Mukesh Goyal

Currently:

Business Management & Sales Strategist, Razorpay

Expertise:
Business
Company Registration
Sales

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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Pharma Company Registration: How to Open a Pharma Company in India?

Pharma Company Registration: How to Open a Pharma Company in India?

India is the world’s third-largest pharmaceutical market by volume and a key player in the global healthcare ecosystem. With its robust manufacturing base, cost efficiency, and innovation-driven approach, India has earned the reputation of being the “pharmacy of the world.” 

Both Indian pharmaceutical giants and foreign companies entering the market are shaping this growth trajectory, making the sector one of the most lucrative industries to invest in.

If you are an entrepreneur or investor looking to establish a pharmaceutical company in India, understanding the regulatory requirements and registration process is essential. 

This article provides a step-by-step guide on everything you need to know to register a pharma company in India, ensuring compliance while tapping into this high-growth industry.

Table of Contents

About the Pharma Company in India

A pharmaceutical company is an entity involved in the development, manufacturing, distribution, and marketing of medicines and healthcare products. Depending on the business model, pharma companies in India are typically classified as:

  • Manufacturing companies: involved in the production of drugs and medicines.
  • Marketing companies: focus on branding and distribution, often outsourcing manufacturing.
  • Wholesale businesses: supply medicines in bulk to retailers, hospitals, and distributors.
  • Retail businesses: run pharmacies and directly sell medicines to consumers.

India’s pharmaceutical industry has been expanding rapidly. As of 2025, it is valued at $55 billion and is projected to reach $120–130 billion by 2030. The government has also introduced several supportive measures:

  • 100% Foreign Direct Investment (FDI) allowed in greenfield pharma projects.
  • ₹15,000 crore PLI (Production Linked Incentive) scheme to promote domestic manufacturing.
  • Incentives for Active Pharmaceutical Ingredients (APIs) and medical devices to reduce import dependency.

With this growth potential, starting a pharmaceutical business in India is both a profitable and impactful opportunity.

Choosing the Right Business Structure for a Pharma Company

The first step in starting a pharmaceutical business in India is selecting the proper business structure. The choice depends on the scale of operations, funding requirements, and ownership preferences. Common structures include:

  • Limited Liability Partnership (LLP): Offers flexibility with limited liability.
    Private Limited Company (Pvt Ltd): Ideal for manufacturing and marketing businesses due to scalability and investor appeal.
  • Public Limited Company: Suitable for large-scale operations planning to raise funds from the public.
  • Indian Subsidiary of a Foreign Company: Allows foreign companies to establish a presence in India and leverage the growing market.

India ranks 3rd in the world by volume and 14th by value in pharmaceuticals, making it a preferred hub for domestic and international players. Choosing the right structure ensures smooth registration and compliance.

Eligibility for Registering a Pharma Company

Eligibility criteria are designed to maintain quality and compliance in the pharma sector. Key rules include:

  • The applicant must be legally competent to enter into a contract.
  • The company must appoint qualified directors and pharmacists, depending on the business type.
  • Proper compliance with the Drugs and Cosmetics Act of 1940 is mandatory.
  • Only individuals or entities with relevant pharmaceutical qualifications/experience can run such businesses.

Requirements for Registering a Pharma Company

Corporate & Structural Requirements

These are the standard legal requirements for forming a company under the Ministry of Corporate Affairs (MCA).

  • Directors and Members: The structure depends on your company type. For a Private Limited Company, a minimum of two directors and two members (shareholders) are required. The same individuals can hold both positions.
  • Director Credentials: Every proposed director must have a Digital Signature Certificate (DSC) for online document submission and a Director Identification Number (DIN), a unique identifier issued by the MCA.
  • Unique Company Name: Your proposed company name must be unique and not resemble any existing company or trademark. It must be approved and reserved through the MCA portal.
  • Registered Office Address: You must provide a physical address in India as the company's official registered office. Proof of address, such as a utility bill or rental agreement, is mandatory for verification.

Pharmaceutical & Technical Requirements

These are specific mandates from the Drugs and Cosmetics Act, 1940, enforced by state drug control departments, which are essential for obtaining a drug license.

Qualified Technical Personnel: 

You must employ qualified individuals to supervise the sale and distribution of drugs. The requirements vary based on the business type:

  • For Wholesale Business (Distribution): The operations must be supervised by a "Competent Person." This can be:
    • A Registered Pharmacist.
    • A graduate with at least one year of experience in dealing with drugs.
  • For Retail Business (Pharmacy): All sales and dispensing activities must be conducted under the direct supervision of a Registered Pharmacist.

Adequate Storage Premises: 

You must have a proper commercial space for storing medicines. The premises are inspected by a Drug Inspector and must meet specific conditions:

  • Minimum Area: Typically, a minimum of 10 square meters is required for a wholesale license. This can vary by state.
  • Proper Storage Facilities: The premises must be clean, well-lit, and equipped with necessary storage solutions like cupboards, racks, and, crucially, a refrigerator and freezer to store temperature-sensitive drugs like vaccines and serums.

Enjoy limited liability protection, easy fundraising, and better brand credibility. Register your Pvt Ltd company online with Razorpay Rize and focus on building your pharmaceutical business while we handle compliance.

How to Start a Pharmaceutical Company in India?

The incorporation process is now simplified through the SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) form by the Ministry of Corporate Affairs. Steps include:

Phase 1: Business Incorporation

The first step is to register your business as a legal entity with the Ministry of Corporate Affairs (MCA). The modern SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) form has streamlined this process significantly.

  • Get Director Credentials: All proposed directors of the company must obtain a Digital Signature Certificate (DSC) and a Director Identification Number (DIN). The DSC is an electronic signature used for filing documents online, and the DIN is a unique number assigned to each director.
  • Reserve a Company Name: You must apply for and reserve a unique name for your company. This can be done through the MCA portal's RUN (Reserve Unique Name) service or directly within the SPICe+ form.
  • Draft Foundational Documents: Two critical documents need to be prepared:
    • Memorandum of Association (MoA): This document defines the company's objectives and the scope of its business activities.
    • Articles of Association (AoA): This document outlines the internal rules and regulations for managing the company.
  • File the SPICe+ Form: This single, integrated web form is used to file for incorporation. It combines applications for the company name, DIN allotment, and issuance of important tax numbers like PAN and TAN.
  • Receive Certificate of Incorporation: Once the MCA approves your application, you will receive a Certificate of Incorporation. This certificate includes your unique Corporate Identity Number (CIN) and officially marks the legal birth of your company.

Phase 2: Securing Pharmaceutical Licenses

This is the most critical phase and is specific to the pharmaceutical industry. These licenses are granted by the Central Drugs Standard Control Organization (CDSCO) and State Drug Control Departments.

  • Drug License: This is the primary license required to deal with drugs and cosmetics. The type of license depends on your business model:
    • Manufacturing License: Required if you plan to manufacture drugs. This involves a rigorous inspection of your manufacturing facility to ensure it complies with Good Manufacturing Practices (GMP) and has the necessary technical staff and equipment.
    • Wholesale/Distribution License: Required for stocking, selling, and distributing drugs. This requires having adequate storage premises with proper refrigeration facilities and employing a registered pharmacist.
  • GST Registration: Before you can apply for a drug license, you must complete your Goods and Services Tax (GST) registration. The GSTIN is a mandatory requirement for the drug license application.

Phase 3: Brand and Tax Formalities

With your company and licenses in place, the final step is to protect your brand and manage your finances.

  • Trademark Registration: It is highly advisable to register your company name, logo, and the brand names of your pharmaceutical products. This protects your intellectual property and prevents others from using similar names.
  • Bank Account Opening: You can open a corporate bank account using the Certificate of Incorporation and other registration documents.

Get started with Razorpay Rize and complete your company registration online in just a few clicks. Fast approvals, 100% digital process, and expert support to make your pharma business official.

Documents Required to Register a Pharma Company

Here’s a checklist of essential documents required to open pharma company:

For Indian Directors/Shareholders:

  • PAN Card
  • Aadhaar Card
  • Passport-size photographs
  • Address proof (utility bill, bank statement)

For Foreign Directors/Shareholders:

  • Passport (notarised and apostilled)
  • Proof of overseas address
  • Photograph

For the Company:

  • Registered office address proof (rent agreement/ownership proof)
  • Utility bill of the premises (electricity/water bill)
  • MoA and AoA

Other Registrations Required for a Pharma Company

After incorporation, a pharma company must obtain additional registrations and licenses to operate legally:

  1. Drug License (under the Drugs and Cosmetics Act, 1940)


    • Manufacturing License
    • Wholesale License
    • Retail License
    • Loan License (for outsourcing manufacturing)
    • Import License (for foreign medicines)

  2. GST Registration – Mandatory for taxation and interstate sales.
  3. FSSAI Registration – Required if dealing with nutraceuticals or dietary supplements.
  4. Trademark & Patent Registration – Protects brand identity and intellectual property.
  5. Import Export Code (IEC) – For companies engaged in pharma exports/imports.

Frequently Asked Questions (FAQs)

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What is the minimum investment required to open a pharmaceutical company in India?

The minimum investment depends on the type of pharma business you plan to set up:

  • Retail pharmacy/wholesale distribution – ₹5–10 lakhs (primarily for licenses, shop setup, and inventory).
  • Small-scale manufacturing unit – ₹2–5 crores (including land, plant, machinery, and approvals).
  • Marketing company (without manufacturing) – ₹10–20 lakhs (mainly for licenses, branding, and distribution network).

The costs vary depending on location, scale, and whether you plan to export.

Which business structure is best for a pharmaceutical startup in India?

The Private Limited Company structure is considered the most suitable for pharmaceutical startups because:

  • It provides limited liability protection to the founders.
  • It is preferred by investors and VCs, making it easier to raise funds.
  • It ensures better compliance and credibility with regulators, suppliers, and customers.

For foreign companies, setting up an Indian subsidiary is often the best route to enter the Indian pharma market.

How long does it take to register a pharma company?

Registering a pharmaceutical company in India through the SPICe+ process generally takes 10–15 working days, provided all documents are in order.

Do I need separate licenses for manufacturing and marketing drugs?

Yes. The licenses are different depending on your business model:

  • Manufacturing License: Required if you are producing drugs and medicines.
  • Marketing License: Required for companies that outsource production but handle branding and distribution.
  • Wholesale/Retail License: Required for distribution or retail pharmacy operations.

So, you must apply for the specific license(s) that match your pharma company’s scope of operations.

How can I protect my pharma brand name and logo from competitors?

To secure your brand identity in the competitive pharma market, you should:

  1. Register a Trademark: Protects your brand name, logo, and tagline under the Trademarks Act, 1999.
  2. Patent Registration: If you’ve developed a new drug formula or process, apply for patents to secure exclusivity.

Copyright Protection: For marketing materials, packaging, and designs.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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How to Register a Production House or Media Company in India in 2025?

