All About Company Incorporation and Its Procedure

What is Company’s incorporation ?

-Company’s Incorporation means making a Company a legal person; making its own identity.

-Basically incorporation  means giving Birth to a Company.

Why incorporating a Company is necessary ?

i. Shield yourself from liability.

ii. Establish Perpetual Existence and Transfer of Ownership.

iii. Gain Tax Advantage

iv. Enhance the Company’s image

v. Improve ability to manage.

Why incorporation of a Business is Necessary ?

• Incorporation is a government registration process. As a legal entity, the created corporation is given the same powers in law as a ‘natural’
• So, just like a ‘natural person’, a corporation can sue and be sued, it can sign contracts and buy and sell property in its own It can be taxed and even commit crimes. This is Why incorporation of a Business is necessary.

Types of Company’s Incorporation in India and its definition?

Sec (71) Public Limited Company – A Public company is a company owned by the public. There are two uses of this term. A company that is owned by stockholders who are members of the general public and traded publicly. It requires 7 or more persons for its set up. hat a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles

Sec (68) – A private company is a closely held one and requires at least two or more persons, for its formation. A private Company is not traded publicly. It means a Company restricts the right to transfer it shares and except in one person Company, limits the number of member to 200.

Sec (92) – Unlimited Company: An Unlimited liability refers to the legal obligations general partners and sole proprietors because they are liable for all business debts if the business can’t pay its liabilities. In other words, general partners and sole proprietors are responsible for paying off all of the company debts personally if the company can’t make its payments. unlimited company” means a company not having any limit on the liability of its members.

Sec (62) – One Person Company: There can be only one, natural person resident of India who can be the member of OPC. As the name itself suggests it is a company which is owned by one single person.

Sec (62) – One Person Company: There can be only one, natural person resident of India who can be the member of OPC. As the name itself suggests it is a company which is owned by one single person.

Section 8 Company: The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives. These companies also apply their profits towards the furtherance of their cause and do not pay any dividend to their members.

Producer Company:

“Producer Company” means a body corporate having objects or activities specified in section 581B and registered as Producer Company under the Companies Act, 1956.

(a) Production, harvesting, processing, procurement, grading, pooling, handling, marketing, selling, export of *primary produce of the Members or import of goods or services for their

(b) Rendering technical services, consultancy services, training, education, research and development and all other activities for the promotion of the interests of its Members;

(c) Generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communications relatable to primary produce;

(d) Promoting mutual assistance, welfare measures, financial services, insurance of producers or their primary produce;

Types of Company’s Incorporation in India and its definition?

Nidhi Company : Nidhi Company is a non-banking financial business structure. Nidhi Company performs the functions of lending and borrowing of money within its members where it works through its members only. Nidhi Company is also called as a mutual benefit company. Nidhi Company promotes the art of saving and utilization of funds within its member community. Nidhi company does not require a license of Reserve Bank of India. Companies doing Nidhi Business are also known as Nidhi, Permanent fund, Benefit funds, Mutual Benefit Funds, and Mutual Benefit company.

Limited Liability Partnership: A limited liability partnership (LLP) incorporates some elements of a corporation and some elements of a partnership. An LLP offers greater liability protection and management flexibility than other partnership formats and is easier to set up than a limited liability company. Limited partnerships have at least one general partner and at least one limited partner. The general partner handles day- to-day management and also shoulders liability for the business. The limited partners are “silent partners” who don’t get involved in daily management and are Shielded from liability

Definition of One Person Company?

• One Person Company” means a company which has only one person as a member.
• Only a natural person who is an Indian citizen and resident in India can be member and nominee of an OPC.
• A natural person shall not be a member and nominee of more than a One Person Company at any point of time.
• No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest in such OPC.

Definition of Small Company?

• 2(85) small company” means a company, other than a public company,—
• (i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees and
• turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees.

COMPANY LIMITED BY SHARES (22): A Company that is limited by shares is refer to a Company that has the liability of members limited by such an amount that is unpaid on their respectively held shares

UNLIMITED COMPANIES: Sec (92) : “Unlimited company” means a company not having any limit on the liability of its members. An unlimited company or  private  unlimited  company is a hybrid company incorporated with or without a share capital but where the legal liability of the members or shareholders is not limited: that is, its members or shareholders have a joint, several and non-limited obligation to meet any insufficiency in the assets of the company to enable settlement of any outstanding financial liability in the event of the company’s formal liquidation.

