insured and their families including full range of medical, surgical and obstetric treatment, supply of all drugs, ambulance services, super-specialty consultation, etc., In addition, to the medical care, insured persons also enjoy sick pay benefits. Registration with ESI provides the employee with tremendous benefits and improves worker morale and retention.
MSME stands for micro, small and medium enterprises and any enterprise that falls under any of these three categories. MSME enterprises are the backbone of any economy and are an engine of economic growth, promoting equitable development for all. Therefore, to support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSMED Act. To avail the benefits under the MSMED Act from Central or State Government and the Banking Sector, MSME Registration is required.
Micro, Small and Medium sized enterprises in both the manufacturing and service sector can obtain MSME Registration under the MSMED Act. Though the MSME registration is not statutory, it is beneficial for business at it provides a range of benefits such as eligibility for lower rates of interest, excise exemption scheme, tax subsidies, power tariff subsidies, capital investment subsidies and other support.
IMPORT EXPORT CODE
Import Export (IE) Code is a registration required for persons importing or exporting goods and services from India. IE Code is issued by the Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industries, Government of India. IE Codes when issued can be used by the entity throughout its existence and doesn't require any renewal or filing. Therefore, it is recommended for most organizations to obtain IE Code, irrespective of if they need it at the moment.
IE Code application must be made to the Directorate General of Foreign Trade along with the necessary supporting documents. Once, the application is submitted, DGFT will issue the IE Code for the entity in 15 - 20 working days or less.
FSSAI Registration and License
The Food Safety & Standards Act, 2006 introduced to improve the hygiene and quality of food has brought about tremendous changes in the food industry. As per the Act, no person shall commence or carry on any food business except under a FSSAI license or FSSAI registration. Therefore, any food manufacturing or processing or packaging or distributing entity is now required to obtain a FSSAI License or Registration.
FSSAI License is issued by the Food Safety and Standards Authority of India (FSSAI), Ministry of Family Health & Welfare, Government of India. Application to commence a food business must be made to the FSSAI in the prescribed format. Based on the application and supporting documents, FSSAI will accord approval.
Karnataka Trade License
Trade license is a permit issued by a municipal corporation granting permission to a person or entity to carry on a particular business at a specific premise. It ensures that the citizens are not adversely affected by health hazards and perils brought forth by the improper conduct of trade. It is a system that also ensures the manner of business pursued by a company is in accordance with the specified rules, safety guidelines and standards. The terms of trade license are laid down by the State Government, who is entrusted with the task of regulating and observing the trade within a city. If a trade is found to be unauthorized, it will be considered as an offense and may result in substantial penalty and prosecution. In this article, we look at the requirements and eligibility for obtaining Karnataka trade license.
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Although Private Limited Company is the most popular form of starting a business, there are various compliances which are required to be followed once your business is incorporated.
Managing the day to day operations of your business along with complying the corporate laws can be little taxing for any entrepreneur. Hence, it is essential to take help of a professional and also understand such legal requirements to ensure timely fulfilment of compliances, without any levy of interest or penalty.
We have elaborated below some of the common compliances which a private limited company has to mandatorily ensure:
The purpose of a statutory audit is the same as the purpose of any other audit – to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records and financial transactions.
Annual RoC Filings
Annual General Meeting
Every director has to disclose about his directorship in other companies every year. This shall be done by giving a declaration in writing to the company every year in a specified Directors’ Report format.
Maintenance of Statutory Registers and Records
A Private Limited Company has to maintain various statutory registers and records as required by the Company law such as Register of shares, Register of Members, Register of Directors etc. Besides, Incorporation documents of the company, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting etc are also required to be preserved by the Company.
Such records are to be kept at the registered office of the company and shall be open for inspection to its members during business hours. Also, the books of account of every company relating to a period of atleast eight financial years should be preserved and kept in good order.
Other Event-Based Filings
Besides Annual Filings, there are various other compliances which need to be done as and when any event takes place in the Company. Instances of such events are:
Different forms are required to be filed with the Registrar for all such events within specified time periods. In case, the same is not done, additional fees or penalty might be levied. Hence, it is necessary that such compliances are met on time.
If a Company fails to comply with the rules and regulations of the Companies Act, then the Company and every officer who is in default shall be punishable with fine for the period for which default continues.
If there is a delay in any filing, then additional fees are required to be paid, which keeps on increasing as the time period of non-compliance increases. It should be noted that some of the Annual Filing Forms can also be revised but the fees for subsequently revised filing shall be charged, assuming it as a new filing.
We will be pleased to help you with statutory and mandatory compliances for your Private Limited Company. Get in touch with us at ____________________
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