How to Register a Production House or Media Company in India in 2025?

Starting a production house or media company in India can be a thrilling venture- whether you dream of making films, binge-worthy web series, catchy ad campaigns, soulful music videos, or the next big OTT hit, the possibilities are endless.

But here’s the truth- great ideas alone don’t pay the bills or win investor trust. In this industry, your creative spark must be backed by strong legal, financial, and operational groundwork.

From choosing the right business structure to securing your brand, protecting your scripts, and joining the right industry bodies, every step you take builds the foundation for a production house that’s not only creative but also credible and future-ready.

This blog walks you through the legal, financial, and operational requirements for registering and running a production house in India.

Table of Contents

Choose the Right Business Structure for Your Film Production Company

Your first decision is choosing the right legal entity. This impacts ownership, liability, taxation, funding, and compliance. Here’s how the most common options compare:

Private Limited Company

  • Best choice for media companies aiming to scale, raise investment, or partner with OTT platforms.
  • Offers limited liability protection, higher brand credibility, and Foreign Direct Investment (FDI) eligibility.
  • Easier to bring in shareholders and attract funding from production partners or venture capital.

Register Your Private Limited Company Online in Just a Few Steps with Razorpay Rize. 

LLP (Limited Liability Partnership)

  • Suitable for small-to-mid scale production outfits.
  • Combines the flexibility of a partnership with limited liability protection.
  • Compliance is lower than that of a Private Limited Company but is still not as investor-friendly.

Get LLP Registration Done Quickly & Hassle-Free with Razorpay Rize

Partnership Firm

  • Easy to set up but offers unlimited liability, meaning partners’ personal assets may be at risk.
  • Limited in terms of scalability and investor trust.

While an OPC (One Person Company) works well for solo ventures, it restricts ownership expansion and isn’t ideal for scaling or attracting investors. A Sole Proprietorship, though simple to set up, comes with unlimited personal liability and lacks credibility. So, both structures are generally not preferred for a growing film or media business aiming for scalability, credibility, and investor interest.

Register Your Sole Proprietorship Online in a Few Easy Steps with Razorpay Rize!

Register the Production House as a Legal Entity

Once you choose your structure, follow these steps:

  1. Obtain DSC for directors/partners.
  2. Reserve your company name via the MCA portal.
  3. Draft and file the MoA & AoA (for companies) or LLP Agreement.
  4. File incorporation documents with the MCA.
  5. Receive Certificate of Incorporation (COI), PAN, and TAN.

Register the Brand and Logo as a Trademark

Your production house’s name and logo are powerful brand assets that set you apart in a competitive entertainment industry. Protecting them early ensures that no one else can misuse your identity or ride on your hard-earned reputation.

Steps:

  1. Trademark Search – Visit the IP India portal to check if a similar name or logo already exists.
  2. Class Selection – Most media companies file under Class 41 (entertainment services) and Class 38 (broadcasting), but additional classes may apply based on your services.
  3. File TM Application Online – Submit your application with the required documents and fees.
  4. Examination & Objections – The Trademark Registry will review your application; be prepared to respond to any objections or clarifications.
  5. Final Registration – Once approved, your trademark is valid for 10 years and can be renewed indefinitely, ensuring long-term brand protection.

Get Copyright Registration for Original Works

In the media business, your creative works- films, scripts, songs, storyboards, promotional videos- are valuable. Copyright registration legally secures these works, giving you the exclusive right to reproduce, distribute, adapt, and monetise them.
Steps: 

  • Apply online at the Copyright Office website.
  • Submit the required documents (work details, creator’s info, soft copies).
  • Pay the applicable fee.
  • Wait for scrutiny and the issuance of the certificate.

Join a Film Producers Association

Organisations like the Indian Motion Picture Producers' Association (IMPPA), Film Producers Association of India (FPAI), and Western India Film Producers Association (WIFPA) provide legal backing, industry recognition, and a platform for networking.

Benefits include:

  • Access to legal advice and dispute resolution services
  • Opportunities for co-productions and collaborations
  • Industry events and workshops to stay updated on trends and regulations
  • Collective bargaining power and advocacy on industry matters

To join, submit your company incorporation documents and proof of work (films, scripts, or projects). Complete the membership application process as per the association’s guidelines and pay the prescribed membership fees. 

Open a Current Account in Your Company’s Name

A current account is essential for managing your production house’s day-to-day financial transactions smoothly and professionally. Unlike a regular savings account, a current account offers higher transaction limits and facilities tailored for businesses, such as overdraft options and multiple signatories.

Documents Required:

  • Certificate of Incorporation (COI)
  • PAN card of the company
  • Memorandum of Association (MoA) and Articles of Association (AoA)
  • KYC documents of directors (identity and address proof)
  • Proof of registered office address

Consider banks that offer robust digital banking platforms, ease of fund transfers, and competitive transaction charges. Also, check for value-added services like merchant accounts for receiving payments, foreign currency transactions, and working capital loans.

Get GST Registration and Import Export Code (IEC)

For production houses and media companies, GST registration is mandatory if your annual turnover exceeds the prescribed threshold (₹20 lakh or ₹40 lakh, depending on your state). GST compliance helps you claim input tax credits, maintain transparency, and avoid legal penalties.

If you work with international clients, monetise content on platforms like YouTube, or export your services globally (e.g., selling films or digital content overseas), obtaining an Import Export Code (IEC) is essential. IEC is issued by the Directorate General of Foreign Trade (DGFT) and acts as a license to conduct cross-border trade legally.

How to Apply:

  • GST Registration can be done online via the GST portal by submitting PAN, business details, and bank information.
  • IEC application is filed online on the DGFT portal, linked to your PAN, with processing typically completed within a few days.

Get Music, Scripts, and Third-Party IP Licenses

In the media and production industry, using music, scripts, or other creative content created by others requires proper licensing to avoid legal issues.

Common Types of Licenses:

  • Sync License: Allows you to synchronise music with visual media like films or ads.
  • Master License: Grants permission to use the original sound recording.
  • Adaptation Rights: Needed if you plan to remake, translate, or modify existing works.

Key Licensing Bodies in India are IPRS (Indian Performing Right Society) & PPL (Phonographic Performance Limited).

Protect Digital Content and Manage Online Rights

In today’s digital age, safeguarding your media company’s content online is as important as creating it. With piracy and unauthorised sharing rampant, implementing strong digital protection measures helps you retain control and monetise your work effectively.

Here are a few ways you can protect and manage your digital content: 

  • Digital Rights Management (DRM): Technology that restricts how digital content is accessed, copied, or shared, ensuring only authorised users can view or distribute your work.

  • Content ID Systems: Platforms like YouTube use automated systems to identify copyrighted content and manage its use, including monetisation or takedown.

  • Watermarking and Metadata Tagging: Embedding invisible or visible markers in your videos or music that trace the content back to you, deterring theft and helping prove ownership.
  • DMCA Takedown Notices: Legal requests to platforms to remove unauthorised copies of your content.

Frequently Asked Questions (FAQs)

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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

Register your business
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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What is the minimum number of directors required to register a film production company in India?

  • For a Private Limited Company, the minimum is 2 directors.
  • For an LLP, at least 2 partners are required.

What is the validity of the certificate of incorporation for a film production company in India?

The Certificate of Incorporation (COI) does not expire. It is a lifetime proof of your company’s legal existence unless the company is dissolved or struck off.

What is the average time taken to complete the registration process for a film production company in India?

Typically, it takes about 7 to 15 working days from filing the incorporation documents to receiving the Certificate of Incorporation, depending on the completeness of documents and MCA processing times.

What documents are required to register a film production company in India?

  • Identity and Address Proof of directors/partners (Aadhaar, Passport, Voter ID, Driving License)
  • PAN Card of directors/partners
  • Proof of Registered Office Address (rental agreement or utility bill)
  • No Objection Certificate (NOC) from the property owner (if rented)
  • Passport-sized photographs of directors/partners
  • Digital Signature Certificate (DSC)

What are the risks of not registering a trademark or copyright?

  • Loss of exclusive rights over your brand name, logo, or creative works
  • Increased risk of brand infringement or piracy by competitors
  • Difficulty in legally enforcing your ownership and protecting your content
  • Potential loss of business reputation and revenue from unauthorised use

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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Do You Need a CA to Register a Company in India?

Do You Need a CA to Register a Company in India?

Starting a company in India is an exciting journey, but it comes with a maze of legal and financial formalities. One common question entrepreneurs often ask is: Do I need a Chartered Accountant (CA) to register my company? The short answer is- not necessarily. However, understanding when and why to involve a CA can save you time, money, and compliance headaches down the road.

Let’s break down the role of a CA in company registration and explore whether you need one for your business setup.

Table of Contents

Is CA Required for Company Registration?

Technically, a chartered accountant is not mandatory to register a company in India. The Ministry of Corporate Affairs (MCA) provides an online portal that allows founders to complete the registration process on their own.

However, company registration involves more than just filing forms- it requires compliance with various legal and financial requirements. While you can handle these steps yourself, professional guidance from a CA can ensure accuracy and avoid costly mistakes.

Who is a CA (Chartered Accountant)?

A Chartered Accountant (CA) is a certified finance expert trained in areas such as accounting, taxation, auditing, and corporate laws. They help businesses navigate complex financial landscapes and comply with statutory norms.

Beyond technical know-how, CAs translate rules into business action. They design accounting systems and controls, prepare accurate financial statements, interpret tax laws (income tax, GST, transfer pricing and international tax issues), and conduct statutory and internal audits to reduce risk. They also support compliance tasks such as preparing ROC filings, tax returns, GST returns, and maintaining books in line with applicable standards.

For startups and MSMEs, they often act as a de facto finance team, building financial models for fundraising, advising on the optimal business structure, preparing due diligence packs for investors, or structuring transactions to be tax-efficient and legally sound.

Why Hire a CA While Setting Up a Company?

Hiring a CA during your company’s setup offers end-to-end support, including:

  • Selecting the right company type (Private Ltd, LLP, Sole Proprietorship, etc.) based on your goals and tax implications

  • Handling registrations like PAN, TAN, GST, and Certificate of Incorporation (COI)

  • Drafting key documents such as the Memorandum of Association (MOA) and Articles of Association (AOA)

  • Ensuring tax compliance right from the start

  • Setting up your accounting system tailored to your business

  • Preparing financial statements and projections that appeal to investors and lenders

In short, a CA simplifies the entire process and helps lay a solid foundation for your business growth.

The Legal Requirements for Company Registration

Under the Companies Act, 2013, company registration involves the following key legal steps:

  • Selecting your business structure

  • Obtaining a Digital Signature Certificate (DSC) for directors

  • Filing the SPICe+ (Simplified Proforma for Incorporating Company electronically Plus) form with the MCA

  • Preparing and submitting the Memorandum of Association (MOA) and Articles of Association (AOA)

  • Applying for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for tax purposes

While none of these steps legally require a CA, professional guidance can help avoid errors, delays, or non-compliance issues that could cost you in penalties or missed opportunities.