COMPANY LIMITED BY GUARANTEE (21): A Company limited by guarantee is termed as Guarantee Company. It is a Company without shareholders but it is owned by members called guarantors who agree to pay a nominal amount in the event of company’s being wound up. It is a specific form used for non- profit organization. Under this form, profits earned by the company are re invested again in the company to use it for different purposes. Hence, it’s a legally preferred structure for non-profit companies, clubs, charitable trusts and other similar set ups. Example: Charities, Clubs, Sport association, NGOs and other social enterprises.

FEATURES OF CATEGORY OF COMPANIES –

PROS AND CONS OF COMPANY LIMITED BY SHARES

Why one should opt for a Company Limited by Shares?

1. The Company Shareholder’s will be only liable for any debt the Company accrues according to their own level of investment and no more.

2. No taxation of profit- A Shareholder in such a Company is at an advantaged position because whatever accrues from the shares in the form of dividends is not taxable and also limited companies are taxed on their profits and therefore they are not liable to pay higher taxes

3. Separate Entity- The Limited Company by shares is deemed to be separate entity from its owners. Therefore the Company has advantage to existing beyond the life of its members.

4. Limited Liability helps to boost professional status and reputation as it creates an impression that the business is grounded, deducted and reliable.

5. A Company Limited by shares will help an individual to sell shares to other people to raise finance and protect the name of their business.

PROS AND CONS OF COMPANY LIMITED BY GUARANTEE

Why one should opt for a Company Limited by Guarantee?

1. Members will have protection for being held liable in their personal capacity for the amount borrowed for business in the name of the company.

2. Members of the company are only liable to pay only the guaranteed amount as mentioned in memorandum of association of the company.

3. Members are liable to pay only at the time of winding up of company.

Types of Guarantee Company – Having Share Capital and Not having Share Capital

Company Limited by guarantee Having Share Capital- Company will be set in motion with some initial capital or working funds from its members as initial working capital is not available through grants, subscriptions, fees, endowments or any other sources. But later, once the operation is started, normal working funds can be received from the services rendered in the form of fees, charges and subscriptions. Voting power in guarantee company having share capital is determined by the shareholding.

Company Limited by guarantee not having share Capital–Such type of guarantee companies do not obtain initial capital or working funds from its members. Instead, the company raise the working funds through various other sources like endowments, grants, subscriptions and fees etc. For example, non-profit companies or charitable institutes started by public donations or government grants. Voting power in guarantee company not having share capital is determined by the guarantee.

PROS AND CONS OF CHOOSING UNLIMITED COMPANY

Why One Should Opt for Unlimited Company?

• Confidentiality
• Improved Management
• Confidence of Creditor
• Flexible Share Capital Options
• Tax Advantage
• Members Controlled

Why One Should not Opt for Unlimited Companies?

• Unlimited Liability
• Missed Opportunities
• Difficult to Raise Capital
• No Perpetual Existence

SUB-CATEGORIES OF COMPANY

• UNION GOVERNMEN T COMPANY
• STATE GOVERNMENT COMPANY
• GUARANTEE AND ASSOCIATION COMPANY
• SUBSIDIARY OF A  COMPANY INCORPORATED OUTSIDE IINDIA INDIA
• NON- GOVERNMENT COMPANY

ADVANTAGES AND DISADVANTAGES BETWEEN FORMING A SOLE PROPRIETORSHIP CONCERN

ALL ABOUT SOLE PROPRIETORSHIP REGISTRATION, ITS BENEFITS, ADVANTAGES AND DISADVANTAGES:

What is Sole Proprietorship?

A sole proprietorship is a type of entity that is managed and run by one person as an owner and in which there is no legal distinction between the owner and the proprietorship.

* Note: There is no prescribed legal formalities to starting or operating sole proprietorship, only appropriate or proper licensing to conduct a business and registration of business name if it differs from the sole proprietorship is required.

