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 ?
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” 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;
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?
Definition of Small Company?
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?
Why One Should not Opt for Unlimited Companies?
SUB-CATEGORIES OF 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
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
ADVANTAGES OF PUBLIC COMPANY
> Raising Capital through Public Issue of Shares
> The more people that buy shares in your Company, the more the risk is spread out.
> 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.
DISADVANTAGE OF PUBLIC LIMITED COMPANY
PRODUCER COMPANY AND ITS FEATURES
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?
KEY FEATURES OF ONE PERSON COMPANY
KEY FEATURES OF ONE PERSON COMPANY (Cont…)
ADVANTAGES AND DISADVANTAGES OF ONE PERSON COMPANY
ADVANTAGES AND DISADVANTAGES OF ONE PERSON COMPANY(cont..)
FEATURES OF A NIDHI COMPANY
ADVANTAGES AND DISADVANTAGES OF NIDHI COMPANY
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
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.|
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.