Benefits of Hiring a CA for Company Registration

  • Expert handling of complex regulatory and tax matters
  • Reduced chances of filing errors and rejections
  • Better financial and tax planning from day one
  • Time savings and peace of mind

That said, if you decide not to hire a CA, you can always use online platforms that provide comprehensive company registration services, guiding you through each step seamlessly and at competitive prices.

When is a CA Essential for Company Registration?

While not mandatory, involving a CA becomes essential in specific situations such as:

  • Registering complex entities like Limited Liability Partnerships (LLPs) registration, sole proprietorship registration companies with foreign directors
  • Preparing detailed financial projections and business plans for funding
  • Ensuring strict tax and GST compliance, especially if your business deals with multiple states or international transactions
  • Handling annual compliances post-registration, including audits and tax filings

In such cases, a CA’s expertise is crucial to keep your business compliant and financially sound.

Can You Register a Company Without a CA?

Absolutely! Company registration is possible without a CA, especially through the MCA’s online portal designed for entrepreneurs to file their incorporation documents directly. The process has been simplified over the years, making it more accessible than ever.

However, registering without professional help means you need to be very thorough with legal and financial nuances. Using an online platform that manages the end-to-end registration process can be a smart alternative- these platforms often offer packages that include form filing, document drafting, and government liaison, all without the higher fees of a traditional CA.

Frequently Asked Questions (FAQs)

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Register your business
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Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

Register your business
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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Do freelancers need to register a company in India?

No, freelancers in India do not need to register a company to work legally. You can operate as an individual under your own name using your PAN card and file your income tax returns as a self-employed professional.

What does a CA do for a company?

A Chartered Accountant (CA) provides end-to-end financial and compliance services for a company, including:

  • Choosing the right business structure during setup
  • Company incorporation and registrations (PAN, TAN, GST, etc.)
  • Bookkeeping and accounting as per legal standards
  • Tax planning and filing (Income Tax, GST)
  • Statutory audits and financial reporting
  • Advising on cost control, cash flow, and budgets
  • Assisting in fundraising by preparing investor-ready financials
  • Ensuring compliance with corporate laws under the Companies Act, 2013

In short, a CA ensures that your business remains financially healthy, compliant, and investor-ready.

Which CA is highly paid?

The highest-paid Chartered Accountants in India are usually those who:

  • Work in big consulting firms (like the Big 4- Deloitte, PwC, EY, KPMG) in senior positions
  • Serve as Chief Financial Officers (CFOs) or Finance Heads in large corporations
  • Specialise in niche, high-demand areas such as:
    • International taxation
    • Mergers & acquisitions (M&A) advisory
    • Forensic auditing
    • Risk and compliance management for large banks and multinationals

Build a strong independent practice serving high-net-worth individuals, big corporations, or startups in funding and IPO stages

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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How to Convert a One Person Company (OPC) to LLP in India

How to Convert a One Person Company (OPC) to LLP in India

As India's entrepreneurial ecosystem evolves, founders now have access to a range of legal business structures tailored to different growth stages and ownership goals. From sole proprietorships and partnerships to private limited companies and, more recently, One Person Companies (OPCs) and Limited Liability Partnerships (LLPs) are among the most popular. 

While a One-Person Company (OPC) is ideal for solo entrepreneurs starting small, many founders later seek more flexibility, lower compliance, and shared ownership, making a Limited Liability Partnership (LLP) an attractive alternative.

If you’re planning to scale or bring in partners, converting your OPC to an LLP could be the right move. This blog walks you through the concept, legal framework, and procedure for converting an OPC to an LLP in India.

Table of Contents

Limited Liability Partnership (LLP)

An LLP is a hybrid business structure that combines the benefits of a company (limited liability) with the flexibility of a partnership. Some key features include:

  • Minimum two partners required
  • Liability of partners is limited to their contribution
  • No minimum capital requirement
  • Fewer compliance requirements than a company
  • Separate legal identity from its partners

One Person Company (OPC)

Introduced under the Companies Act, 2013, an OPC allows a single individual to operate a corporate entity. It offers:

  • Limited liability
  • Separate legal identity
  • Easier fundraising compared to a sole proprietorship
  • Greater credibility in business dealings

However, OPCs face limitations like:

  • Restrictions on fundraising
  • Mandatory conversion if turnover exceeds ₹2 crore or capital exceeds ₹50 lakh
  • Cannot have more than one member

Conversion of OPC to LLP

OPC conversion to LLP is governed by the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. While direct provisions for OPC-to-LLP conversion are not explicitly provided, companies (including OPCs) can be converted into LLPs under Section 366 of the Companies Act and the Second Schedule of the LLP Act.

Understanding the Legal Provisions for Conversion of OPC to LLP

The legal path for converting an OPC to an LLP involves:

  • Section 366 of the Companies Act, 2013 (deals with companies being converted into LLPs)
  • Second Schedule of the LLP Act, 2008 (provides the procedure for such conversions)
  • Form FiLLiP and Form 18 under the LLP Rules, 2009

Note: Prior approval from the Registrar of Companies (ROC) is mandatory.

Related Read: ROC Compliance Calendar for 2025–2026

Eligibility Conditions and Compliance Steps for Conversion

To be eligible for conversion:

  • Before conversion, the OPC must have at least two shareholders (LLPs require a minimum of two partners).
  • No active defaults in filing annual returns, income tax, or other statutory dues.
  • All secured creditors (if any) must give their consent.
  • The company should not have applied for winding up or struck-off status.

Compliance steps include:

  1. Holding a Board Meeting and passing a resolution for conversion
  2. Increasing the number of members/directors to meet LLP requirements
  3. Obtaining name approval through RUN–LLP or FiLLiP form
  4. Filing Form FiLLiP and Form 18 with ROC
  5. Executing an LLP Agreement within 30 days of incorporation

Looking to switch from OPC to LLP? Get professional help for a smooth and compliant business conversion with Razorpay Rize's LLP Registration Service.

Documents Furnished along with Form 18

Form 18 is the declaration for conversion and must be supported with:

  • Board resolution for conversion
  • Consent of all shareholders
  • Statement of assets and liabilities certified by a CA
  • List of creditors and their consent
  • Latest income tax return acknowledgement
  • Copy of PAN card and Aadhaar of all proposed partners
  • Address proof of the registered office of the LLP
  • NOC from the property owner (if rented office)

Procedure for Conversion of OPC to LLP

Here’s a step-by-step breakdown:

  1. Board Resolution: Approve the conversion plan and authorise directors to file the necessary forms.

  2. Increase Number of Members: Since an LLP requires at least two partners, the OPC must first induct another shareholder.

  3. DIN & DSC: Ensure all partners have a Director Identification Number (DIN) and Digital Signature Certificate (DSC).

  4. Name Approval: Apply for name reservation using RUN–LLP or through FiLLiP.

  5. Form FiLLiP Filing: File FiLLiP with ROC for incorporating the LLP.

  6. Attach Form 18: While filing FiLLiP, attach Form 18 with the required documents.

  7. Certificate of Incorporation: On approval, the ROC will issue a Certificate of Incorporation for the LLP.

  8. Execute LLP Agreement: Draft and file the LLP Agreement within 30 days.

  9. Apply for PAN, TAN & GST: Update statutory registrations with new LLP details.

  10. Close OPC Bank Account & Update Records: Close existing bank accounts of OPC and update stakeholders.

Frequently Asked Questions (FAQs)

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Register your Business starting at just 1,499 + Govt. Fee

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Why convert an OPC into an LLP?

Converting to an LLP offers greater flexibility, allows multiple partners, reduces compliance burden, and enables easier capital infusion, making it suitable for scaling beyond a single founder.

Is it mandatory to get creditor consent for conversion?

Yes. Obtaining written consent from creditors is required, as their rights could be affected during the conversion process.

Can an OPC with outstanding debts be converted into an LLP?

Yes, but all creditors must be informed, and their no-objection certificates (NOCs) must be secured. The LLP will assume all debts and liabilities of the OPC post-conversion.

Will the new LLP retain the OPC’s assets and liabilities?

Yes. Upon conversion, all assets, liabilities, obligations, and agreements of the OPC automatically vest in the LLP.

Do tax implications arise during conversion?

If the conversion meets certain conditions under the Income Tax Act (e.g., continuity of business and ownership), it can be tax-neutral. Otherwise, capital gains tax or other liabilities may apply. It’s advisable to consult a tax expert.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
Certificate of Commencement of Business: A Complete Guide

Certificate of Commencement of Business: A Complete Guide

Starting a business in India involves more than just registering a company name and opening a bank account. One of the most important legal steps for companies with share capital is obtaining a Certificate of Commencement of Business, as mandated by the Companies Act, 2013.

This certificate ensures that the company has met all preliminary legal requirements and is authorised to begin operations. It also helps maintain transparency, prevent fraudulent incorporations, and validate a company’s legal status in the eyes of regulators and stakeholders.

In this blog, we’ll walk you through everything you need to know about the Certificate of Commencement of Business- including its definition, significance, legal background, eligibility, documents required, filing procedure, and the consequences of non-compliance.

Table of Contents

What is a Certificate of Commencement of Business?

The Certificate of Commencement of Business is a mandatory legal document that certain companies in India must obtain before they start their business activities. It is issued by the Registrar of Companies (ROC) under the Companies Act of 2013, and applies specifically to public and private companies limited by shares.

Beyond legal compliance, this certificate also plays a big role in establishing trust. It shows investors, banks, and stakeholders that your company has met all foundational requirements and is operating within the bounds of the law. It also helps prevent fraudulent incorporations by ensuring that companies follow due process from the start.

Significance of Commencement of Business Certificate

The Certificate of Commencement of Business serves multiple purposes:

  • Legal Authorisation: It acts as formal approval for a company to start its operations.
  • Regulatory Compliance: Ensures adherence to the provisions of the Companies Act of 2013.
  • Prevention of Fraud: Minimises the risk of shell companies or fraudulent incorporations.
  • Credibility: Enhances trust with investors, financial institutions, and stakeholders.
  • Access to Funds: Allows the company to exercise borrowing powers and raise capital legally.

Commencement of Business under Companies Act 2013 – Old Act and Procedure

Under the Companies Act, 2013, companies with share capital cannot begin operations immediately after incorporation. While companies without share capital may commence business right after receiving the Certificate of Incorporation, those with share capital must secure a Certificate of Commencement of Business as per Section 11 of the Act and Rule 24 of the Companies (Incorporation) Rules, 2014.

This requirement is applicable to all newly formed public and private companies with share capital, highlighting the importance of meeting initial capital commitments and completing registration protocols before beginning operations or seeking external financing.

