Private Limited Company and One Person Company (OPC) are both regulated by the Companies Act and share many similarities. However, it's important to understand their differences before choosing the right legal structure for your business. 

In this blog, we'll discuss the distinctions between Private Limited Company and OPC in detail, helping you make an informed decision when registering your business. 

‍

<CTA>

<H2> Difference between Private Limited and One Person Companies 

Although we will explore each legal structure in the upcoming sections, let's currently delve into a comparative analysis between these two entities.

‍

Private Limited Company

One Person Company

Suitable for

Financial Services, Tech Startups, Medium Enterprises

Franchises, Retail Stores, Small Businesses

Shareholders

Minimum- 2

Maximum- 200

Minimum- 1

Maximum- 1

Nominee

Not required

One Nominee mandatory

Minimum Capital Requirement

No minimum capital requirement

No minimum paid-up capital requirement exists. However, the minimum authorized capital required is Rs. 1,00,000 (One Lakh)

Tax Rates

The basic tax rate, excluding Surcharge and Cess, is 25%

The applicable Tax rate to the OPC would be 25%, excluding cess and surcharge

Fundraising 

Multiple options for Fundraising

Limited options for Fundraising

ESOPs

Can issue ESOPs to the Employees

Unable to issue ESOPs to the Employees

DPIIT Recognition

Eligible for DPIIT recognition

Ineligible for DPIIT recognition

Transfer of Shares

Shares can be easily transferred by amending AOA

Transfer of shares isn’t possible; it can only be done in case of transfer of ownership

Compliances

• More compliance costs
• Mandatory 4 Board Meetings
• No mandatory audits till a specified threshold limit

• Less Compliance Costs

• Minimum 2 Board Meetings
• Mandatory Audits

Foreign Directors

NRIs and Foreign Nationals can be Directors

No foreign directors are allowed

Foreign Direct Investment

Eligible through Automatic route

Not eligible for FDI 

Mandatory

Conversion

No mandatory conversion 

If annual turnover exceeds Rs. 2 Crores or paid-up capital exceeds Rs. 50 lakhs, then mandatory conversion into a private limited company

‍

While we have provided some context on the differences between a private limited company and an OPC, let's break down their features and registration process in detail. This will help you figure out which one suits your business needs best.

<H2> Private Limited Company 

In India, a Private Limited Company is the most prevalent form of company registration, regulated by the Companies Act of 2013 under the Ministry of Corporate Affairs (MCA). Startups and businesses aiming for growth & stability often prefer this structure due to its flexible ownership and effective management. 

There are multiple features that collectively make a Private Limited Company an attractive and versatile business structure, combining limited liability protection and growth opportunities. Some key features include:

1. Limited Liability:

The liability of the Shareholders is limited to the amount invested in the company, protecting personal assets from business debts and liabilities.

2. Separate Legal Entity:

A Private Limited Company is considered a distinct legal entity from its owners, providing legal recognition and enabling it to enter contracts, sue, or be sued in its own name.

3. Perpetual Succession:

The company continues to exist despite changes in ownership, ensuring continuity even if shareholders or directors change.

4. Fundraising Opportunities:

Private Limited Companies can issue shares, making it easier to attract investors and raise capital for business expansion.

5. Transferability of Shares:

Shares can be transferred to others, facilitating the ease of ownership transfer and potential exit strategies for shareholders.

<H3> Private Limited Company Registration

The Ministry of Corporate Affairs (MCA) has implemented an efficient online process for the incorporation of companies known as the Simplified Proforma for Incorporating Company Electronically Plus (SPICe+). This form is divided into two integral parts: Part A and Part B.

‍

• Obtain a Digital Signature Certificate through listed Government Certifying Agencies. 

‍

• Part A of SPICe+ involves the facilitation of 'Name Reservation.' This section allows applicants to propose two potential names for the company, along with the option for re-submission if needed.

‍

• Part B of SPICe+ includes essential steps such as-some text
  • Application for the allotment of Director Identification Number (DIN)
  • Incorporation of the new company
  • Submission of the e-Memorandum of Association (e-MoA) and e-Articles of Association (e-AoA)
  • Applications for PAN, TAN, EPFO registration, ESIC registration, etc. 

‍

• File for the Commencement of Business Certificate through Form INC-20A within 180 days of incorporation.

‍

Following the approval of the SPICe+ Form, the Registrar of Companies (ROC) issues the Certificate of Incorporation, officially affirming the successful registration of your company. This crucial document includes essential details, including the company's name, registration number (CIN), date of incorporation, registered office address, and other pertinent information.

‍

<CTA>

<H2> One Person Companies (OPCs)

One Person Companies (OPCs) represent a distinctive form of business structure that allows a single individual to establish and operate a company. They seamlessly integrate the features of a Private Limited Company and the benefits associated with Sole Proprietorship. 

‍

Specifically crafted for entrepreneurs and business owners, OPCs are tailored to scenarios where a sole individual assumes ownership, operation, and management responsibilities for the entire business.

‍

Here are key aspects of One Person Companies:

‍

• Sole Ownership:

An OPC is owned and operated by a single individual, known as the sole shareholder or member. This individual holds all the shares of the company, consolidating ownership in a singular capacity.

‍

• Limited Liability:

Similar to other corporate structures, OPCs provide limited liability to the sole owner. 

‍

• Separate Legal Entity:

OPCs enjoy the status of a separate legal entity distinct from the sole owner. This legal separation allows the company to enter into contracts, own assets, and engage in legal proceedings in its own name.

‍

• Perpetual Succession

Even with just one member, the OPC has the feature of continuous succession. The nominee chosen while incorporating the OPC often takes over when the sole member is unavailable.

‍

This business form combines limited liability, a separate legal entity, and simplified operations, making it an attractive option for small businesses and startups led by a single entrepreneur.

<H3> One Person Company Registration

One Person Company (OPC) registration involves a step-by-step process to establish a business structure designed for a single owner. In a similar manner, SPICe+ is also implemented during the registration process to facilitate name reservation and application. 

1. Obtain a Digital Signature Certificate (DSC) for the sole Director through various Government Certifying Agencies.

2. Apply for name approval through Part A of the SPICe+ form which allows for the submission of up to two proposed names and one re-submission (RSUB).

3. Draft the Memorandum of Association (MoA) and Articles of Association (AoA), which outline the company's objectives, rules, and regulations. 

4. Submit Part B of the SPICe+ form, along with the necessary documents, including DSC, MoA, AoA, and declarations. Pay the prescribed fee for company registration.

5. Appoint a nominee director, as required by OPC regulations.

6. Within 180 days of incorporation, file for the Commencement of Business Certificate (Form INC-20A) with the Registrar of Companies.

Upon the successful approval of the SPICe+ Form, an email notification will be sent by the Ministry of Corporate Affairs (MCA), enclosing the Certificate of Incorporation (COI) and the PAN and TAN details of the Company. 

‍

This certificate includes crucial details such as the Company Name, Registration Number (CIN), Date of Incorporation, Registered Office Address, Company Structure, and more.

‍

<CTA>

<H2> Register Your Company with Razorpay Rize

Razorpay Rize provides a comprehensive suite of offerings that simplifies the complexities of business registration- exclusively designed to cater to the requirements of both startups and established businesses.

Discover a hassle-free and entirely online business registration process with robust support and seamless document collection. Unlock the perks of being an incorporated company with Razorpay Rize!  

‍

Our package includes:

‍

• Company Name Registration
• 2 Digital Signature Certificates (DSCs)
• 2 Directors’ Identification Numbers (DINs)
• Certificate of Incorporation(COI)
• MoA & AoA [Applicable for Private Limited Companies and OPCs]
• LLP Agreement [Applicable for LLPs]
• Company PAN & TAN

‍

*Prices and documents can differ based on the company type.

<H2> Which company type to register your business with?

Before commencing the registration process for either a Limited Liability Partnership (LLP) or a company, it is essential to carefully assess the following factors.