ADVANTAGES AND DISADVANTAGE OF SOLE PROPRIETORSHIP

• Less Formalities during formation.
• No Government Intervention
• Less wastage of time for taking various approvals.
• Limited Capital required according to your wish.
• Current account can be opened easily.
• Have a registration name in proprietorship.
• No Sharing of profits.
• Personal Property Of Proprietor Is Also Affected In Case Of Any Loss Arise In Sole Proprietorship.
• Because Of Proprietor Pan Is Used In The Business For All The Compliance Or Registration It Is Not Easy To Transfer The Business To Some One Else If Required Or Needed In Future.
• There Is No Chance Of Perpetual Existence In Case Of Sole Proprietorship Because Proprietor And Proprietorship Both Are In Case Of Death Of Proprietor – Proprietorship Is Also Come To Its End.
• Not Easy to get funds from outside.
• Limited Scope of Recognition.

HOW TO REGISTER A SOLE PROPRIETORSHIP?

There is no Specific Registration Process Or Procedure Prescribed By The Government For The Registration Or Operation Of Sole Proprietorship.

One or more Business license or tax license are applicable:

1. MSME Registration

2. GST Registration (Optional for Start ups)

3. Trademark – In case you want no one can use your business name

4. Shops and Establishment License.

DIFFERENCE BETWEEN PUBLIC COMPANY AND PRIVATE COMPANY

• A Public Company is owned and Traded publicly on Stock Exchange.
• Minimum 7 members must be required to form a Public Company.
• There is no maximum limit of members forming a Company.
• Atleast 3 Directors are required to form a public Company.
• Public Subscription of Shares is allowed in Public Companies
• 5 members should be present at AGM.
• The Statutory Meeting is Compulsory.
• It is mandatory to issue Prospectus of the Company.
• Shares can be transferred Freely in Public Companies.
• It is mandatory to disclose financial report quarterly and annually.
• A Public Company can raise funds by issuing an initial public offering to general public.
• A Private Company is traded Privately
• Minimum 2 members are required to form a Private Company.
• The maximum limit of members in a Private Company is 200.
• Atleast 2 Directors are required in a Private Company.
• Public Subscription of Share is not allowed in a Private Company.
• 2 Members Should be Present at AGM.
• The Statutory meeting in a Private Company is Optional.
• Transfer of Shares is restricted in Private Companies.
• There is no obligation for a Private Company to disclose financial Statement.
• Private Companies can raise funds through Private O

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ADVANTAGES OF PUBLIC COMPANY

> Raising Capital through Public Issue of Shares

• Limited Liability & It can even lead to free publicity with the media devoting more attention to such firms.
• Higher status than a public limited company so will benefit from more publicity.

> The more people that buy shares in your Company, the more the risk is spread out.

• Share prices listed on the stock exchange so shareholders ca work out the value of their shares. They can buy or sell shares.
• Being listed on an exchange ensures that hedge funds, mutual funds, and other traders take note of your business. More interest means more business opportunities for you on top of more capital to be gained.

> By having less risk, it’s the perfect opportunity for growing and expanding your business – investing into new projects and products, through the money gained via shares.

• Potentially, this can raise significant funds if your company is particularly appealing to the public and traders.
• Banks are often more willing to extend finance to a public limited company, with a stock exchange listing frequently improving your creditworthiness

DISADVANTAGE OF PUBLIC LIMITED COMPANY

• Original owners lose control and ownership of the business.
• Company can be taken over if a majority of shareholders agree to bid.
• Public limited companies are held to account and more thoroughly scrutinised by auditors.
• Professional directors and manager appointed to run the business may have different aims to those of the shareholders.
• Regulation is far more stringent when you run your company as a PLC. If you want your shares listed, you need to meet strict discourse and filing requirements
• Annual general meetings must also be held, demonstrating    your accountability to more people than before
• Must disclose all main accounts to the public. These are often greatly publicised by the media.
• High initial financial commitment than the financial needs of a private Company with further cost potentially coming from legal and investment professionals advising you on your listing process.
• It’s much harder to control who is a shareholder of your company, so there’s a possibility of losing control of the direction of your business.