Position Under Erstwhile Companies Act, 1956

Previously, the Companies Act of 1956 governed the commencement of business for companies in India. Under this law, only public companies with share capital were required to obtain a Certificate of Commencement of Business. Private companies, on the other hand, were exempt and could begin operations immediately after incorporation.

The 2013 Act introduced more stringent rules, bringing private companies with share capital under the same requirements to enhance transparency and accountability.

Certificate of Commencement of Business Under Companies Act 2013

To obtain this certificate under the current law, companies must meet two critical requirements:

  1. Declaration by a Director: The director must declare that every subscriber to the memorandum has paid for the shares they subscribed to.
  2. Registered Office Verification: The company must file verification of its registered office with the ROC.

Only after fulfilling these conditions can the company apply for the certificate and begin lawful operations.

Eligibility Criteria for Commencement of Business Certificate

The Certificate of Commencement of Business (COB) is mandatory for the following categories of companies:

  • Companies Incorporated on or after November 2, 2018: Any company registered after this date is required to obtain the COB Certificate within 180 days from the date of incorporation.
  • Companies with Share Capital: Regardless of industry or business type, all companies with share capital must apply for and secure the COB Certificate before starting operations.

Which Company is Not Required to File a Certificate of Commencement of Business?

The following categories of companies are exempt from filing for the Certificate of Commencement of Business. These include:

  • Companies Incorporated Before November 2, 2018: This exemption applies to companies that were established prior to the implementation of the Companies (Amendment) Ordinance, 2018, specifically before November 2, 2018.
  • Companies Registered After November 2, 2018, Without Share Capital: Companies that were incorporated after November 2, 2018, but do not have a share capital structure, meaning they haven’t issued any shares, are also exempt from obtaining the COB Certificate.

Documents Required to Obtain Commencement of Business Certificate in India

To apply for the Certificate of Commencement of Business, companies must submit the following documents:

  • Form INC-20A: A declaration filed by a director.
  • Board Resolution: Approving the commencement of business.
  • Proof of Capital Subscription: Evidence that all subscribers have paid their share value.
  • Registered Office Proof: Utility bill or rental agreement confirming office address.
  • Certificate of Incorporation: Issued by the ROC.

Application Process for Commencement of Business Certificate

Here’s a detailed walkthrough:

  1. Log in to the MCA Portal
    Visit the official website of the Ministry of Corporate Affairs (MCA). Log into the MCA portal using your registered credentials (User ID and Password). If you are not registered yet, you must create an account first.
  2. Navigate to the e-Filing Section
    After logging in, go to the 'MCA Services' tab and select the 'e-Filing' option. This section contains all the necessary forms and submission options for company-related filings.
  3. Download and Fill out Form INC-20A
    Locate and download Form INC-20A- the specific form used for the Declaration of Commencement of Business. Carefully fill in all the required details, such as company information, paid-up share capital details, and confirmation of compliance with registration requirements.
  4. Select the Correct Corporate Identification Number (CIN)
    Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
  5. Attach the Required Documents
    Upload the necessary supporting documents, which typically include:
    • The director’s declaration that the subscribers have paid all share capital
    • Proof of registered office verification (such as a utility bill, rent agreement, or ownership document)
  6. Select the Correct Corporate Identification Number (CIN)
    Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
  7. Submit the Form and Pay the Prescribed Fee
    Once the form and attachments are ready, submit them through the portal. Pay the applicable government fee based on your company's authorised share capital. The payment can usually be made online through various options available on the MCA portal.
  8. Receive the Service Request Number (SRN)
    After successful submission, the system will generate a Service Request Number (SRN). Save this number carefully, it will help you track the status of your application and any future correspondence regarding your Certificate of Commencement of Business.

Time Limit for Filing the Declaration of Commencement of Business

As per Section 11 of the Companies Act, 2013, the declaration must be filed within 180 days from the date of incorporation. Failure to do so can lead to:

  • Penalties for the company and its officers.
  • Potential strike-off from the ROC register

Form INC-20A

Form INC-20A is the declaration form filed to confirm the commencement of business. It must be signed by a director and certified by a professional (CA/CS/CWA). The form includes:

  • Company details
  • Paid-up capital confirmation
  • Registered office address verification

Fee For Filing Form 20A and Receiving Commencement of Business Certificate

The fee for filing Form INC-20A depends on the company's authorised share capital:

Up to ₹1,00,000 ₹200
₹1,00,001 to ₹4,99,999 ₹300
₹5,00,000 to ₹24,99,999 ₹400
₹25,00,000 to ₹99,99,999 ₹500
₹1 crore and above ₹600

Consequences of Not Filing Certificate of Commencement of Business

Failing to file Form INC-20A within the 180-day window leads to:

  • Penalty of ₹50,000 for the company.
  • ₹1,000 per day penalty for each defaulting officer, up to ₹1 lakh.
  • ROC may strike off the company’s name if it remains inactive under Section 11(3).

Conclusion

Obtaining the Certificate of Commencement of Business is a critical step that validates your company's readiness to operate in India’s regulatory landscape. For public and private companies with share capital, understanding and complying with this requirement ensures legal clarity, business credibility, and uninterrupted growth. By following the correct process, submitting the necessary documents, and meeting deadlines, companies can avoid heavy penalties and begin their entrepreneurial journey on the right foot.

Frequently Asked Questions

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Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

Register your business
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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Which Company Needs a Certificate of Commencement of Business?

All companies incorporated after November 2, 2018, are required to obtain a Certificate of Commencement of Business.

How to Download Certificate of Commencement of Business?

You can download the Certificate of Commencement of Business after your application (Form INC-20A) is approved.Here’s how:

  1. Login to the Ministry of Corporate Affairs (MCA) portal.
  2. Go to the MCA Services section.
  3. Click on View Public Documents.
  4. Enter your company’s CIN (Corporate Identification Number).
  5. Look for the approved Form INC-20A and download the certificate attached to the filing.

What is the Difference Between Incorporation and Commencement Certificate?

  • Certificate of Incorporation: This is issued when a company is legally created. It proves the company exists as a legal entity under the Companies Act.
  • Certificate of Commencement of Business:
    This is issued after the company fulfills specific post-incorporation requirements (like depositing the minimum share capital and verifying the registered office). It authorises the company to start business operations and borrow money.

Why is a Commencement Certificate Required?

A Commencement Certificate is important because:

  • It ensures the company has met its initial legal and financial commitments.
  • It prevents fraudulent incorporations by making sure real business intent is established.
  • It validates the company’s status with regulators, banks, investors, and other stakeholders.
  • Without it, a company cannot legally start business activities or raise funds, and risks penalties or even strike-off by the Registrar of Companies (ROC).

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
Addition and Removal of Partners in Partnership Firm

Addition and Removal of Partners in Partnership Firm

Adding or removing partners is a common occurrence in partnerships and Limited Liability Partnerships (LLPs). The process involves several legal and procedural steps that must be carefully followed. Changes in partnership composition impact the firm's registration, capital contribution, profit sharing, and management.

This article provides a comprehensive guide on how to add or remove a partner from a partnership, including the eligibility criteria, procedures, documentation, and key considerations. Whether you're looking to bring in a new partner or remove a business partner, understanding the legal framework is crucial.

Table of Contents

What is meant by Addition of Partner?

The addition of a partner involves introducing a new member into an existing partnership firm. This decision requires the unanimous consent of all current partners unless the partnership agreement stipulates otherwise. The incoming partner must possess the legal capacity to enter into a contract, as outlined in the Indian Contract Act, 1872. New partners bring specialised skills and industry expertise, enhancing operational efficiency. Their networks open doors to new business opportunities and markets. Overall, this flexibility enables firms to bring in fresh capital, skills, and expertise to support growth and expansion.

Process Of Addition Of Partners

The process of introducing a new partner involves several key steps:

  1. Agreement on terms and conditions: The existing and incoming partners must mutually agree on aspects such as profit sharing ratio, capital contribution, roles and responsibilities.
  2. Execution of deed of admission: A supplementary agreement containing the terms of admission should be drafted and signed by all partners, including the new entrant.
  3. Capital contribution: The incoming partner must bring in the agreed capital.
  4. Intimation to Registrar: Form 3 along with the prescribed fee should be filed with the Registrar within 30 days of the change.
  5. Notification to stakeholders: The firm must inform its bank, tax authorities, and vendors/suppliers about the new partner's admission.

Documents Requirement For Addition of Partners

The following documents are typically required for the addition of a partner:

  • A Digital Signature Certificate (DSC) is necessary for e-filing with the Registrar of Companies (ROC).
  • Form 3 must be filed to update the LLP agreement, reflecting the new partner’s inclusion.
  • Form 4 is used to notify the ROC about the appointment and obtain the partner’s consent.
  • A Limited Liability Partnership Identification Number (LLPIN) is essential for all filings.
    These documents ensure the smooth onboarding of a new partner while maintaining regulatory compliance under the LLP Act, 2008. of Admission/Supplementary Partnership Deed

Advantages Of Adding Partners in Partnership Firms

The introduction of a new partner offers several benefits to a partnership firm:

  • Capital infusion to support business growth and expansion
  • Fresh expertise and skills to enhance the firm's capabilities
  • Shared responsibilities and decision-making
  • Potential for increased profitability and market share

What is meant by Removal of Partner?

Partner removal in a partnership firm or LLP occurs when an existing partner exits, either voluntarily or by a decision of other partners, as per the partnership agreement. The process must comply with the Indian Partnership Act, 1932, which allows removal only if expressly stated in the agreement and with the consent of all partners (except the one being removed). In LLPs, removal must also adhere to the Limited Liability Partnership Act, 2008 and LLP agreement terms.

Why Removal of a Partner May Become Necessary?

The removal of a partner may become necessary due to several reasons:

  • Voluntary retirement or withdrawal
  • Breach of partnership agreement or trust
  • Incapacity or inability to perform duties
  • Misconduct or negligence detrimental to the firm
  • Insolvency or bankruptcy
  • Death of the partner

Steps Involved In Removing a Partner

The process of removing a partner typically involves:

  1. Serving notice: A notice of the proposed removal, specifying the grounds, should be served on the concerned partner.
  2. Considering reply: The concerned partner must be allowed to submit a response to the notice.
  3. Majority approval: Obtain at least 75% approval from the remaining partners through a resolution.
  4. Executing deed of retirement/reconstitution: The change in partnership should be documented through a formal deed.
  5. Intimating Registrar: Form 4 with the applicable fee should be filed with the Registrar within 30 days.
  6. Settlement of accounts: The outgoing partner's accounts should be settled as per the partnership deed or mutual agreement.

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Section 31: Introduction of a New Partner

Section 31 of the Indian Partnership Act, 1932, governs the introduction of a new partner into an existing firm. It stipulates that a new partner can only be admitted with the consent of all existing partners unless the partnership agreement provides otherwise.