1. Consider the Nature and Size of Your Business:

Evaluate the nature and size of your business. If your operations are on a smaller scale and you are a single operator, opting for OPC registration may be advantageous. Conversely, for larger businesses with substantial employee numbers and capital needs, registering as a Private Limited Company offers greater flexibility in capital raising.

2. Fundraising Requirements:

Assess your fundraising requirements. If your objective is to raise funds through equity, opting for a company structure is essential. However, if you can fundraise through debt options, the OPC structure may work. 

3. Compliance Requirements:

Generally, OPCs have fewer compliance requirements compared to Private Limited Companies, making them more suitable for small businesses. Nonetheless, ensure that you are aware of several post-incorporation compliances that come along with each business structure and choose accordingly. 

<H2> Know Your Ideal Company Type

‍

For the first time in India, answer a brief set of questions about your startup, and our tool  "Know Your Company Type" will utilize your responses to pinpoint the ideal company registration type. 

‍

Discover your perfect fit with a single click!

‍

<CTA>

‍

Explore side-by-side comparisons of popular company types with prices to help you give a clear picture of the nuances involved with different legal structures. 

Partnership Deed for Firms in India

‍

<image >

‍

A partnership deed is a legal document that outlines the rights, responsibilities, and obligations of individuals forming a partnership. 

Typically drafted at the beginning of the partnership, the deed includes essential details such as the business name, purpose, and location. It also incorporates various clauses that highlight details about the partners, including aspects such as profit-loss sharing, salary, interest on capital, drawings, and the procedures for admitting a new partner. 

In this blog, we’ll talk about how the Partnership Deed acts as the foundation for all partnership operations. 

<H2> Format of a Partnership Deed

<Image>

‍

The format of a partnership deed may vary based on the specific requirements of the partners and the nature of the business. However, a typical partnership deed includes the following essential elements:

‍

• Name of the Partnership:

The official business name under which the partnership operates is stated, along with the physical address where the primary business activities occur. This section also highlights the duration of the partnership firm alongside the date of the commencement.

‍

• Details of the Partners: 

This section includes the full name, address, and relevant particulars of the Individuals participating in the Partnership. 

‍

• Purpose:

Here, the nature and scope of the business activities conducted by the partnership is clearly stated. The firm shall have the power to fulfill the objectives of the

company and conduct any such lawful business activities.

‍

• Capital Contribution:

The total capital of the firm and the individual share contributed by each partner are to be mentioned here. The contribution can be in cash, goods, or property on agreed values.

‍

• Profit and Loss Sharing:

It clearly articulates the agreed-upon ratio or percentage in which profits and losses will be distributed among the partners. 

‍

• Financial Decisions:

It includes information such as the partners' salary and commission, permissive drawings from the firm for each partner, the interest payable to the firm on these drawings, partnership loans, and other relevant details.

‍

• Admission and Retirement of Partners:

This part outlines the criteria and process for admitting new partners into the business. Similarly, it details the procedures for the retirement or withdrawal of existing partners.

‍

• Dispute Resolution:

Procedures for resolving disputes among partners are established. This may include mechanisms for mediation or arbitration to address conflicts and maintain a harmonious partnership.

‍

• Dissolution:

It states the conditions and procedures for the dissolution of the partnership which highlights the distribution of assets, settlement of liabilities, and the overall process of winding up the business.

‍

• Witnesses and Signatures:

The partnership deed is formally executed with the signatures of all partners, and done in the presence of witnesses. 

<H2> How to draft a Partnership Deed?

A partnership deed can be a verbal or written agreement outlining the rights, responsibilities, profit-sharing, and other obligations of the partners.

‍

While it can be recorded verbally, it is highly advisable to formalize a written partnership deed with the Registrar of Firms as it aids in resolving potential disputes. It also proves beneficial for tax purposes and ensures the formal registration of the partnership firm. 

‍

• The Partnership Deed, formulated by the partners, must be executed on stamp paper with a minimum value of Rs. 200, as per the Indian Stamp Act. 
• Each partner should retain a copy of the partnership deed for future reference.
• Once stamped, the Partnership deed is attached with the application to the Registrar of Firms for formal registration and legal validation.

‍

As per the Partnership Act, Registration of Partnership Firms is optional, but if you still choose to register your firm- 

The application should be accompanied by essential documents, including a duly filled affidavit, a certified true copy of the Partnership Deed, and proof of ownership or a rental/lease agreement for the main business location.

<H2> Validity of the Partnership Deed

The validity of the firm is mentioned in the deed, whether it's for a limited period, for a specific project or for an unlimited period. 

‍

Note: A partnership deed that has been notarized alone does not hold legal validity in the event of legal disputes. However, if the partnership firm is formally registered with RoF, the partnership deed will be recognized as having legal standing. 

<H2> Fees for the Partnership Deed in India

The Partnership Deed must be executed on a stamp paper with a minimum value of Rs. 200, as per the Indian Stamp Act. 

‍

However, Partnership registration fees vary among states due to different compliance requirements and stamp duty rates. The cost for registering a Partnership Firm ranges from Rs. 500 to Rs. 3000. 

‍

Note: Stamp duty is calculated based on partner contributions and follows state-specific regulations.

<H2> Alterations in the Partnership Deed

Partners have the flexibility to modify, alter, or change the partnership deed through mutual agreement. All partners are required to sign the amended deed. 

Subsequently, the modified partnership deed should be registered at the Sub-Registrar's office, where the original deed was registered. Additionally, it is necessary to submit the modified deed to the Registrar of Firms for record-keeping purposes.

‍

Are you an aspiring entrepreneur ready to make your business official? If so, one of the critical decisions you'll need to make is choosing the right business structure. From Private Limited Companies (PLCs) to Limited Liability Partnerships (LLPs) to One Person Companies (OPCs), each structure offers its own set of advantages and considerations.

In this blog, we'll explore the nuances (features & differences) of these three popular business structures - Private Limited, LLP, and OPC—and provide insights to help you make an informed decision that aligns with your entrepreneurial goals.

<H2> Difference between Private Limited, LLPs & OPCs

‍

Private Limited Company

Limited Liability Partnership

One Person Company

Governing Act

Governed by the Companies Act

Governed by the Limited Liability Partnerships Act

Governed by the Companies Act

Suitable For 

Financial Services, Tech Startups, Medium Enterprises

Consultancy firms, Professional Services

Franchises, Retail Stores, Small Businesses

Shareholders/ Partners

Minimum Shareholders - 2

Maximum Shareholders- 200

Minimum Partners - 2

Maximum Partners - Unlimited

Minimum Shareholders- 1

Maximum Shareholders - 1

(Maximum Directors can be 15)

Nominee

Not required

Not required

One Nominee mandatory

Minimum Capital Requirement

No minimum capital requirement, but it is often advised to set the authorized capital at INR 1,00,000 (One Lakh) 

No minimum capital requirement, but it is often advisable to consider an initial capital of INR 10,000

No minimum paid-up capital requirement exists. However, the minimum authorized capital required is INR 1,00,000 (One Lakh)

Tax Rates

The basic tax rate, excluding Surcharge and Cess is  25%

The standard fixed rate is  30% on their generated earnings.

The applicable Tax rate would be 25%, excluding cess and surcharge

Fundraising 

Easier to raise funds from Investors 

Raising funds can be challenging

Limited options for Fundraising

DPIIT Recognition

Eligible for DPIIT recognition

Eligible for DPIIT recognition

Ineligible for DPIIT recognition

Transfer of Shares

Shares can be easily transferred by amending the AOA

Transfer of partnership rights may require the consent of other partners and is generally more complex

Transfer of shares isn’t possible; it can only be done in case of transfer of ownership

ESOPs

Can issue ESOPs to the Employees

Unable to issue ESOPs to the Employees

Unable to issue ESOPs to the Employees

Agreements

Duties, Responsibilities, and other basic clauses outlined in MOA and AOA

Duties, Responsibilities, and other basic clauses outlined in the LLP Agreement

Duties, Responsibilities, and other basic clauses outlined in MOA and AOA

Compliances

• More compliance costs
• Mandatory 4 Board Meetings
• Mandatory Statutory Audits
• Mandatory filings include Annual financial statements in form AOC-4 and annual returns in Form MGT-7, etc.