PRODUCER COMPANY AND ITS FEATURES

• Minimum No. of 10 member (individual) or Two or more producer institutions or combination of two.(10+2)
• The members have necessarily to be primary producers.
• The limit of maximum number of member is not applicable to these companies
• Share capital of a Producer Company shall consist of equity shares only
• Minimum 5 and not more than 15 directors
• A full time chief executive should (CEO) be appointed by the board.
• Only of individual then voting rights shall be based on a single vote for every member.

DIFFERENCE BETWEEN LIMITED COMPANY AND UNLIMITED COMPANY?

Difference in forming limited and Unlimited Company is while in limited company during the insolvency, the members are limited up to the extent of their unpaid shares. While in unlimited Company, company is unable to pay off its debts, the creditors will be able to use the personal assets of the directors and shareholders in order to pay off the liability. Regardless of how many shares are owned in unlimited company, shareholders and directors are responsible ultimately.

ADVANTAGES AND DISADVANTAGES OF UNLIMITED COMPANY?

• Confidentiality: The affairs of the company are largely kept hidden from competitors. This can mean that the unlimited company could look through the financial information of their competitors while keeping their own hidden
• Improved Management: Seems shareholders and directors of unlimited companies could stand to lose everything if the company liquidates, this can have the effect of encouraging careful risk management.
• Creditor Confidence: Seems shareholders and directors are responsible if the company is liquidated then creditors can have increased trust that the company will not borrow more than they can afford to pay back. This with increased risk control can give creditors a greater confidence in the Company.
• Flexible Share Capital Options: Compared to limited companies, with unlimited companies, it is easier to return capital to shareholders. This flexibility is useful when you’re in a group structure, as it gives more option to move capital between entities in the group.
• Unlimited Liability: If the company has to liquidate there is no protection for the shareholders, and there is essentially no limit on what they can lose in order to pay back This is by far the biggest drawback to being an unlimited Comapny.
• Missed Opportunities: Because of the unlimited liability, if things go wrong, the directors and shareholders may not be inclined to take high-risk opportunities. While this low-risk approach could mean they get a steady amount of smaller jobs it could mean that this misses out on opportunities that could lead to bigger, more profitable jobs.
• This careful approach could slow the development of the company and could potentially scare off potential shareholders who will want to see a return on their initial investment.
• Not many people understand it: Because not many business owners have heard of it, it may not be thought of when registering as a company.
• Also, any directors who have registered as an unlimited company may find that they have a harder time researching their roles and responsibilities than if they had registered as limited. You could also find that some external advisers may not know what it is, so you may have a difficulty finding an accountant who knows the ins and outs in regards to reporting.
• It could be seen that, by hiding your finances, you are in fact trying to hide poor management.
• If your unlimited company needs to borrow money, lenders will base their decision partly on whether they believe the money will be repaid – including the security of personal assets. They will also look at whether the company can sustain itself without borrowing. This can mean that lending would be harder due to the fact that circumstances can change and other liabilities can come into play.

KEY FEATURES OF ONE PERSON COMPANY

• Only a natural person who is an Indian citizen and resident in India can be member and nominee of an OPC.
• A natural person shall not be a member and nominee of more than a One Person Company at any point of time.
• No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest in such OPC.
• Such Company cannot be incorporated or converted into a company under section 8 (Company with Charitable Objects) of the Act.
• Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any other body corporate.
• No such company can convert voluntarily into any kind of company unless two years is expired from the date of incorporation of One Person Company except in the case if its falls under the mandatory conversion criteria.
• In case the paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into private or public Company.
• One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year.

KEY FEATURES OF ONE PERSON COMPANY (Cont…)