Rights and Liabilities of a New Partner

Upon admission, the new partner becomes entitled to share in the profits and is liable for the losses and debts of the firm from the date of their entry, unless agreed otherwise. They have the right to access the firm's books of accounts and to participate in the management of the business. However, they are not liable for any acts of the firm before their admission, unless they expressly assume such liability.

Section 32: Retirement of a Partner

Rights of Outgoing Partner

Section 36: Right to Conduct a Competing Business

Unless restricted by an agreement, a retiring partner has the right to carry on a business competing with that of the firm and to advertise such business. However, they cannot use the firm's name or represent themselves as carrying on the firm's business.

Right To Share

The retiring partner is entitled to receive their share of the firm's assets, including goodwill, as per the terms of the partnership agreement or mutual understanding. They also have the right to share in the profits of the firm until the date of their retirement.

Section 37: Entitled to Claim

The outgoing partner has the right to claim their due share from the continuing partners. If not paid outright, they are entitled to interest at 6% per annum on the amount due.

Liabilities of Outgoing Partner

Section 32(3) and (4): Liability to the third party

The retiring partner remains liable to third parties for all acts of the firm until public notice of their retirement is given. They are also liable for any obligations incurred by the firm before their retirement unless discharged by agreement.

Section 32(2): Agreement of Liability

The retiring partner and the continuing partners may agree to discharge the retiring partner from all liabilities of the firm, but such an agreement is not binding on third parties unless they are aware of it.

Section 33: Expulsion of a Partner

A partner may be expelled from the firm by a majority of partners if such power is conferred by an express agreement between the partners. The power to expel must be exercised in good faith. Unless agreed otherwise, the expelled partner can claim the value of their share as if the firm were dissolved on the date of expulsion.

Section 34: Insolvency of a Partner

If a partner is adjudicated as insolvent, they cease to be a partner from the date of the insolvency order. Their share in the firm vests with the Official Assignee or Receiver appointed by the court. The firm is dissolved unless the solvent partners buy the insolvent partner's share and continue the business with proper intimation.

Section 35: Death of a Partner

In the event of a partner's demise, their legal heirs or executors step into their shoes. The firm dissolves from the date of death unless the partnership deed provides for continuity. The deceased partner's share in the firm's assets, goodwill, and profits is settled as per the partnership agreement or mutual understanding.

Section 38: Continuing Guarantee Revocation

The estate of a deceased or insolvent partner, an expelled or retired partner, is not liable for the firm's debts contracted after their death, insolvency, expulsion or retirement. A continuing guarantee given to a firm or a third party in respect of the firm's transactions is revoked as to future transactions by any change in the firm's constitution.

Conclusion

Changes in the composition of a partnership firm through the addition or removal of partners are significant events. While new partners can infuse capital and expertise, the exit of partners due to retirement, expulsion, insolvency or death can impact the firm's continuity and harmony. The Partnership Act provides a framework for inducting and removing partners. The terms of entry and exit should be clearly documented in the partnership agreement to minimise disputes. Intimations to the Registrar and third parties should be made promptly. With some foresight and planning, partnership firms can manage changes in their constitution smoothly and continue their business journey.

Frequently Asked Questions

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

How do I add and remove a partner in LLP?

A new partner can be added to an LLP with the consent of all existing partners. Form 4 along with the supplementary LLP agreement admitting the new partner should be filed with the Registrar within 30 days. For removing a partner, Form 4 along with the supplementary agreement removing the partner should be filed.

Can we add a new partner in LLP?

Yes, a new partner can be admitted to an LLP with the consent of all existing partners, unless the LLP agreement provides otherwise. The admission should be documented through a supplementary agreement and Form 4 should be filed with the Registrar.

How do you remove and add a new partner in a partnership firm?

The best name for your company is one that aligns with your brand identity, business operations, and legal requirements. It should be simple, professional, and free from misleading or offensive words.

Can you remove a partner from a company?

Yes, a partner can be removed from a partnership firm through retirement, expulsion, insolvency, death or dissolution of the firm, as per the provisions of the Partnership Act, 1932.

How do I remove a partner from a limited company?

A partner is associated with a partnership firm, not a limited company. To remove a director from a limited company, the procedures under the Companies Act, 2013 should be followed, which may involve passing a resolution in a general meeting.

How do I add a partner in a private limited company?

A private limited company has directors and shareholders, not partners. To appoint a director in a private limited company, the procedures laid down in the Companies Act, 2013 should be followed, which typically involve passing a board resolution and filing necessary forms with the Registrar of Companies.

How do I remove a partner from a general partnership?

A partner can be removed from a general partnership through retirement (with the consent of all other partners or as per the partnership agreement), expulsion (if such power is conferred by express agreement), insolvency, death or dissolution of the firm. The removal should be documented through a deed of retirement or reconstitution and intimated to the Registrar and third parties.

How do I add a partner to an existing partnership?

A new partner can be admitted to an existing partnership with the consent of all current partners unless the partnership agreement provides otherwise. The terms of admission should be agreed upon and documented through a supplementary agreement. The incoming partner must bring in the agreed capital contribution. Form 3 should be filed with the Registrar within 30 days of the change.

How do I add a partner in a private limited company?

A private limited company does not have partners. It has directors and shareholders. To appoint a director in a private limited company, the procedure laid down in the Companies Act, 2013 should be followed. This typically involves passing a board resolution and filing necessary forms with the Registrar of Companies.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
LLP Names Suggestion: Acceptable Name for Company or LLP

LLP Names Suggestion: Acceptable Name for Company or LLP

Choosing the right name for your Limited Liability Partnership (LLP) or company is a crucial step in business registration. Under the Companies Act 2013, your business name must comply with legal guidelines, ensuring it is unique, relevant, and free from restricted or misleading words. A well-chosen name enhances brand identity while meeting regulatory requirements.

The Registrar of Companies (ROC) approves names based on availability and adherence to naming rules. Hence, before finalising a company name, you must conduct a name availability check to avoid rejections.

Table of Contents

Rules for Selecting Company Name Under the Companies Act

When you select a company name, it must comply with the Companies Act to ensure uniqueness and legal approval. Here are the key rules to follow:

Avoid Similar or Identical Names

Your company name must not closely resemble an already registered business. The ROC conducts a company name check, and if the proposed name is found to be too similar to an existing one, it will be rejected. For example, if "GreenTech Solutions Pvt Ltd" is already registered, "GreenTech Solution Pvt Ltd" may be rejected due to similarity.

Restriction on Certain Words

You cannot use words that suggest a connection with the Central or State Government, local authorities, or government bodies, unless prior approval is obtained. For instance, names like "India National Bank Ltd" or "Government Infrastructure Pvt Ltd" require special permissions.

Prohibited Expressions

Some words and expressions are restricted under Rule 8B of the Incorporation Rules. You must seek approval from the Central Government before using them in your LLP or company name.

Mandatory Suffix for Entity Type

The company name must clearly indicate its legal structure.

A Brief About Acceptable Name for LLP

An acceptable LLP or company name in India consists of three key components. The Name Part that gives the business a unique identity, such as "Bright" in Bright Solutions LLP. The Object Part that reflects the company's activity, like "Solutions" indicating a service-based business. The Constitution Part that defines the legal structure, such as "LLP" in Bright Solutions LLP.

Name Part

The Name Part is the unique and distinguishable element of a company or LLP name. It must comply with the Companies Act 2013 or the LLP Act 2008 and should not be identical or deceptively similar to existing companies, LLPs, or registered trademarks within the same industry. The ROC verifies the name to ensure distinctiveness and prevent duplication.

For example, a name like Bluewave Technologies LLP is acceptable because it is unique and clearly identifiable. However, Bluewave Tech LLP may be rejected as it closely resembles an existing name. Similarly, GreenVista Textiles Private Limited is a valid name, but Green Vista Private Limited may be considered too similar to an existing business and could face rejection. Ensuring a distinct name that does not match or closely resemble an existing company improves the chances of approval.

Object Part

The Object Part in a company or LLP name defines its primary business activity. It must be clearly stated to indicate the company's purpose and ensure compliance with naming regulations.

If two companies have similar name parts but different object parts, both names may still be approved, as long as they belong to distinct industries. However, names without a clear object part or with generic words like "dash Private Limited" are too vague and may be rejected by the ROC because it does not specify what the company does.

Related Read: Difference Between LLP and Partnership

Examples of Common Object Parts in Company and LLP Names

Company Name Object Part Reason
AAA Trading Private Limited Trading Clearly defines that the business deals in trade
AAA Hospital Private Limited Hospital Indicates a healthcare-related business, different from “AAA Trading”
Bright Textiles LLP Textiles Specifies that the company operates in the textile sector
GreenVista Construction Pvt Ltd Construction Shows that the company deals with construction activities
Sun Pharma Ltd Pharmaceuticals Clearly states that the company is in the pharmaceutical industry

Constitution Part

The Constitution Part indicates the legal structure of the business. It must match the type of entity being registered, ensuring clarity in compliance and business operations. Here are the specific terms which are used for different entities:

  • Private Limited Company (Pvt Ltd) - For privately held businesses
  • One Person Company (OPC) - For single-owner companies
  • Limited Company (Ltd) - For publicly listed businesses
  • Limited Liability Partnership (LLP) - For partnership-based entities with limited liability

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Minimum Authorised Capital For Certain Words

When registering a company, using specific words in its name requires meeting minimum authorised capital requirements as per the Companies Act 2013. Words like "Corporation," "International," and "Industries" have higher capital requirements to ensure that only financially strong businesses use them. This helps maintain credibility and prevents misuse of these terms by companies with limited resources.

Before you apply to register a company name, verifying the capital requirements is essential to ensure compliance and avoid rejection. The table below outlines the required minimum authorised capital for specific words:

Word Minimum Authorised Capital Required
Corporation ₹5 Crore
International, Globe, Universal, Continental, Inter-Continental, Asiatic, Asia (as the first word) ₹1 Crore
Industries / Udyog ₹1 Crore
International, Globe, Universal, Continental, Inter-Continental, Asiatic, Asia (used within the name) ₹50 Lakhs
Hindustan, India, Bharat (as the first word) ₹50 Lakhs
Enterprises, Products, Business, Manufacturing ₹10 Lakhs
Hindustan, India, Bharat (used within the name) ₹5 Lakhs

When Will Companies House Refuse to Register a Company Name?

Companies House may reject a name if it does not comply with legal guidelines. Below are the key reasons why a company name may be refused:

  • Identical or Too Similar to an Existing Name: If the proposed name is the same or closely resembles an already registered company, it will be rejected.
  • Offensive or Illegal Names: Any name containing offensive, abusive, or illegal terms will not be approved.
  • Implying Government Affiliation: Names suggesting an association with the government, public authorities, or international organisations require special approval.
  • Use of Sensitive Words or Symbols: Certain words, such as "Royal," "Bank," or "Trust," require prior consent before use.
  • Misleading Use of Business Terms: Using terms like "Limited" (Ltd.), "Public Limited Company" (PLC), or "LLP" incorrectly or misleadingly can lead to rejection.