• Less Compliance Costs
• No mandatory Board Meetings
• Statutory Audits are not required if turnover is less than 40 Lakhs, or capital contribution is less than 25 Lakhs.
• Mandatory filings include Annual financial statements in Form 8 and annual returns in Form 11.

• Less Compliance Costs

• Minimum 2 Board Meetings
• Mandatory Audits

Foreign Directors/ Partners

NRIs and Foreign Nationals can be Directors

NRIs and Foreign Nationals can be Partners

No foreign directors are allowed

Foreign Direct Investment

Eligible through Automatic route

Eligible through Automatic route

Not eligible for FDI 

Mandatory

Conversion

No mandatory conversion 

No mandatory conversion 

If annual turnover exceeds Rs. 2 Crores or paid-up capital exceeds Rs. 50 lakhs, then mandatory conversion into a private limited company

‍

Now that we've introduced the differences between these three types, let's explore their features and registration processes more thoroughly. This will help you determine which one is the most suitable for your business needs.

<H2> Private Limited Company: Features

In India, the Private Limited Company stands as the predominant choice for company registration, governed by the Companies Act of 2013 under the jurisdiction of the Ministry of Corporate Affairs (MCA). This structure is favoured by startups and businesses aspiring for growth and stability, owing to its adaptable ownership model and efficient management practices.

‍

Outlined below are some key characteristics of a Private Limited Company:

• Limited Liability: Shareholders enjoy limited liability, safeguarding personal assets from business debts.
• Separate Legal Entity: Regarded as a distinct legal entity from its shareholders, allowing it to engage in contracts, own assets, and litigate under its name.
• Ownership: Owned by shareholders who possess shares in the company, with ownership transfer facilitated through share transactions.
• Management: Managed by appointed Directors, while day-to-day operations are overseen by management, with significant decisions often requiring shareholder approval.
• Shareholders: Requires a minimum of two shareholders and can accommodate a maximum of 200.
• Regulation and Compliance: Governed by the Companies Act and regulated by the Ministry of Corporate Affairs, mandating compliance with annual financial filings, general meetings, and statutory record maintenance.
• Investment and Funding: Attracts investment and funding relatively easily due to its defined ownership structure and limited liability feature.

<H2> Private Limited Company: Registration in India

The Ministry of Corporate Affairs (MCA) has introduced a streamlined and online process for company incorporation known as Simplified Proforma for Incorporating Company Electronically Plus (SPICe+), comprising two parts: Part A and Part B.

The steps are as follows:

1. Obtain a Digital Signature Certificate (DSC) from Certifying Agencies (CAs) with either one or two-year validity. 
2. Apply for Name Approval using SPICe+ Part A which facilitates 'Name Reservation' with the provision for two proposed names and one re-submission (RSUB).

‍

Note: While simultaneous application for name approval (Part A) and Incorporation (Part B) through SPICe+ is feasible, only one name can be reserved.

‍

3. Following name approval, apply for Company Registration using SPICe+ Part B, which also includes the application for allotment of Director Identification Number (DIN), Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), etc. 
4. Open a current account for your company to facilitate seamless financial transactions and business operations.
5. Within 180 days of incorporation, file the Commencement of Business Certificate through Form INC-20A, which is a declaration submitted by the Director of the Company to the Registrar of Companies.
6. Upon approval of the SPICe+ Form, the Registrar of Companies (ROC) issues the Certificate of Incorporation, confirming the successful registration of your company.

The Certificate of Incorporation includes vital information such as the Company's name, registration number (CIN), date of incorporation, registered office address, and so on.

Example of CIN: U72200KA2013PTC097389

Read more about what each letter in a CIN signifies here. 

<CTA>

<H2> Limited Liability Partnerships: Features

A Limited Liability Partnership (LLP) is a business structure that combines features from both traditional partnerships and limited companies. And, LLPs are often favoured by professional services firms, small businesses, and ventures seeking the blend of partnership flexibility and limited liability protection.

Key characteristics of an LLP include:

• Limited Liability: Partners in an LLP benefit from limited liability akin to private limited companies.
• Separate Legal Entity: An LLP exists as a distinct legal entity from its partners, capable of owning assets, entering contracts, and engaging in legal proceedings independently.
• Ownership: Partners own the LLP, with the ownership structure outlined in the LLP agreement. Ownership transfer typically requires consent from other partners.
• Management: Managed by partners or a designated management team as specified in the LLP agreement. Decision-making is often collaborative, with each partner having an equal say.
• Number of Partners: Requires a minimum of two partners, with no maximum limit.
• Regulation and Compliance: Governed by the Limited Liability Partnership Act in India, featuring less stringent regulatory requirements compared to private limited companies. Compliance entails filing annual returns and maintaining statutory records.
• Flexibility: Offers enhanced flexibility in internal management and decision-making processes compared to private limited companies.

<H2> Limited Liability Partnerships: Registration in India

Establishing a Limited Liability Partnership (LLP) as a legally recognized business structure involves several crucial steps. Here is a brief and comprehensive outline of the LLP registration process. 

‍

• Obtain a Digital Signature Certificate (DSC) from Certifying agencies. To know more about the process, click here. 
• Reserve an LLP's name via the LLP-RUN form, overseen by the Central Registration Centre. Up to two names can be proposed.
• Fill out the FiLLiP form and submit it to the Registrar along with the Subscriber sheet and Director's consent (Form DIR-9).
• File the LLP Agreement using Form 3 on the MCA portal within 30 days of registration.

‍

Upon approval of the FiLLiP Form by the Registrar of Companies (ROC), you will receive the Certificate of Incorporation, which has important details such as the LLP's name, registration number (LLPIN), date of incorporation, registered office address, and so on.

Example of LLPIN: AAA-1234

<CTA>

<H2> One Person Companies: Features

One Person Companies (OPCs) present a unique business structure where a single individual can establish and manage a company. Combining aspects of a Private Limited Company and the advantages of Sole Proprietorship, OPCs cater to entrepreneurs and business owners who handle all ownership, operation, and management duties themselves.

• Sole Ownership: An OPC is solely owned and managed by a single individual, referred to as the sole shareholder or member. 
• Limited Liability: Like other corporate structures, OPCs offer limited liability protection to the sole owner.
• Separate Legal Entity: OPCs are recognized as separate legal entities independent of the sole owner. This legal distinction enables you to enter contracts, own assets, and participate in legal proceedings under your company’s name.
• Perpetual Succession: Despite having only one member, OPCs feature perpetual succession. A nominee appointed during incorporation typically assumes control in the absence of the sole member.

By combining limited liability, separate legal entity status, and simplified operations, OPCs emerge as an appealing choice for small businesses and startups led by single entrepreneurs.

<H2> One Person Company Registration: Registration in India

Due to their similarities with private limited companies, OPCs also employ SPICe+ for their company registration process. 

‍

SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is a comprehensive online form introduced by the Ministry of Corporate Affairs (MCA) in India to streamline and simplify the company registration process. 

• Obtain a Digital Signature Certificate (DSC).
• Apply for name approval using Part A of the SPICe+ form, allowing for submission of up to two proposed names and one re-submission.
• Draft the Memorandum of Association (MoA) and Articles of Association (AoA) detailing the company's objectives and rules. 
• Submit Part B of the SPICe+ form along with necessary documents, including DSC, MoA, AoA, and declarations. Pay the prescribed fee for registration.
• Appoint a nominee director as required by OPC regulations.
• Within 180 days of incorporation, file for the Commencement of Business Certificate (Form INC-20A) with the Registrar of Companies.
• Upon successful approval of the SPICe+ Form, you’ll receive an email notification from the MCA containing the Certificate of Incorporation (COI) and PAN and TAN details of the Company.