• The provision of holding of Annual General Meeting is not applicable to OPC.
• The OPC is required to hold minimum two Board meeting during a calendar year and one meeting in each half of the calendar year and gap between two meetings is not more than 90 days.
• For the purposes of quorum, in case of a single Director, it shall be sufficient if the passed resolutions is entered in the minutes book and signed and dated by such director.
• Nomination by the Subscriber or Member of One Person Company
• The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
• The name of the person nominated under sub-rule (1) shall be mentioned in the memorandum of One Person Company and 1[such nomination in Form No. INC-32 (SPICe+) along with consent of such nominee obtained in Form No. INC-3]
• The person nominated by the subscriber or member of a One Person Company may, withdraw his consent by giving a notice in writing to such sole member and to the One Person Company.
• Provided that the sole member shall nominate another person as nominee within fifteen days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person so nominated in Form INC.3.
• The company shall within thirty days of receipt of the notice of withdrawal of consent under sub-rule (3) file with the Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No INC.4 and the written consent of such another person so nominated in Form INC.3
• The subscriber or member of a One Person Company may, by intimation in writing to the company, change the name of the person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the prior consent of such another person in Form No 3.
• Where the sole member of One Person Company ceases to be the member in the event of death or incapacity to contract and his nominee becomes the member of such One Person Company, such new member shall nominate within fifteen days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company, and the company shall file with the Registrar an intimation of such cessation and nomination in Form No INC.4 within thirty days of the change in membership and with the prior written consent of the person so nominated in Form No.INC.3.

ADVANTAGES AND DISADVANTAGES OF ONE PERSON COMPANY

• There is a less compliance burden for OPC.
• OPC will bring the unorganized sector of proprietorship into the organized version of a private limited Various small and medium enterprises, doing business as sole proprietors, might enter into the corporate domain.
• Minimum 1 Director, Minimum 1 shareholder, Minimum 1 Nominee.
• Limited Liability protection to Directors and Shareholders: OPC allows an individual to take risks without risking their personal assets.
• Legal Status and Social Recognition for Business: OPC is a Private Limited Structure; this is the most popular business structure in the world. Gives suppliers and customers a sense of confidence in business. Large organizations prefer to deal with private limited companies instead of proprietorship firms.
• Adequate Safeguard: In case of death/disability of the sole person should be provided through appointment of another individual as nominee On the demise of the original director, the nominee director will manage the affairs of the company till the date of transmission of shares to legal heirs of the demised member.
• Incorporation of such a company requires lots of paper work as compared to a sole proprietorship. These procedural complexities with respect to incorporation of One Person Company might make this concept less attractive for sole entrepreneur.
• This is one of the characteristics of the company, which is seriously challenged by the new Companies Act, 2013, where the line between the ownership and control is blurred Which might result in unethical business. A person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
• NRIs not allowed incorporating One Person Comapny.
•  Requirement to appoint a nominee for incorporating a One Person Company.

ADVANTAGES AND DISADVANTAGES OF ONE PERSON COMPANY(cont..)

• Easy to get loans from Bank: Banking and financial institutions prefer to lend money to the company rather than proprietary firms. In most of the situations Banks insist the entrepreneurs to convert their firm into a Private Limited company before sanctioning funds. So it is better to register your startup as a One Person private limited rather than proprietary firm.
• Complete control of the Company with single owner.
• No requirement to hold Annual or EGM, A One Person Company may conduct at least one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings shall not be less than ninety days, quorum will not apply to one person company
• Perpetual sucession: An OPC being an incorporated entity will also have the feature of perpetual succession and will make it easier for entrepreneurs to raise capital for business. The OPC is an artificial entity distinct from its owner
• Tax Flexibility and Savings.
• One-person Company can have Minimum or Maximum no. of 1 Member.
• > A minor shall not be eligible to become a member or nominee of the One Person Company or can hold share with beneficial interest.
• > Only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company and shall be a nominee for the sole member of a One Person Comapny.
• Suitable only for Small Business: OPC is suitable only for small business. OPC can have maximum Paid up share capital of Rs.50 Lakhs or Turnover of Rs.2 Crores.
• One Person Company cannot carry out Non – Banking Financial Investment activities including investment in securities of anybody Corporates.
• > One Person Company cannot be incorporated or converted into a company under Section 8 of the Act.

FEATURES OF A NIDHI COMPANY

• Promotes Small Savings among middle and Lower Class
• Accepts term deposits for timely returns.
• Easy Source of Loan to members against collateral.
• Effective means of saving loans with minimum documentation.
• Secured means of Investment due to rigid membership Structure.
• Borrowing & Lending to its members: Nidhi Company cannot lend & borrow from outside its member Restricting the business area of company also reduces the chances of business collapse.
• “Nidhi ltd.”: “Nidhi limited” must be added to name of the company incorporation if it is registered as a Nidhi company under companies act, 2013.
• Share capital: Minimum equity share capital of INR 5 lakh is required for company incorporation as Nidhi Once you have registered it as a Nidhi company, You cannot issue preference shares.
• of members: At least 7 members must be there to start a Nidhi company. Out of these 7 members, 3 must be the full time directors of the company.