Objections to Company Names

Even after registration, objections to a LLP or company name may arise if it does not comply with legal requirements. Ensuring that the name is unique and non-misleading is crucial to avoiding disputes. Common reasons for objections include:

  • Too Similar to an Existing Business: If a company name closely resembles another registered entity, the affected business can file an objection.
  • Misleading Information During Registration: If false or inaccurate details were provided while registering the name, objections may be raised.
  • Failure to Meet Registration Conditions: A name that does not adhere to naming regulations or lacks necessary approvals may face challenges.
  • Opportunistic Registration: If a name is registered to take advantage of another company’s goodwill, it can be legally disputed.

Related Read: How much does an LLP cost in India?

How to Check Company Name Availability Online?

Before registering a company, you must check whether the proposed name is available to avoid rejection. The Ministry of Corporate Affairs (MCA) portal provides an online tool to verify company name availability. Here’s a step-by-step guide to checking a company name online:

  1. Visit the MCA Website: Go to www.mca.gov.in.
  2. Access the Name Availability Tool: Under the ‘MCA Services’ section, select ‘For Services’ from the drop-down menu and then select ‘Check Company/LLP Name’.
  3. Enter the Proposed Name: Type the desired company name in the search box and click on the ‘Search’ button.
  4. Review the Results: The portal will indicate whether the name is available or already registered.

Additional Checks for Better Approval Chances

  • Trademark Search: Use the Razorpay Rize Name Search Tool to check for potential trademark conflicts.
  • Alternative Name Options: Verify multiple name options to avoid rejection and ensure compliance with naming rules.

Conclusion

Choosing the right company or LLP name is crucial for legal compliance and brand identity. Ensure the name is unique, relevant, and adheres to MCA guidelines to avoid objections. Conduct a thorough name availability check on the MCA portal and verify potential trademark conflicts before finalising a name. A well-chosen name not only simplifies registration but also builds a strong brand identity while ensuring long-term legal compliance.

Frequently Asked Questions

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Register your One Person Company in just 1,499 + Govt. Fee

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Register your Business starting at just 1,499 + Govt. Fee

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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are good names for a company?

A good company name is unique, relevant to your business, and easy to remember. It should comply with MCA guidelines and avoid restricted words.

How can I name my company?

To name your company, ensure it is distinctive, reflects your business activity, and follows MCA regulations. Use the MCA name availability tool to check if the name is already registered. Additionally, verify trademark availability to avoid conflicts.

Which name is the best for my company?

The best name for your company is one that aligns with your brand identity, business operations, and legal requirements. It should be simple, professional, and free from misleading or offensive words.

What should a company name be?

A company name should be unique, legally compliant, and descriptive of the business. It must include an appropriate suffix, such as Private Limited (Pvt. Ltd.) or Limited Liability Partnership (LLP), based on the entity type.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
Promoters of a Company: Meaning, Roles, and Legal Responsibilities

Promoters of a Company: Meaning, Roles, and Legal Responsibilities

Behind every successful company lies the vision and initiative of its promoters—the individuals or entities responsible for bringing the business into existence. Promoters play a pivotal role in the early stages of a company's lifecycle, from conceptualising the business idea to ensuring its legal incorporation and securing initial funding.

Their responsibilities extend beyond just setting up the business; they lay the foundation for the company’s structure, compliance, and future growth. However, with great influence comes great responsibility, as promoters are entrusted with legal and ethical obligations to act in the best interests of the company and its stakeholders.

This blog dives into the meaning, types, roles, duties, and liabilities of company promoters, offering insights into their critical role in shaping successful businesses.

Table of Contents

Definition of Company Promoter

A company promoter is a person or entity that undertakes the responsibility of forming a company. As per legal definitions, a promoter is someone who conceives the idea of the business, takes the necessary steps to incorporate the company, and facilitates its registration.

For instance, if an individual drafts the Memorandum of Association (MOA) and Articles of Association (AOA) for a business and secures initial funding, they qualify as a promoter. Promoters can be:

  • Individuals (e.g., founders of a startup)
  • Groups of people (e.g., a partnership forming a company)
  • Organisations (e.g., a holding company promoting a subsidiary)

Who Are the Promoters of a Company?

Promoters can be anyone involved in the process of establishing a company. This includes:

  1. Founders – Entrepreneurs or individuals initiating the business idea.
  2. Investors – Entities that fund the company’s formation and help in structuring.
  3. Professional Firms – Companies that specialise in managing incorporation and initial stages.

It is important to differentiate between named promoters, whose roles are mentioned in legal documents like the prospectus, and unofficial contributors, who may assist without formal recognition.

Types of Promoters of a Company

Promoters can be classified based on their involvement and expertise:

1. Professional Promoters

These are specialists with expertise in company formation. For example, consulting firms or legal advisors assisting in setting up a company.

2. Occasional Promoters

Individuals who promote companies sporadically, typically when they spot a business opportunity, such as a seasoned entrepreneur launching a startup.

3. Financial Promoters

Entities like venture capitalists or investment firms promote businesses by providing initial funding.

4. Entrepreneurial Promoters

Business owners or founders who initiate the company based on their vision and strategy. An example is a tech founder creating a software startup.

Functions of a Promoter

The role of a promoter is multifaceted. Their primary functions include:

  1. Identifying a Business Opportunity
    Promoters analyse market trends, identify viable opportunities, and decide on the scope of the business.
  2. Preparing Necessary Documentation
    Drafting the MOA, AOA, and other legal documents essential for company registration.
  3. Securing Capital and Initial Funding
    Approaching investors or institutions to raise funds for the company.
  4. Registering the Company
    Ensuring the company’s incorporation by meeting all legal requirements, such as filing with the Registrar of Companies (RoC).
  5. Establishing Operations
    Setting up offices, hiring the initial workforce, and laying out the operational roadmap.

Duties of a Company Promoter

Promoters have critical duties to uphold the integrity and governance of a company. These include:

  1. Acting in Good Faith
    They must prioritise the company’s interests over personal gain.
  2. Avoiding Conflicts of Interest
    Promoters are obligated to disclose any potential conflicts that may affect the company.
  3. Disclosure of Personal Interests
    Any benefits or transactions involving the promoter must be transparently disclosed.
  4. Providing Accurate Information
    Misrepresentation of facts during the company’s formation can lead to legal consequences.

Rights of a Promoter

Despite their duties, promoters are entitled to certain rights:

  1. Right to Indemnity
    They can claim indemnity for liabilities incurred during company formation.
  2. Right to Recover Preliminary Expenses
    Expenses made for incorporation can be reimbursed.
  3. Right to Remuneration
    Promoters can receive remuneration for their services, either as cash or shares.

Liability of a Promoter

Promoters may face liabilities in specific scenarios:

  • Civil Liability: Misrepresentation or breach of duties can result in compensation claims.
  • Criminal Liability: Fraud or deliberate misconduct can lead to prosecution.
  • Public Examination: Promoters may be publicly examined in cases of company insolvency.
  • Personal Liability: They can be personally held liable for contracts signed before incorporation if the company does not ratify them.

Difference Between Promoters and Directors

Parameters Promoters Directors
Role Initiates the idea and formation of the company. Manages and oversees the operations of the company post-incorporation.
Involvement Active during the pre-incorporation phase. Active throughout the life of the company.
Legal Appointment Not formally appointed; their role is based on their contribution to forming the company. Formally appointed by shareholders or the board of directors.
Legal Status Not considered an officer of the company. Considered an officer under company law with defined duties.
Remuneration Paid for services during company formation, often through shares or cash. Paid via salaries, commissions, or benefits as determined by the company.
Ownership of Shares May or may not hold shares in the company. Often hold shares as part of their involvement in the company, but not mandatory.
Examples Founders, early-stage investors, or consultants initiating the company. Board members or executives appointed to run the company.

Related Read - Who is a Director of a Private Limited Company?

Real-Life Examples of Famous Company Promoters

1. Dhirubhai Ambani (Reliance Industries)

Dhirubhai Ambani, the visionary founder of Reliance Industries, started the company in 1966 as a small polyester trading firm. Through his entrepreneurial spirit, he transformed it into a global conglomerate spanning petrochemicals, textiles, and telecommunications, making Reliance a household name in India.

2. Narayana Murthy (Infosys)

Narayana Murthy, the co-founder of Infosys, played a pivotal role in establishing one of India’s most successful IT companies in 1981. His commitment to transparency, innovation, and customer-centricity positioned Infosys as a global leader in software services and outsourcing.

3. Elon Musk (Tesla, SpaceX)

Elon Musk is a modern-day promoter known for revolutionising industries through Tesla and SpaceX. By promoting electric vehicles and renewable energy with Tesla and pioneering space exploration with SpaceX, Musk has demonstrated how visionary leadership can disrupt traditional industries and redefine the future.

Frequently Asked Questions

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Register your Private Limited Company in just 1,499 + Govt. Fee

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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are the promoters of a company?

Promoters are individuals, groups, or entities that take the initiative to establish a company. They are responsible for conceiving the business idea, arranging initial funding, completing legal formalities, and ensuring the company is incorporated. 

Can a promoter of a company be the independent director?

No, a promoter cannot serve as an independent director of the same company. According to Section 149(6) of the Companies Act of 2013, independent directors must not have any material or relationship with the company, its promoters, or its directors. 

How to become a promoter of a company?

To become a promoter of a company, you need to:

  1. Conceive a Business Idea: Identify a viable business concept or opportunity.
  2. Conduct Feasibility Studies: Evaluate the market potential, resources, and legal requirements.
  3. Prepare the Incorporation Process: Draft documents such as the Memorandum of Association (MOA) and Articles of Association (AOA).
  4. Arrange Capital: Secure the initial funds needed to start the business, either through personal investment, partnerships, or external sources.
  5. Register the Company: File for incorporation with the Registrar of Companies (ROC) as per the applicable laws in your jurisdiction.

How to find promoters of a company?

To identify the promoters of a company, you can:

  1. Check Company Filings: Promoters are often named in the incorporation documents, such as the MOA, AOA, or prospectus.
  2. Review Annual Reports: Public companies disclose promoter details in their annual reports under the shareholding pattern section.
  3. Visit MCA (Ministry of Corporate Affairs): In India, you can access promoter details on the MCA website by searching the company’s filings.
  4. Examine Stock Exchange Filings: For listed companies, stock exchanges (like NSE and BSE) provide shareholding data that identifies promoters.

What is the legal position of a promoter?

The legal position of a promoter is that of a fiduciary agent for the company. While they are not employees or directors, promoters owe a duty of good faith and fairness to the company. Their legal responsibilities include:

  • Acting in Good Faith: Avoiding conflicts of interest and prioritising the company’s interests.
  • Disclosing Personal Interests: Declaring any personal benefits or profits made during the promotion process.
  • Liability for Misrepresentation: Promoters can be held liable for false statements in the prospectus or incorporation documents.
  • Compliance with the Law: Ensuring all legal formalities are followed during company formation.