The certificate of Incorporation (COI) includes crucial details such as the Company Name, Registration Number (CIN), Date of Incorporation, Registered Office Address, Company Structure, and more.

‍

<CTA>

‍

For added clarity, check out our curated collection of sample templates, where you can download and customize most of these above-mentioned templates, as required. 

<H2> Company Registration with Razorpay Rize

Razorpay Rize provides a wide array of services to facilitate an end-to-end streamlined company registration process, all at the lowest fees and without any hidden charges. Explore the different legal structures below to find the one that’s best for your business. 

‍

‍

Our package includes:

‍

• Company Name Registration
• 2 Digital Signature Certificates (DSCs)
• 2 Directors’ Identification Numbers (DINs)
• Certificate of Incorporation(COI)
• MoA & AoA [Applicable for Private Limited Companies and OPCs]
• LLP Agreement [Applicable for LLPs]
• Company PAN & TAN

‍

*Prices and documents can differ based on the company type.

<H2> Find Out Which Company Type to Register 

If you operate a small business with limited resources, opting for LLP or OPC registration might be more favourable due to lighter compliance requirements. However, for larger businesses with substantial capital needs, registering as a Private Limited Company provides greater flexibility in raising funds. So, before proceeding with the registration of either a Private Limited Company, LLP, or OPC, it is essential to carefully evaluate the following factors. 

• Business Nature and Size
• Fundraising Requirements
• Tax Implications

• Personal Liability Protection

Ultimately, the choice between a Private Limited Company, LLP, or OPC structure depends on the unique characteristics of your business, including its nature, size, fundraising requirements, tax implications, and personal liability protection.

Still confused about which company type to register with? We’ve got you covered! Introducing our latest tool - "Know Your Company Type."

‍

For the first time in India, answer a quick set of questions about your startup, and this tool will utilize your responses to identify the perfect company registration type for you. Find your ideal fit with just one click! 

‍

<CTA>

‍

In summary, choosing between Private Limited Companies, OPCs, and LLPs depends on your business goals and preferences. Each structure offers unique benefits, whether it's scalability with Private Limited Companies, convenience with OPCs, or simplicity with LLPs. If you have any unanswered questions or want to get started with the company registration process, feel free to get in touch with us! 

‍

A Digital Signature Certificate (DSC) is a secure digital key issued by a trusted authority, known as a Certificate Authority (CA), that is used to authenticate the identity of individuals, organizations, or devices in the digital world. 

‍

It is a digital equivalent of a handwritten signature or a stamped seal, providing assurance of the signer's identity and the integrity of the signed document or message. In general, a DSC includes details such as name, postal code, country, email address, certificate issuance date, and the name of the certifying authority.

‍

In this blog, we'll explore the significance of DSCs, the process of applying for them in India, and their key features.

<H2> Importance of a Digital Signature Certificate

The importance of a Digital Signature Certificate (DSC) lies in its ability to provide strong authentication, integrity, and proper encryptions in digital transactions and communications. 

‍

Here are several key reasons why DSCs are important and why you should apply for one as a founder:

‍

• Authentication: DSCs verify the identity of individuals, organizations, or devices involved in digital transactions, ensuring that the sender is who they claim to be.

‍

• Integrity: Digital signatures created using DSCs ensure the integrity of electronic documents or messages by detecting any unauthorized changes or tampering.

‍

• Security: DSCs use strong cryptographic techniques to protect sensitive information and prevent unauthorized access. 

‍

• Legal Recognition:  In India, many industries and regulatory frameworks require the use of DSCs for specific types of transactions or communications to comply with security and privacy regulations. 

‍

• Government Services: DSCs play an important role in the company registration process irrespective of the company type. Accessing government services, filing tax returns, or participating in e-tendering processes require digital signatures for authentication and authorization.

‍

• Efficiency: DSCs streamline digital workflows by enabling secure and paperless transactions without the physical presence. 

‍

Overall, DSCs offer numerous benefits, including enhanced security, legal validity, efficiency, and cost savings, making them indispensable for digital transactions and communications

<H2> Different Classes of Digital Signature Certificates (DSCs)

Certifying authorities issue 3 types of DSCs to accommodate various needs and purposes.

The type of applicant and the intended use of the Digital Signature Certificate determine the specific kind of DSC that should be sought based on the requirements.

‍

Class 1 DSC:

‍

• These certificates are issued for individuals or private users and are primarily used for email communication and basic transactions.
• Verification requirements are minimal, typically involving email validation or verification of basic personal information.

‍

Class 2 DSC:

‍

• Class 2 certificates are used for both individual and organizational purposes and offer a higher level of security and trust compared to Class 1.
• To obtain a Class 2 DSC, the applicant's identity is verified against a trusted government-issued identity document, such as a passport or driver's license.

‍

Class 3 DSC:

‍

• Class 3 certificates provide the highest level of security and are typically used for online transactions involving high-value financial transactions, e-commerce, and government applications.
• The verification process for Class 3 DSCs involves rigorous identity verification procedures, including in-person verification and submission of supporting documents.

<H2> Certifying Authorities in India

‍

Certifying Agencies are designated by the office of the Controller of Certification Agencies (CCA) in accordance with the provisions of the IT Act, 2000. Currently, there are eight Certification Agencies authorized by the CCA to issue Digital Signature Certificates (DSCs).

‍

• MTNL CA
• TCS
• IDBRT
• SAFESCRYPT
• nCODE solutions
• NIC
• Central Excise and Customs
• e-Mudhra

<H2> Format of a Digital Signature Certificate

A DSC typically contains the following components:

‍

• Public Key: A cryptographic key that is made publicly available and used to verify digital signatures created by the corresponding private key.

‍

• Private Key: A secret key that is securely held by the owner and used to create digital signatures for documents or messages.

‍

• Certificate Information: Details about the certificate, including the issuer (Certifying Authority), the validity period, a unique identifier, the subject (owner), and the digital signature of the CA to confirm its authenticity.

‍

• Digital Signature: A unique digital signature generated using the private key of the certificate, which can be verified using the corresponding public key.

‍

The format of a Digital Signature Certificate (DSC) can vary depending on the issuing Certificate Authority (CA) and the type and class of the certificate. 

<H2> Documents required for obtaining a Digital Signature Certificate

The documents required for obtaining a Digital Signature Certificate (DSC) include:

‍

• Proof of Identity: Copy of any one of the following government-issued identity documents attested by a Gazetted officer:some text
  • Passport
  • Aadhaar Card
  • PAN Card
  • Voter ID Card

‍

• Proof of Address: Copy of any one of the following documents showing the applicant's residential address attested by a Gazetted officer:some text
  • Utility bill (electricity, water, gas, telephone)
  • Bank statement
  • Rent agreement

‍

• Passport Size Photograph: 

Recent passport-size color photograph of the applicant.

‍

• Self-attested Copy of PAN Card: 

A self-attested photocopy of the applicant's PAN Card.

‍

• Organization Documents (if applicable):

For organizations, additional documents such as the Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), or Partnership Deed may be required.

‍

It's important to note that the specific documents required may vary depending on the type of Digital Signature Certificate (e.g., Class 1, Class 2, Class 3), the Certification Authority (CA) issuing the certificate, and the purpose for which the certificate is being obtained. 

‍

<H2> How to apply for a Digital Signature Certificate?

‍

Razorpay Rize simplifies this process by streamlining e-filing on the MCA portal (company registration process), and as part of the package, you can acquire 2 Digital Signature Certificates for the involved directors/partners.

‍

Note: It's necessary to obtain a Digital Signature Certificate (DSC) of either the Class 2 or Class 3 signing certificate category issued by a licensed Certifying Authority (CA) to facilitate e-filing on the MCA Portal for company registration processes. 