ADVANTAGES AND DISADVANTAGES OF NIDHI COMPANY

• Nidhi rules, 2014: Athey are not allowed to deal with the funds of any person other than their members and the powers to impose certain restriction by RBI are limited.
• Ease of formation: Unlike other NBFCs or scheduled banks, Nidhi Company does not have to obtain a license from They have to initiate the process of new company registration as a public company with MCA under the Nidhi rules 2014 and they can start the functioning of the company.
• Channelizing savings: Nidhi Company gives an opportunity to all its members to start the borrowing and lending process once they become member of it. Promoting an environment of savings among a lower and middle section of These small sections can now contribute and avail credit from Nidhi companies.
• Low credit rate: Lower rate of interest on loan which is offered to the members of the Nidhi Company than prevailing market rate. This brings greater confidence amongst the members and boosts the process of savings to the members.
• Minimal outside intervention: Since Nidhi company offers the borrowing and lending facility for its members Therefore, outsider intervention is automatically reduced since an outsider does not actually have a say in the internal matter of the company.
• Cost effective: Nidhi Company registration is a cost effective affair. Unlike a scheduled bank registration or a private company registration formalities involved in Nidhi company registration are minimal. The minimum capital requirement of Nidhi Company registration is INR 5 lakh where you have the opportunity to invest the capital within the 2 months after the company registration.
• Limited Fund Raising: Fund raising in a Nidhi Company is directly related with the number of members it have because a Nidhi Company can only accept deposits and lend only to its members which limits it source of raising funds.
• Limited credit availability: Limited fund with the company raises the concern of limited credit availability which ultimately beats the very purpose for which the Nidhi companies were established.
• RBI vigilance: Although there are no strict compliances imposed upon the Nidhi company by RBI, still their activities are governed by the Reserve Bank especially their deposit acceptance operations.
• Other Regulations: The central government issues rules and directions governing Nidhi Companies from time to time. Therefore, they are not totally exempt from the regulatory framework.
• Nidhi Company can accept deposit and lend money between its shareholder- members As a Nidhi Company you can’t accept deposits directly from the public.
• Nidhi Company can’t issue any Preference Shares, Debentures or any Debt Instrument to any person or corporate.
• No Nidhi Shall involve in businesses like Chit Fund, Hire Purchase Finance, Lease Finance and Insurances or can not buy any Corporate Share.
• Within a year after the commencement, Nidhi Company should ensure minimum 200 members and net owned fund of 10,00,000 according to the Section 406 of Companies Act 2013 and Nidhi Rules 2014

The central government issues rules and directions governing Nidhi Companies from time to time. Therefore, they are not totally exempt from the regulatory framework.

KEY FEATURES OF SECTION 8 COMPANY

Income and Dividends: Income or any profit from the company is to be applied in the advancement of the object of the company, i.e. to promote commerce. Arts, science, sports, research and social welfare.

Special License: Section 8 companies are also called licensed companies, as these companies need to get special approval for a license from the central government. When a section 8 company is in an incorporation process, they need to provide special license approval to ROC.

Charitable Objective: The companies under section 8 of the companies act are not formed with the objective of earning a profit. They are established with a basic objective of furthering causes like science, culture, research and religion.

When its objective is to promote and enhance the fields such as art, commerce, science, sports, environmental protection. When it applies its profit derived if any to the promotion of such fields.

Doesn’t intend to pay its dividend to the members, in such cases the central government may by issuing a license to get that company registered under this act after that the registrar may register such a company under this act.

The company registered under this section may enjoy all the rights and obligations of such limited companies.

ADVANTAGES AND DISADVANTAGES OF SECTION 8 COMPANY

Tax benefits: Section 8 Company is a non-profit organization that is why they are exempted from some provisions of the income tax. They are also given numerous other deductions and other tax benefits. They avail benefits under section 80G of the Income Tax Act, 1961. They also are required to pay less stamp duty as compared to other organization.