What is the difference between the promoter and the founder of the company?

Parameters Promoter Founder
Definition Individual or entity responsible for establishing the company. Person who starts the business idea.
Role Focuses on legal incorporation and securing capital. Often plays a visionary role in the business journey.
Involvement May step away after incorporation. Usually continues to manage and grow the company.
Legal Status Named in company incorporation documents as per law. Not necessarily defined legally.
Example Early-stage investors or professionals. Entrepreneurs or business visionaries.

In many cases, a founder can also act as a promoter, but not all promoters are founders.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
Private Company Vs Public Company: Key Differences Explained

Private Company Vs Public Company: Key Differences Explained

Are you an aspiring entrepreneur looking to start your own business? One of the crucial decisions you'll need to make is whether to structure your company as a private or public entity. Understanding the difference between private company and public company is essential for entrepreneurs, businessmen, and investors as it impacts ownership structure, funding, regulations, and operational transparency. 

Entrepreneurs and businessmen can choose the right structure for growth and compliance while investors evaluate risks, liquidity, and returns. Public companies are listed on stock exchanges, allowing easier capital access but with stricter compliance and disclosure requirements. 

Private companies offer more control and flexibility but limited fundraising options. This knowledge helps stakeholders make informed decisions regarding growth strategies, ultimately aligning their goals with the company's structure.

In this article, we'll dive deep into the characteristics of a private company and a public company, highlighting their key features, advantages, and differences. By the end, you'll have a clear understanding of which structure suits your venture best.

Table of Contents

What is a Public Company?

A public company, also known as a publicly traded company, is a corporation whose shares are freely bought and sold by the public on stock exchanges or over-the-counter markets. Key aspects of a public company include:

  • Unlimited number of shareholders.
  • Shares are publicly traded and easily transferable.
  • Must issue a prospectus before offering shares to the public.
  • Strict disclosure and reporting requirements.
  • Ability to raise substantial capital through public markets.
  • Governed by a board of directors responsible to shareholders.

Public companies must comply with stringent regulations set by securities commission like the the Securities and Exchange Board of India (SEBI). These regulations ensure transparency, protect investor interests, and maintain market integrity.

Features of Public Limited Company

  1. Free transferability of shares: Shares can be freely bought and sold on stock exchanges, providing liquidity to investors.
  2. No limit on number of shareholders: There is no restriction on the maximum number of shareholders a public company can have.
  3. Prospectus requirement: Public companies must issue a prospectus before offering shares to the public, disclosing key information about the company.
  4. Public disclosure of financials: Public companies are required to publicly disclose their financial statements on a regular basis.
  5. Strict compliance norms: Public companies are subject to stringent regulations and disclosure requirements set by governing bodies like SEBI.
  6. Access to capital markets: Public companies can raise substantial funds from a large pool of investors through various securities like IPOs, FPOs, rights issues and preferential allotments.
  7. Listing on stock exchanges: The shares of public companies are listed and traded on recognised stock exchanges.

What is a Private Company?

A private company, also referred to as a privately held company, is a business entity whose shares are not publicly traded. Ownership is closely held by a limited group of shareholders, such as founders, family members and private investors. Key characteristics of a private company include:

  • Limited to a maximum of 200 shareholders
  • Shares are privately owned and not freely transferable
  • Minimal disclosure requirements and greater privacy
  • Raising capital through private means like angel investors or venture capital
  • Closely controlled and managed by founders and early investors

Private companies have more flexibility in their operations and decision-making as they are not subject to the same level of public scrutiny and regulatory oversight as public companies.

Features of Private Company

  1. Restricted share transfer: Shares of a private company cannot be freely transferred and are subject to restrictions outlined in the company's articles of association.
  2. Limited number of shareholders: Private companies can have a maximum of 200 shareholders.
  3. No prospectus requirement: Private companies are not required to issue a prospectus to the public for raising funds.
  4. Confidentiality of financial information: The financial statements of private companies are not publicly disclosed and remain confidential.
  5. Fewer compliance requirements: Private companies have lesser compliance and regulatory filing requirements compared to public companies.
  6. Flexibility in management: Private companies have greater flexibility in their management structure and decision-making processes.
  7. No requirement for a statutory meeting: Private companies are not required to hold a statutory meeting or file a statutory report.

Public Company Vs Private Company

Following are the key differences between public and private companies:

Parameter Public Company Private Company
Ownership Shares are owned by the general public and can be freely traded on stock exchanges Shares are privately held by a limited number of shareholders
Share Transfer Shares can be freely transferred without restrictions Share transfer is restricted and subject to the consent of other shareholders or the company's articles
Number of Shareholders No limit on the number of shareholders Limited to a maximum of 200 shareholders
Prospectus Must issue a prospectus before offering shares to the public Not required to issue a prospectus for raising funds
Financial Disclosure Required to publicly disclose financial statements and reports Financial statements are not publicly disclosed
Compliance Subject to stringent compliance and regulatory requirements Fewer compliance requirements and regulatory filings
Access to Capital Can raise substantial funds from the public through capital markets Relies on private funding sources and has limited access to public capital
Management Separation of ownership and management, leading to potential agency problems Greater control and flexibility in management and decision-making
Valuation Determined by the market price of shares on stock exchanges Difficult to value in the absence of a public market for shares
Liquidity Shares are liquid and can be easily bought or sold on stock exchanges Shares are illiquid and not easily transferable

The choice between operating as a public or private company depends on various factors such as the company's capital requirements, desired level of control and flexibility, willingness to disclose financial information, and long-term objectives.

Can A Public Company Convert into a Private Company and Vice Versa?

Yes, a public company can be converted into a private company and vice versa, subject to certain conditions and procedures outlined in the Companies Act 2013.

To convert a public company into a private company, the following steps need to be taken:

  1. Pass a special resolution in a general meeting of the company to approve the conversion.
  2. Alter the company's memorandum and articles of association to reflect the changes required for a private company.
  3. File an application with the National Company Law Tribunal (NCLT) for approval of the conversion.
  4. Obtain approval from the NCLT after considering any objections or suggestions from regulatory authorities or other stakeholders.
  5. File the NCLT order approving the conversion with the Registrar of Companies (ROC) within 30 days.
  6. The ROC will issue a fresh certificate of incorporation reflecting the company's status as a private company.

Similarly, a private company can be converted into a public company by following these steps:

  1. Pass a special resolution in a general meeting of the company to approve the conversion.
  2. Alter the company's memorandum and articles of association to comply with the requirements of a public company.
  3. Increase the number of directors to the minimum required for a public company (3 directors).
  4. File an application with the ROC for approval of the conversion.
  5. Obtain approval from the ROC after ensuring compliance with all the necessary provisions.
  6. The ROC will issue a fresh certificate of incorporation reflecting the company's status as a public company.

Conclusion

Understanding the differences between private and public companies is crucial for entrepreneurs, investors and other stakeholders. While public companies offer the advantage of access to public capital and liquidity for shareholders, they also face stricter compliance requirements and public scrutiny. On the other hand, private companies provide greater control and flexibility to shareholders but have limitations in raising capital and providing liquidity to investors.

Regardless of the choice, both private and public companies play vital roles in the economy, driving innovation, creating jobs, and contributing to overall economic growth. Understanding their distinct characteristics and the implications of each structure is essential for navigating the complex world of business and making sound decisions.

Frequently Asked Questions

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Private Limited Company
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1,499 + Govt. Fee
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  • Service-based businesses
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Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What is a Public company?

A public company is a business entity whose shares can be freely bought and sold by the general public on stock exchanges. These companies are subject to stringent regulations and are required to disclose their financial information regularly.

What is a private company?

A private company is a business entity that is privately held and does not offer its shares to the general public. The ownership of a private company is limited to a small group of shareholders, and the shares are subject to transfer restrictions.

Can private limited companies issue shares?

Yes, private limited companies can issue shares to their existing shareholders or to new investors. However, the transfer of these shares is restricted and subject to the consent of other shareholders or the company's articles of association.

Is it better to be a private company or a public company?

The choice between being a private or public company depends on various factors such as the company's capital requirements, desired level of control and flexibility, willingness to disclose financial information, and long-term objectives. Each structure has its own advantages and disadvantages, and the decision should be based on a careful evaluation of the company's specific needs and goals.

Is it easier for public companies to raise capital than it is for private companies?

Yes, public companies generally have an easier time raising capital compared to private companies. 

Public companies can access a larger pool of investors by offering their shares to the general public through capital markets. They can raise substantial funds through various means, such as initial public offerings (IPOs), follow-on public offerings (FPOs), rights issues and preferential allotments. 

Private companies, on the other hand, rely on private funding sources such as promoter capital, venture capital, private equity, and debt financing, which can be more limited and challenging to secure.

Who can invest in a private company?

Investment in a private company is typically limited to a small group of shareholders, which may include the founders, family members, friends, and private investors such as angel investors, venture capitalists, and private equity firms. 

These investors are often accredited and have a higher risk tolerance compared to the general public. The shares of a private company are not freely traded on stock exchanges and are subject to transfer restrictions outlined in the company's articles of association or shareholder agreements.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
 LLP Registration Fees: How much does an LLP cost in India?

LLP Registration Fees: How much does an LLP cost in India?

Starting a business in India is an exciting journey, but it begins with one crucial decision—choosing the right business structure. For entrepreneurs, particularly those leading small and medium enterprises (SMEs), a Limited Liability Partnership (LLP) has emerged as a favoured choice. 

This is due to its unique combination of the operational flexibility of a traditional partnership and the protective shield of limited liability that separates personal assets from business obligations.

An LLP is governed by the Limited Liability Partnership Act of 2008, which provides a robust legal framework and ensures a balance between flexibility and compliance. This structure is ideal for businesses looking to scale steadily while enjoying benefits like simplified compliance procedures and protection against unlimited liability.

In this blog, we’ll explain the various expenses associated with LLP registration online in India, including mandatory fees, additional charges, and professional costs. 

Table of Contents

How Much Does an LLP Cost in India?

The cost of LLP registration in India depends on multiple factors, including government fees, professional assistance, and other associated charges. Here’s a detailed breakdown of LLP registration fees:

1. LLP Registration Fees

The government fees for LLP registration are based on the contribution amount:

  • For a contribution of up to ₹1 lakh: ₹500
  • For a contribution between ₹1 lakh and ₹5 lakhs: ₹2,000
  • For a contribution between ₹5 lakhs and ₹10 lakhs: ₹4,000
  • For a contribution above ₹10 lakhs: ₹5,000

2. Digital Signature Certificate (DSC) Fees

At least one designated partner must obtain a Digital Signature Certificate (DSC) to sign and file documents online. Depending on the certifying authority, the cost of a DSC typically ranges from ₹2,000 to ₹4,000 per partner.