‍

Alternatively, you also have the option to apply for DSCs through designated certifying agencies through the following steps.

‍

• Choose a Certifying Authority (CA) accredited by the Controller of Certification Agencies (CCA) under the provisions of the IT Act, 2000.
• Determine the type and class of DSC required based on your needs and the level of security required (e.g., Class 1, Class 2, Class 3).
• Gather the necessary documents, including proof of identity, proof of address, passport-size photograph, self-attested copy of PAN card, and any organization-related documents (if applicable).
• Obtain and fill out the DSC application form provided by the chosen Certifying Authority. Fill in the necessary details like the Class of the DSC, validity, type, applicant name and details, residential address, etc. 
• Undergo the identity verification process as per the CA's requirements, which may involve in-person verification or online verification, depending on the type of DSC and the CA's policies.
• Pay the prescribed fees. 
• Upon successful verification and payment, the Certifying Authority will generate a unique key pair consisting of a public key and a corresponding private key.
• Once the key pair is generated, the Certifying Authority will issue the Digital Signature Certificate.
• Install the DSC on the appropriate device or token as per the CA's instructions.

<H2> Validity of the Digital Signature Certificate

Digital Signature Certificates (DSCs) are commonly issued with either a one-year validity or a two-year validity period. 

‍

These certificates can be renewed upon expiry of the initial validity period. Renewal procedures typically involve submitting updated documentation and undergoing identity verification processes, similar to the initial application process.

<H2> Fees for the Digital Signature Certificate in India

If you’re registering your business with Razorpay Rize, DSCs are commonly included in the package regardless of the company type. 

‍

In the case of direct applications, the fees include various components, including the one-time cost of the medium (such as a USB token), the Digital Signature Certificate (DSC) issuance cost, the renewal cost after the validity period expires, and the support costs (if any).

‍

The costs, as mentioned on the MCA website, are as follows-

‍

Certifying Authority

Cost of DSC with one-year validity, excluding USB token cost & Taxes

Cost of DSC with two-year validity, excluding USB token cost & Taxes

MTNL CA

Rs. 300/- ( for MTNL phone subscribers) and Rs. 450/- for others 

Rs. 400/- ( for MTNL phone subscribers) and Rs. 600/- for others

TCS

Rs. 1245 (Inclusive of 12.24% Sales Tax.)

Rs. 1900/- (Inclusive of 12.24% Sales Tax)

IDBRT

Rs. 750/- (Rs. 500/- towards administrative expenses and Rs 250/-for Certificate)

Rs. 1500/-

SAFESCRYPT

Rs. 995/-

Rs. 1650/-

NIC

NIL for Government Rs. 150/- for PSU, Autonomous & Statutory Bodies

NIL for Government Rs. 150/- for PSU, Autonomous & Statutory Bodies

Central Excise and Customs

NA

NA

e-Mudhra

Rs. 899/-

Rs. 1149/-

‍

<H2> Frequently Asked Questions

<H3> Is there a difference between a digital signature and a DSC?

Yes, a digital signature refers to the cryptographic technique used to sign electronic documents, while a DSC is the digital certificate that contains a digital signature key pair and is used to verify the signer's identity.

<H3> What are the different types of DSCs valid during Company registration?

The different types of Digital Signature Certificates currently valid during company registration are class 2 and class 3 types.

<H3> Is a Director Identification Number (DIN) required to apply for DSC?

No, you can apply for a DSC without the DIN with supported documents as mentioned in the above sections

<H3> How can I check the validity of a DSC?

To check the validity of a Digital Signature Certificate (DSC), you can follow these steps:

• Access the different USB token tools that are currently available.
• Login & enter the token password when prompted.
• Select your certificate name from the list. 
• Once selected, the certificate will open. Navigate to the ‘Details’ tab, where you will find comprehensive information about your certificate, including its validity details.

‍

The Director Identification Number (DIN) is a unique identification number assigned to an individual who is appointed as a director of a company in India. It is issued by the Ministry of Corporate Affairs (MCA) under the provisions of the Companies Act 2013. 

‍

The DIN is mandatory for all existing and aspiring directors, and it serves as a way to track the activities and roles of directors across different companies to prevent fraud and ensure transparency.

‍

In the blog, we'll explore the intricacies of the Director Identification Number (DIN) system in India and its crucial role in corporate governance.

<H2> Importance of a Director Identification Number (DIN)

The Director Identification Number (DIN) is of significant importance in India's corporate governance framework. Here are some key reasons why DIN is crucial:

• Unique Identification: DIN provides a unique identification number to each director, ensuring there is clarity among individuals holding directorial positions in various companies.

• Transparency and Accountability: DIN enhances transparency by making director-related information publicly available. 

Stakeholders, including shareholders, regulators, and investors, can access the DIN database to verify the credentials and track the activities of directors across different companies.

• Regulatory Compliance: Obtaining a DIN is a mandatory requirement for individuals aspiring to become directors of Indian companies. The DIN system in India was implemented through Sections 266A to 266G of the Companies (Amendment) Act, 2006.

• Ease of Business Operations: DIN streamlines administrative processes related to director appointments and changes. 

By having a standardized identification system for directors, companies can efficiently manage their board compositions, update regulatory filings, and ensure compliance with legal requirements.

• Investor Confidence: The existence of a robust director identification system like DIN instills confidence among investors, both domestic and international.

<H2> Format of a Director Identification Number

The DIN is an 8-digit identifier issued by the Ministry of Corporate Affairs (MCA), the regulatory authority overseeing corporate affairs in India. 

‍

Each DIN is unique to the individual director and remains valid for their lifetime unless surrendered or revoked by the MCA due to non-compliance or other regulatory reasons.

‍

Example of a DIN: 002345678

<H2> Documents required for obtaining a Director Identification Number

For SPICe+:

‍

• Proof of Identity
• Proof of Address
• NOC or Rental Agreement 

‍

For DIR 3:

• Proof of Identity
• Proof of Residence
• NOC or Rental Agreement
• Digital Signature Certificate (DSC)

Note: The identity proof and Address proof must be attested by the Company Secretary, a CA or, any professional. , 

<H2> How to apply for a Director Identification Number?

Obtaining a Director Identification Number (DIN) is mandatory before being appointed as a director of an existing company or designated partner of an existing Limited Liability Partnership (LLP) in India. 

‍

While the DIN for directors of a new company is allotted during the company's incorporation through an integrated SPICe+ Form, if you’re seeking directorship in existing companies or LLPs, you must apply for a DIN separately. The application process, known as DIR-3, can be completed online through the official website of the Indian Ministry of Corporate Affairs (MCA).

Through SPICE+ :

If you don’t have a Director Identification Number (DIN) and intend to serve as the first director in a new company, you must submit an application using the eForm SPICe+.

‍

1. Obtain the Digital Signature Certificates (DSCs) for the proposed Directors, 
2. Log in to the MCA portal with valid credentials.
3. Navigate to the 'SPICe+' application from the application history on the user dashboard.
4.  Submit the SPICe+ Part A application.
5. Click on the 'Proceed for incorporation' button.
6. Access the SRN dashboard by clicking on the relevant SRN/SPICe+ application with the status as 'Draft.'
7. Click on "Form No. SPICe + Part B”.
8. Complete and Submit the SPICe+ Part B application along with the linked forms.
9. Upload the DSC-affixed PDF document(s).
10. Pay the fees.
11. An intimation mail, along with the Certificate of Incorporation, PAN, TAN, etc., will be generated upon processing the web form.
12. If the forms are uploaded successfully and the payment is made, the Approved DIN will be generated if there are no indications of potential duplication. However, if the details are flagged as potentially duplicate, a Provisional DIN will be generated instead.

‍

Note: A provisional DIN will remain valid for a period of 60 days from the date on which it was generated.

‍

<CTA> 

Through DIR 3:

If you intend to become a Director in an existing company, you must submit an application using eForm DIR-3 and adhere to the process outlined below.