Minimized Share Capital: Unlike the other limited companies like private, public, or one person, the companies registered under section 8 doesn’t require much share capital. They can be directly funded from subscriptions or donations made to them.

Use of title: Unlike the other companies, who have to use the title as ‘limited company’, section 8 of the IT Act exempts them for the use of any suffix or title, they can still exercise their functions without informing the public of their limited liability status.

Ease at Transfer of title/ownership: Unlike the limited liability companies who are not allowed to transfer the title or ownership, but as per section 8 of the Income Tax Act, 1961 allows the transfer of title or ownership of both movable and immovable interest with no hurdles or restrictions of any sort.

No Stamp Duty Payable: A section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other structures such as private limited or a public limited company.

Separate Legal Entity: A Section 8 Company also holds its own identity like other companies structures, and has its own separate legal standing from its member. A Section 8 Company also has a perpetual existence

Use of Profits: The profits of the companies could only be used in limited fields such as art, commerce, science, sports, environmental protection and fields of such sort and not on anything else.

No profit distribution: There could be no distribution of the profits among shareholders or partners.

Remuneration Officer: In section 8 company any member can be appointed as a remunerating officer.

Zero Benefits: The members of the company will get zero benefits or any advantages out of the They could only be reimbursed for their pocket expenses that might have occurred in the course.

Objectives: The main objective of such companies under section 8 is to use its profits in promoting the particular fields only and not for any other purpose.

Alteration in MOA and AOA: Such a company cannot alter or amend the Memorandum of Association or the articles of association  (MOA  or  AOA) without the prior approval of the central Government.

Rules and Regulations: The central government has imposed various conditions which have to be complied with and such regulations and the impositions have to be necessarily included in their Memorandum of Association and Articles of Association or as directed by the central government.

Since they come under the definition of a company under section 25 of the Company’s act, so the income derived from the company would be applicable to pay tax. though there are exemptions but that doesn’t mean that they would completely be exempted from being subject to pay tax

ADVANTAGES AND DISADVANTAGES OF LIMITED LIABILITY PARTNERSHIP

• Tax Benefits
• Limited Liability
• Any Numbers of Partners
• Flexible
• Separate Entity
• Not accepted in all States
• Be careful about agreements
• LLP Assets
• Lengthy Admission
• Penalty

PROCEDURE FOR INCORPORATION OF A COMPANY

Steps for Incorporating a Company:

Features of SPICE+ (PART A):

1. Two names can be proposed in case application is being made only for name (If SPICE + Part A is submitted Individually.)

2. In case complete SPICe+ is being submitted for name reservation as well as incorporation, only one name can be proposed.

3. The Details that would be required are the type of Company whether its (private, Public, producer) etc and then category of Company is (Company Limited by shares, guarantee or unlimited Company)

4. Object Clause of the Company.

5. Industrial Activity of the Company.

* Note: If a Company is sure of Name availability for which he wants to apply, then its flexible to apply for SPICE+ (Part A & B Together). If the Company is unsure of Name availability then only SPICE+ (Part A) has to be applied separately.

SPICE+ (PART B)

1. Capital Structure of the Company: (Having Share Capital) – Minimum authorised and subscribed share capital required for OPC is Rupee 1, Private Company having share capital is Rupees 2, Public Company having Share Capital is Rupees 7.

2. Capital Structure of the Company: (Not Having Share Capital) – In case if Company is not having Share Capital, it should enter the number of Members Details.]

3. Details of Number of Members –

a. Maximum No. of Members excluding employees should not be > 200 in Private Companies.

b. There is no limit of members excluding employees in Public Companies.

* Note: Number of members excluding proposed employee(s) should be greater than or equal to two in case of Private company and seven in case of public company.

4. Correspondence address: Select yes if Correspondence address is the registered office address and attach copy of utility bill that is not older than two months (or) In case if selected no, then company shall establish its registered office within fifteen days of the approval of incorporation in Form INC-22.