3. Professional Fees

While registering an LLP can be done independently, most entrepreneurs prefer to consult professionals (legal advisors or company secretaries) to ensure compliance. These fees can vary widely depending on the platform.

4. Stamp Duty Fees

Stamp duty is state-specific and varies based on the LLP’s contribution amount and the location of its registered office. On average, stamp duty can range from ₹500 to ₹5,000.

5. Name Reservation Fees

Reserving a unique name for your LLP costs ₹200 per application. This step ensures your chosen name complies with MCA guidelines.

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Other Costs Involved in Registering an LLP in India

Apart from the mandatory registration fees, here are additional LLP registration charges to consider:

1. LLP Agreement Drafting Charges

Drafting the LLP agreement, which outlines the rights, duties, and profit-sharing ratios of the partners, typically costs between ₹2,000 and ₹10,000, depending on complexity and professional assistance.

2. Notarisation Charges

Once the LLP agreement is drafted, it needs to be notarised. The charges for notarisation depend on the contribution amount and the state in which the LLP is registered, averaging ₹500 to ₹2,000.

3. Late Filing Penalties

Timely filing of required forms is crucial to avoid penalties. For instance, the late filing fee for Form 3 (LLP Agreement) is ₹100 per day of delay. Budgeting for timely compliance ensures you avoid these avoidable costs.

Professional Legal Charges Involved in Registering an LLP in India

When setting up a business, time is of the essence, and navigating the registration process can be overwhelming, especially for first-time entrepreneurs. While the government fees for LLP registration are standardised, the professional fees for legal and compliance services can vary depending on your required scope of assistance.

Engaging a qualified professional may feel like an added expense initially, but it can save you significant time, stress, and potential errors in the long run.

Here’s why hiring a professional for your LLP registration is worth the investment:

  • Drafting the LLP Agreement: The LLP agreement is more than just a legal document—it’s the backbone of your business operations. It defines the roles, responsibilities, profit-sharing ratios, and decision-making processes among partners. 
  • Name Reservation Assistance: Choosing the right name for your LLP can be tricky. The Ministry of Corporate Affairs (MCA) has stringent guidelines to ensure uniqueness and avoid duplication.
  • Digital Signature Certificate (DSC): A Digital Signature Certificate (DSC) is mandatory for designated partners to sign and file documents electronically during the registration process. Professionals assist in obtaining the DSC efficiently, ensuring you meet this requirement without delays.

At Razorpay Rize, we simplify the registration process by offering end-to-end support, covering everything from drafting agreements and obtaining DSCs to securing name reservations. 

{{llp-cta}}

Our LLP package includes:

  • Company Name Registration
  • Digital Signature Certificate (DSC) tokens
  • DSC shipping & support
  • Designated Partner’s Identification Numbers (DPIN)
  • Certificate of Incorporation(COI)
  • LLP Agreement
  • Company PAN & TAN

With our team of experts managing the legalities, you can focus on building and growing your business confidently.

Frequently Asked Questions

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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

How Much Will It Cost for LLP Registration?

LLP registration fees in India range from ₹7,000 to ₹25,000 or more, including government fees, DSC, professional assistance, and stamp duty. The exact cost depends on the contribution amount and location.

What is the Stamp Duty for LLP?

Stamp duty varies by state and contribution amount. It generally ranges from ₹500 to ₹5,000 or 0.1%–0.2% of the total contribution, depending on state regulations.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
 Difference Between Sole Proprietorship and One Person Company

Difference Between Sole Proprietorship and One Person Company

When deciding between a One Person Company (OPC) and a Sole Proprietorship (SP), understanding their core differences is crucial. An OPC is a legal entity with limited liability, separate from its owner, which can be beneficial for protecting personal assets. In contrast, a Sole Proprietorship is not a separate legal entity; here, the owner bears full responsibility for business liabilities, making it simpler but riskier.

Factors such as liability, compliance requirements and tax benefits may impact your choice between OPC and SP. While OPC offers better legal protection, SP provides simplicity and minimal regulatory obligations.

This guide will evaluate opc vs sole proprietorship in detail. 

Table of Contents

What is One Person Company (OPC)?

A One Person Company (OPC) is a company structure in India that allows a single individual to establish a business with limited liability. It provides the benefits of a corporate entity while retaining the simplicity of sole ownership.

Unlike a sole proprietorship, an OPC is a separate legal entity. This means it can own assets, enter into contracts, and protect the owner's personal assets from business liabilities.

OPCs operate under regulatory requirements similar to private limited companies but are tailored for single ownership. Additionally, the member must appoint a nominee to take over the business in case of the owner's incapacity or death.

What is Sole Proprietorship?

A sole proprietorship is a simple business structure, where the business is owned and managed by one individual. This makes it ideal for small businesses or individual entrepreneurs. The meaning of a sole proprietor is essentially someone who is the sole beneficiary of all business profits and is personally liable for any debts incurred by the business. There is no particular Sole Proprietorship Act in India. 

Unlike a One Person Company, a sole proprietorship does not separate the business entity from the owner. This means that all legal, financial and operational responsibilities rest with the proprietor, who has full control over decision-making and retains all profits.

Operating as a sole proprietor allows for flexibility and ease in starting or closing a business. There are minimal regulatory formalities, although certain licences may be required for specific sectors, like medical or food services. 

One Person Company vs Sole Proprietorship

Here is a detailed analysis of the difference between sole proprietorship and one person company:

Criteria Sole Proprietorship One Person Company (OPC)
Definition An unincorporated business owned and operated by a single individual, making it the simplest business form. A business structure introduced under the Companies Act 2013, allowing a single person to own a company with limited liability.
Liability The owner has unlimited personal liability, meaning their personal assets are at risk for business debts. Offers limited liability protection to the owner, so personal assets are generally safeguarded from business liabilities.
Formation and Compliance Minimal formalities required for setup, as it is not registered under any specific act. Requires registration with the Registrar of Companies (RoC) and submission of documents like MoA and AoA.
Continuity Business depends entirely on the owner’s existence; it ends if the owner dies or is incapacitated. Separate legal entity status allows the OPC to continue even if the owner passes away, with a nominee assuming control.
Fundraising Limited to personal savings, bank loans or funds from informal sources, which can hinder growth. Better positioned for fundraising through equity shares, allowing more potential for expansion.
Taxation Income is taxed as per individual income tax slabs, making tax management straightforward. Taxed as a company with applicable corporate tax rates, requiring additional annual filings with RoC.
Business Name Generally uses the owner’s name or a trade name, with no specific suffix required. Must include “OPC” in the company name, as mandated by law.

Sole Proprietorship Advantages and Disadvantages

Advantages of Sole Proprietorship

Quick Decision-Making

With full control, the sole proprietor can make prompt decisions, aiding responsiveness and agility in business operations.

Confidentiality

All business information remains private to the owner, enhancing operational discretion.

Ease of Formation and Low Costs

Starting a sole proprietorship involves fewer legal requirements, keeping setup costs low.

Direct Incentives

The owner retains all profits, providing direct motivation for business success.

Disadvantages of Sole Proprietorship

Unlimited Liability

The proprietor’s personal assets can be used to cover business debts, increasing financial risk.

Limited Access to Capital

Raising funds can be challenging, as sole proprietors often rely on personal savings or small loans.

Lack of Business Continuity

The business may end with the owner's incapacity, death or insolvency, impacting long-term stability.

Limited Specialisation

Managing all aspects of the business alone can hinder growth and focus on key areas.

One Person Company (OPC) Advantages and Disadvantages

Advantages of One Person Company

Limited Liability

The owner's liability is limited to the capital invested, safeguarding personal assets from business debts.

Separate Legal Entity

Being legally distinct enhances the company's credibility and professionalism.

Tax Benefits

OPCs enjoy certain tax benefits, such as lower rates and deductions on business expenses.

Single Ownership with Control

The owner retains full control over operations, simplifying decision-making.

Disadvantages of One Person Company

Limited Funding Options

OPCs cannot raise funds from the public, which may restrict growth opportunities.

Compliance Requirements

Annual filings, account maintenance and meetings are required, adding to operational tasks.

Nominee Requirement

The need for a nominee can be limiting for owners wanting complete control.

Naming Restrictions

"One Person Company" must be part of the company’s name, reducing flexibility in branding.

Frequently Asked Questions:

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Register your business
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Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

Register your business
rize image

Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Which is better, OPC or sole proprietorship?

When evaluating one person company vs sole proprietorship, the decision depends on your business goals. An OPC offers limited liability, protecting personal assets and provides credibility as a separate legal entity, which may attract investors. In contrast, a sole proprietorship is simpler to set up with fewer compliance requirements, but the owner is personally liable for business debts. 

Can a sole proprietorship be converted to OPC?

Yes, a sole proprietorship can be converted to an OPC. The process involves registering a new OPC and transferring the business’s assets and liabilities, following the regulations laid out by the Ministry of Corporate Affairs (MCA).

What are the tax benefits of OPC?

An OPC enjoys various tax benefits compared to a sole proprietorship. For example, OPCs can claim deductions on business expenses, such as salaries, office rent and travel costs. Additionally, OPCs benefit from lower corporate tax rates compared to individual tax rates applicable to sole proprietorships. 

How is OPC taxed?

An OPC is taxed as a private limited company, subject to corporate tax rates rather than individual tax rates. The current corporate tax rate in India for domestic companies is typically lower than the personal income tax rate applicable to sole proprietorships. 

Why is OPC a private company?

An OPC is classified as a private company because it operates with a single owner and has similar structural features to a private limited company, such as limited liability, a separate legal entity and compliance requirements. 

Can a sole proprietorship have employees?

Yes, a sole proprietorship can hire employees. The business owner, however, remains personally liable for any obligations or liabilities arising from employment, as the structure lacks limited liability protection.

Is a one person company the same as sole proprietorship?

No, a one person company is not the same as a sole proprietorship. While a one person company has a separate legal entity, a sole proprietorship does not have it. Moreover, the liability of the owner is limited in a one person company, as opposed to a sole proprietorship, where the owner’s liability is unlimited. 

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more

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We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

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Nayan Mishra
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Smooth onboarding, seamless incorporation and a wonderful community. Thanks to the #razorpayrize team! #rizeincorporation
Dhaval Trivedi
Basanth Verma
shopeg.in
Exciting news! Incorporation of our company, FoxSell, with Razorpay Rize was extremely smooth and straightforward. We highly recommend them. Thank you Razorpay Rize for making it easy to set up our business in India.
@foxsellapp
#razorpayrize #rizeincorporation
Dhaval Trivedi
Prakhar Shrivastava
foxsell.app
We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
TBS Magazine
Hey, Guys!
We just got incorporated yesterday.
Thanks to Rize team for all the Support.
It was a wonderful experience.
CHEERS 🥂
#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
Nayan Mishra
https://zillout.com/