‍

1. Visit the official MCA website.
2. Register as a new user if you haven't already done so, or log in using valid credentials.
3. Select the "e-Forms" tab and click on the "e-Form upload" link to access the e-Form DIR-3.
4. Complete the DIR-3 form with accurate details.
5. Scan and upload the necessary supporting documents (attested) as per the requirements specified in the DIR-3 form.
6. Form DIR-3 must be signed by you and digitally verified by a Company Secretary employed full-time by the company or by the Managing Director, Director, CEO, or CFO of the existing company where you intend to be appointed as a director.
7. Pay the prescribed fee for processing.
8. Once the verification process is completed and the application is found to be in order, you will be allotted a DIN. 
9. However, if the details are flagged as potentially duplicate, a Provisional DIN will be generated by the MCA. 

‍

As a director, you must notify all companies where you hold a directorship about the DIN within one month of receiving it from the central government. Subsequently, the company must inform the Registrar of Companies (RoC) within 15 days from the date when the director notifies them of their DIN. Failure to do so can incur penalties.

<H2> Common Causes of Rejection of a DIN

Here are some common mistakes that lead to the rejection of the DIN application:

• Failure to submit supporting documents
• Submission of invalid application or supporting documents
• Lack of attestation on documents
• Absence of a valid Digital Signature Certificate (DSC) for DIR3 applications

<H2> Validity of the Director Identification Number

In India, the Director Identification Number (DIN) remains valid for the lifetime of the individual director unless surrendered or revoked by the Ministry of Corporate Affairs (MCA) due to non-compliance, disqualification, or other regulatory reasons.

<H2> Fees for the Director Identification Number in India

If you are applying for a DIN through SPICe+, there are no additional charges as it is included in the fees of the SPICe+ application. 

‍

However, if you are applying through DIR-3, a fee of Rs 500 will be associated with it.

<H2> Frequently Asked Questions

<H3> 1.  Is there any difference between a Director Identification Number(DIN) and a Designated Partner Identification Number (DPIN)?

DIN is for individuals holding or intending to hold directorial positions in companies under the Companies Act, while DPIN is for designated partners in Limited Liability Partnerships (LLPs) under the Limited Liability Partnership Act. However, in terms of functionality, both serve the same purpose. 

<H3> 2. Can I use my DIN for multiple companies?

Yes, a single DIN can be used to hold directorship positions in multiple companies. However, each company must separately intimate the Registrar of Companies (RoC) about the director's DIN.

<H3> 3. Can I hold multiple DINs?

No, you can hold only one DIN at any point in time. It is illegal to possess multiple DINs, and individuals found to have more than one may face penalties and other legal consequences.

<H3> 4. How can I change the details provided for my DIN in the future?

In case of any modifications to the particulars provided in form DIR-3/SPICe concerning directors, you can submit e-form DIR-6. For example, if there is an address change, you must notify this change by submitting an e-form DIR-6 along with the necessary attested document.

<H3> 5.  What happens if my DIN application is rejected?

If your DIN application is rejected, you will receive a communication from the MCA specifying the reasons for rejection. You may have the option to rectify the errors and reapply.

<H3> 6. Can I transfer my DIN to someone else?

No, a DIN is non-transferable and is associated only with the individual director to whom it is assigned.

‍

<H1> Types of Business Licenses in India

‍

With a multitude of regulations varying from state to state, figuring out what licenses you need and how to obtain them can feel like attempting to solve a complex puzzle with missing pieces. However, worry not! We understand the challenges you face, and we're here to guide you through every step of the way. 

‍

In this blog, we'll lead you through the intricacies of obtaining the necessary licenses to set up and operate your business seamlessly in India.

<H2> Importance of Business Licenses

Business licenses play a crucial role in India's business landscape for several reasons:

Legal Compliance: Obtaining the necessary licenses ensures that businesses operate within the legal framework defined by government regulations. 

Consumer Trust and Safety: Certain licenses, such as FSSAI licenses for food-related businesses or health licenses for healthcare providers, signify compliance with safety and quality standards. 

Public Health and Environmental Protection: Licenses related to environmental clearances, waste management, and pollution control are essential for businesses to mitigate their environmental impact.

Taxation and Revenue Generation: Business licenses, such as GST registration and professional tax registration, facilitate tax compliance and revenue generation for the Government. 

Regulation of Market Competition: Certain licenses, such as trade licenses and import-export licenses, regulate market entry and competition.

Employee Welfare and Labor Rights: Labor licenses ensure that businesses adhere to labour laws and provide a safe and fair working environment for employees. 

Last but certainly not least, business licenses are a badge of honour for your business. They show investors, partners, and customers that you're serious, professional, and committed to doing things the right way. In a crowded marketplace, that kind of credibility can make all the difference.

<H2> Common Types of Business Licenses in India

In India, obtaining the necessary business licenses depends on the type of business activity you intend to undertake and the location in which you plan to operate. Here are some common types of business licenses required in India:

<H3> Business Registration:

While not classified as a license, registering a business with the Ministry of Corporate Affairs (MCA) in India is a fundamental legal requirement if you are an entrepreneur establishing a business venture.

‍

Depending on the type of business structure chosen, such as sole proprietorship, partnership, limited liability partnership (LLP), or private/public limited company, the eligibility criteria, registration process, and compliance obligations can vary significantly. 

‍

There are primarily following types of Business structures:

• Private Limited Company
• Limited Liability Partnerships
• One Person Company
• Public Limited Company
• Sole Proprietorship
• Partnership

Ultimately, registering your business with the MCA not only establishes its legal legitimacy but also lays the foundation for growth, credibility, and long-term success in the Indian startup ecosystem.

For detailed information regarding the eligibility criteria, registration process, and compliance obligations associated with different business structures, check out the link below. 

Company Registration in India - Online Incorporation Process Explained

<H3> Udyam Registration - MSME License

Similarly, Udyam Registration is not technically a license. However, it provides recognition and certain benefits to Micro, Small, and Medium Enterprises (MSMEs) in India. 

The eligibility criteria for Udyam Registration are based on the investment, turnover, years of establishment, etc.

Once registered as an MSME, you can receive a unique Udyam Registration Number (URN) and a certificate that gives access to government schemes, subsidies, and incentives.

<H3> GST Registration

In India, Goods and Services Tax (GST) registration is mandatory for businesses meeting certain turnover thresholds, which is Rs. 40 Lakhs (for goods) and Rs. 20 Lakhs (for services) or engaging in specified activities. 

‍

Here's an overview of the process of obtaining GST registration, which is not exactly a license but a crucial registration for businesses:

‍

1. Access the official GST portal. 
2. Fill out the registration form with accurate details regarding your business activities, turnover, and so on. 
3. Furnish the necessary information, including business details, PAN, Aadhaar, bank account details, and relevant documents.
4. Upon successful verification, you will be issued a unique Goods and Services Tax Identification Number (GSTIN)- a 15-digit unique identifier for the businesses under the GST regime.

<H3> Professional Tax Registration

Professional Tax Registration is a requirement for employers and individuals engaged in certain professions, trades, or employment in India. It is a state-level tax levied by the respective State Governments for the welfare of professionals and workers in various sectors.

‍

In some states like Maharashtra, obtaining professional tax registration is mandatory.  

<H3> Shops and Establishment License 

The Shops and Establishment License is a mandatory requirement for businesses operating within a specific jurisdiction, typically at the state level, in India. It is governed by the respective state Shops and Establishment Act and its rules, which vary slightly across different states.

‍

The primary purpose of the Shops and Establishment License is to regulate the operations of shops, commercial establishments, and other businesses within a state with provisions related to-

• Working hours
• Welfare and safety of employees
• Employment practices

‍

The Shops and Establishment License is usually valid for a specific period, after which it needs to be renewed to continue operating legally.  A valid Shops and Establishment License is often required for various business activities, including obtaining other licenses, permits, or registrations.