5. Subscribers and Directors Detail:

Definition of Non – Individual: Company/Company Incorporated Outside India/Body corporates/ Others:

a	Total No. of First Subscribers (Non Individual+ Individual) *Note: Total number of first subscribers are restricted to seven .(Whether Individual or Non- Individual).	= or > 2 in case of Private Company or 7 in case of Public Company or 1 in case of One person Company.
b	Number of non – individual first subscriber(s)	Particulars of non-individual first subscriber(s) not having DIN
C	Number of individual first subscriber(s) cum director(s) (Row 3)	Enter the number of only those subscribers who are proposed to also be the director in the company.
d	Total number of directors (director(s) who is/are not subscriber(s) + subscriber(s) cum : director(s) as mentioned in above Row no. 3)	Enter the total number of proposed director(s) in the company. This number should include number of those subscribers who are also proposed to be directors in the company.

IMPORTANT NOTE:

1. Total number of directors (including both ‘having’ and ‘not having’ DIN) cannot be more than 20 in (Having DIN Can be 17 + Not Having DIN can be 3).

2. Total number of directors (including both ‘having’ and ‘not having’ DIN) should be minimum 1 in case of OPC, 2 in case of private company (other than producer company) or 3 in case of public company or 5 in case of a producer private company.

3. Directors not having DIN cannot be more than 3 in numbers.

4. For the subscribers having DIN, KYC norms would not be applicable and no other proof of identity or residential proof shall be required.

5. selection of Independent category cannot be selected if the Director is a Managing director, nominee director, whole time director.

6. In case of Nominee director enter the name of the company or institution whose nominee the appointee is.

7. If particulars of individual first subscriber(s) (other than subscriber cum director) Not Having DIN should have proof of identity from the available drop-down values – Voters Identity Card/ Passport/ Driving License. Residential Proof from the available drop-down values – Bank / Electricity Bill/ Telephone bill/Mobile bill.

8. Nomination – Enter the name of subscriber and nominee in case company is One person Proposed nominee should not be a nominee in any other One person company.

9. INC-9 automatically gets generated and now the form has to be signed electronically with Digital signature.

6. Stamp Duty: Stamp Duty to be paid State wise electronically.

7. Information for applying Permanent Account Number (PAN) and Tax Deduction Account Number (TAN)

8. Sources of Income.

Mandatory Attachment for SPICE+

1. Declaration by first subscriber(s) and director(s) – Shall be mandatory where total number of subscribers and/or directors is greater than 20 OR any such subscribers and/or directors does not have DIN/PAN.

2. If any subscriber to the proposed company is Foreign company and/or company incorporated outside India, then it is mandatory to attach Copy of certificate of incorporation of the foreign body corporate and resolution passed.

3. If any subscriber to the proposed company is a Company itself, then it is mandatory to attach Resolution passed by promoter company.

4. In case any of the director has any interest in the proposed company, then it is mandatory to attach Interest of first director(s) in other entities.

5. In case of an OPC, it is mandatory to attach Consent of nominee and Proof of identity and residential address of the nominee.

6. If any one of the subscriber does not have a DIN, it is mandatory to attach – Proof of identity and residential address of the subscribers

7. If any of the director (including subscriber cum director) does not have DIN, then it is mandatory to attach – Proof of identity and residential address of such director.

8. In case proposed company is a Section 8 company, it is mandatory to attach – Declaration in Form INC-14 and Declaration in Form No. INC-15 Important Note : A Professional who is signing SPICe+ as a Director, cannot again Sign the same form as a Professional.

Note: In all the above mentioned cases, the maximum number of subscribers allowed shall be 7 for filing of SPICe+ form. Wherever the number of subscribers exceed 7, SPICe+ form shall be filed with MoA and AoA as attachments.

8. Any user who intends to incorporate a company through SPICe+ can now also apply for GSTIN / EPFO/ ESIC/ Profession Tax/ Opening of bank account through this web form AGILE-PRO (INC35). User is required to file application (SPICe+) for incorporation of a company accompanying linked form AGILE- PRO along with form SPICe+ MOA (INC-33), eForm SPICe+ AOA (INC34) and form URC-1, as applicable for issuance of GSTN/ EPFO/ ESIC/ Profession Tax registration (only for Maharashtra) and opening of Bank account.

9. Applying for GSTIN at the time of incorporation is not mandatory. In case you wish to apply for GSTIN at the time of incorporation, it can be done.