<H3> Trade License

A trade license is a legal permit issued by the local municipal authority or council that authorizes your business to engage in specific commercial activities within a designated area or jurisdiction. 

Trade licenses specify the types of commercial activities that a business is permitted to undertake. These activities may include manufacturing, trading, storage, distribution, or provision of certain services, depending on the nature of the business and local regulations.

‍

In order to obtain a Trade license, you must submit an application to the local municipal authority or council responsible for issuing licenses. The application process typically requires businesses to provide certain documents, such as - 

• Proof of identity,
• Address proof,
• Proof of ownership or tenancy of the premises
• Approvals and NOCs (No Objection Certificates) from relevant authorities

‍

Once the application is approved and all requirements are met, the local authorities will issue the trade license to your business, specifying the permitted activities, duration of validity, and any conditions or restrictions.

<H3> Labour License

Labour licenses, also known as labour permits or labour registrations, are legal authorizations issued by government authorities (Shram Suvidha Portal) to businesses, particularly those employing a significant number of workers, to ensure compliance with labour laws and regulations.

‍

It safeguards the rights and interests of workers by setting standards for fair treatment, safe working conditions, and adequate remuneration. These licenses often require businesses to adhere to minimum wage laws, working hour restrictions, overtime compensation, leave entitlements, and other labour standards aimed at promoting employee well-being.

‍

The process of obtaining a labour license may vary depending on the jurisdiction and the specific requirements imposed by labour laws and regulations.

<H3> Food Safety and Standards Authority of India (FSSAI) License

The Food Safety and Standards Authority of India (FSSAI) license, commonly referred to as the FSSAI license, is a mandatory requirement for businesses involved in the manufacturing, processing, packaging, storage, distribution, and sale of food products in India.

‍

Obtaining an FSSAI license is a legal requirement for food businesses operating in India. It is mandated by the Food Safety and Standards Act of 2006, and non-compliance can result in penalties, fines, or even closure of the business.

‍

Depending on the scale and nature of the business, there are different types of FSSAI licenses, such as Basic Registration, State License, and Central License, each catering to specific business activities and turnover thresholds.

<H3> Import-Export License

An import-export license, also known as an import-export permit, is a legal authorization issued by government authorities that allows businesses to engage in the importation and/or exportation of goods across international borders.

An Importer Exporter Code is mandatory for the export and import of goods. It is a 10-digit identification number that is compulsory for the purpose of exporting from India as well as for the purpose of importing to India. It has lifetime validity. 

The process to obtain an Import Export Code (IEC) registration certificate online involves several steps, as outlined below:

1. Fill out the Application Form.
2. Gather the necessary documents as per the requirements specified.some text
   1. For Private Limited/ LLPs- Company PAN Card, Incorporation Certificate, Aadhar Card, PAN Card of all Directors/Partners, and Cancelled Cheque of the Company.
   2. For Partnerships- Partnership Firm PAN Card, Partnership Deed, Aadhar Card, PAN Card of all Partners, and Cancelled Cheque of the Partnership Firm.
3. Pay the required Fees.
4. Upon successful verification and processing, the Import Export Code (IEC) registration certificate will be issued. You will receive the certificate electronically using the registered email ID provided during the application process.

While we covered some common licenses necessary for businesses in India, certain industry-specific licenses and permits exist that are crucial for compliance with sector-specific laws, regulations, and standards. These can vary widely depending on the nature of the industry, the type of activities involved, and the potential risks or impacts associated with the operations.

To conclude, securing these licenses is crucial for the seamless operation of your business. However, it's essential to prioritize registering your business as a legal entity beforehand, as this step is often a prerequisite for applying for most of these licenses.

Razorpay Rize simplifies this fundamental yet vital aspect of the process with its online company registration services. To learn more about how Razorpay Rize can assist you, click below.

<CTA>

‍

Types of Companies in India

Companies form the backbone of India’s vibrant and dynamic economy, contributing significantly to its growth and development on both domestic and global fronts. From the bustling streets of Mumbai to the tech hubs of Bangalore, companies of all sizes and shapes dot the Indian subcontinent. 

‍

Companies in India are regulated by the Companies Act, which governs the incorporation, operation, management, and dissolution of companies. 

‍

In this blog, we will explore the various dimensions of company types in India and their classifications based on size, liability, listing status, and more. 

‍

<H2> Types of Companies Based on Members

Companies based on members typically pertain to the structure of ownership or number of shareholders within the company. In this context, companies can be categorized based on the number of individuals or entities that hold ownership or membership in the company. 

‍

Here are the main types of companies based on members:

<H3> Private Limited Company

Private Limited Company (Pvt Ltd) is one of the most common and preferred forms of business entities in India, particularly for small to medium-sized enterprises (SMEs) and startups. This corporate structure offers several advantages that make it an attractive choice for entrepreneurs and investors alike.

‍

Furthermore, Pvt Ltd companies have access to various funding sources, including equity financing, debt financing, and venture capital investment. The ability to issue shares to investors enables Pvt Ltd companies to raise capital for expansion, innovation, and strategic initiatives, fueling growth and competitiveness.

‍

<CTA>

<H3> One Person Company

At its core, an One Person Company is a hybrid entity that combines the benefits of a sole proprietorship with the advantages of a private limited company. It enables you to establish a separate legal entity as a single individual for your business activities, shielding personal assets from business liabilities. 

‍

<CTA>

<H3> Public Limited Company

‍

A Public Limited Company represents a dynamic and robust business entity widely recognized for its scalability, transparency, and access to capital markets.

‍

One of the primary advantages of a Public Limited Company is the ability to raise capital through public offerings of shares and debentures. 

‍

By issuing shares to the public, you can attract a diverse pool of investors, including institutional investors, retail investors, and financial institutions. This will facilitate substantial capital infusion for expansion, investment in new projects, and strategic acquisitions.

‍

<H3> Section 8 Company

Section 8 Company, also known as a Section 8 Company under the Companies Act 2013, is a unique form of non-profit organization (NPO) established for promoting charitable or not-for-profit objectives, such as education, art, science, religion, social welfare, environment conservation, and more.

‍

This legal structure is primarily designed for organizations engaged in activities for the promotion of social welfare or national interest without the intention of earning profits or dividends for its members.

Adding to the list of types of companies, there are other legal structures that aren’t considered companies but are equally important, such as-

• Limited Liability Partnerships
• Partnerships 
• Sole Proprietorships

<H2> Types of Companies Based on Size

In India, companies can be categorized based on their size, typically determined by factors such as turnover, capital investment, and employee count. Here are the main types of companies in India based on size:

1. <H3> Micro Enterprises

‍

Micro-enterprises are the smallest category of companies, characterized by low investment in plant and machinery or equipment. In India, micro-enterprises are defined as those with an investment of up to Rs. 1 crore in manufacturing and an annual turnover of Rs. 5 crore.

2. <H3> Small Enterprises

‍

Small enterprises are slightly larger than micro-enterprises but still fall within the small-scale sector. In India, small enterprises are defined as those with an investment of not more than Rs. 10 crore and an annual turnover of not more than Rs. 50 crore.

3. <H3> Medium Enterprises 

‍

Medium enterprises are larger than small enterprises but smaller than large corporations. In India, medium enterprises are defined as those with an investment of more than Rs. 50 crore in manufacturing and an annual turnover of not more than Rs. 250 crore. 

4. <H3> Large Enterprises 

Large enterprises are the largest category of companies, characterized by substantial investment, high turnover, and a large workforce. In India, large enterprises have investments exceeding Rs. 50 crore in manufacturing or Rs. 250 crore in services. They often have hundreds or even thousands of employees and operate nationally or multinational.

These categories are defined by the Ministry of Micro, Small, and Medium Enterprises (MSME) in India to provide various benefits and incentives to small and medium-sized enterprises (SMEs), such as priority lending, subsidies, tax exemptions, and easier access to government schemes and programs. 

<H2> Types of Companies Based on Liabilities

Companies can be categorized based on the extent of liability their members or owners have. Some major types of companies based on liabilities are-

1. <H3> Company Limited by Shares

A Company Limited by Shares is a type of company where the liability of its members is limited to the amount unpaid on their shares. This means that shareholders are not personally liable for the company's debts beyond the amount they have agreed to contribute towards the shares they hold. 

Companies Limited by Shares can be further classified into private limited companies and public limited companies based on the number of shareholders and other criteria.

2. <H3> Company Limited by Guarantee 

In a Company Limited by Guarantee, the liability of its members is limited to the amount they agree to contribute to the company's assets in the event of its winding up. This type of company is commonly used for non-profit organizations, clubs, societies, and associations.

3. <H3> Unlimited Liability Company

In an Unlimited Liability Company, the members or owners have unlimited personal liability for the company's debts and obligations. This means that their personal assets are at risk to satisfy the company's liabilities, and creditors can pursue the members' personal assets to settle debts owed by the company.

<H2> Types of Companies Based on Listing Status

Companies can also be classified based on their listing status, which refers to whether their shares are listed on a stock exchange for public trading. 

‍

1. <H3> Listed Companies

Listed companies are those whose shares are listed and traded on a recognized stock exchange, such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) in India. 

These companies are subject to stringent regulatory requirements and disclosure norms mandated by the Securities and Exchange Board of India (SEBI). Listing provides liquidity to shareholders and enables the company to raise capital by issuing additional shares to the public.

2. <H3> Unlisted Companies

‍

Unlisted companies are those whose shares are not traded on any stock exchange. These companies may be privately held, meaning that their shares are owned by a small group of shareholders or closely held by promoters and investors. 

‍

Unlisted companies are not subject to the same level of regulatory scrutiny as listed companies but may still be required to comply with certain statutory requirements under the Companies Act.

<H2> Types of Companies Based on Holding

Companies can be categorized based on their holding structure, which refers to the relationship between parent companies and their subsidiaries. 

1. <H3> Parent Company

‍

A parent company is a corporation that owns a controlling interest in one or more subsidiary companies. It typically holds more than 50% of the voting rights in the subsidiary companies and has the power to make decisions affecting their operations and strategic direction.

2. <H3> Subsidiary Company

‍

A subsidiary company is a company that is controlled by another company, known as the parent company. Subsidiary companies can be wholly or partially owned by the parent company, depending on the percentage of shares held. 

‍

Subsidiary companies operate independently but are subject to the control and influence of the parent company.

3. <H3> Holdings Company

‍

A holdings company is a company whose primary purpose is to hold investments in other companies rather than engage in operational activities. Holdings companies typically own shares in subsidiary companies and may provide their subsidiaries with strategic direction and financial support.

‍

Unlike a parent company, a holding company does not engage in business operations of its own.

4. <H3> Affiliate Company

‍

An affiliate company is a company that is related to another company through common ownership or control. Affiliate companies may be part of the same corporate group or have a strategic partnership with each other.  

5. <H3> Associate Company

An associate company is one in which another company holds a significant but not controlling interest, usually between 20% to 50% of the voting rights. While the investing company has influence over the associate company's operations and management, it does not exercise full control.

In conclusion, from sole proprietorships and partnerships to corporations and joint ventures, each type of company offers distinct advantages and considerations suited to various business needs and objectives. As the business landscape continues evolving, choosing the right company type cannot be overstated.

‍

<H1> Company Registration in USA from India

In recent years, there has been a discernible shift among Indian entrepreneurs towards incorporating their companies in the United States. The surge in Indian startups seeking investment from U.S. sources has contributed significantly to this inclination to establish a foothold in the American market. 

‍

This trend is driven by several factors, including access to a larger pool of venture capital and angel investors in the U.S., as well as the desire to tap into the vast market potential.

‍

‍

In today’s blog, we'll explore the essentials of U.S. incorporations, covering essential factors and offering insightful guidance on navigating cross-border requirements.

<H2> Benefits of USA Company Registration

It is highly advisable to go for U.S. incorporation when aiming to raise capital from U.S. investors or penetrate the U.S. market with product sales. Beyond the inherent credibility associated with a U.S. business entity, it instills investor confidence and aligns with U.S. regulatory expectations. 

‍

1. It boasts a thriving and a diverse business ecosystem, providing access to a vast market, diverse consumer base, and a network of established businesses and startups.

‍

2. Companies incorporated in the U.S. often find it easier to attract investment, whether through venture capital, private equity, or public markets. 

‍

3. It is home to renowned innovation hubs such as Silicon Valley, which fosters creativity, collaboration, and technological advancement. This can be especially beneficial for tech startups and businesses in emerging industries.

‍

4. It offers a relatively straightforward process for business incorporation. Many states, like Delaware, have business-friendly regulations and efficient online platforms that facilitate the setup and management of companies.

‍

5. While the U.S. tax system is complex, businesses may find advantages in various tax incentives and deductions, especially if structured as certain types of corporations.

‍

6. It can serve as a strategic base for international expansion, providing a gateway to both North American and global markets.

<H2> Types for Company Registration in USA from India

The United States offers several types of legal structures for businesses, each with its own characteristics and implications. Here are some of the most common types:

• Single-Person Businesses
• S Corporations
• C- Corporations (C-Corp)
• Limited Liability Companies (LLCs)
• Non-profit Organizations

Regarding U.S. business structures, two predominant forms of incorporation stand out: Limited Liability Companies (LLCs) and C-Corporations (C-Corps). These structures offer distinct features tailored to diverse business needs and goals.

‍

• If you want lower compliance and small franchise fees: An LLC may be a suitable choice, especially for small businesses or startups with simpler structures and a desire for reduced administrative burdens.

‍

• If you want to raise funds: If the goal is to attract external investment, issue stock, or go public in the future, a C Corporation is often more attractive to investors and provides the necessary flexibility for these activities.

<H2> Minimum Requirements to register a company in the U.S.

To register a company in the U.S., several essential criteria must be met. 

‍

1. Minimum Number of Individuals:

‍

At least one person is required to register a company in the U.S. This person can act as the sole owner or be part of a group of owners (members or shareholders), depending on the chosen business structure (e.g., LLC, corporation).

‍

2. Registered Agent in Delaware:

‍

If choosing to register the company in Delaware, having a registered agent in the state is a legal requirement. The registered agent is a person or entity designated to receive legal documents, official correspondence, and other important information on behalf of the company. 

‍

3. U.S. Address:

‍

A U.S. address is required for official correspondence and legal purposes. This address can be either a physical location (such as a brick-and-mortar office) or a virtual address, depending on the nature of the business and the chosen state of registration.

<H2> Documents required for U.S. Incorporation

A succinct breakdown of the documents needed for the initial stages of business registration.

‍

1. Name Approval:

The process for name approval is straightforward. In Delaware, you can perform a real-time search for the desired business name and immediately reserve it if available. This reservation ensures that your chosen business name is secured for your use.

‍

2. Director Details:

Provide details about the directors or members of the company. This typically includes full names, addresses, contact information, and roles or titles within the company. 

‍

3. Number of Shares and Value Per Share: 

Specify the number of authorized shares the company is allowed to issue. Also, determine the par value or the assigned value to each share. 

<H2> Process for Company Registration in the USA

<H2> Must-Have Documents After Incorporation

Here’s a list of documents that a business typically receives after the registration process:

‍

1. Certificate of Incorporation:

This document, issued by the state authorities, officially recognizes the establishment of the corporation. It includes important details such as the company's name, location, and date of incorporation.

‍

2. EIN (Employer Identification Number):

The EIN is a unique identifier assigned by the IRS for tax purposes. It typically takes 3 to 4 weeks through standard processing, but an expedited option is available, reducing the timeline to 3 days if you already possess a Social Security Number (SSN). 

‍

This unique identifier, similar to India's PAN (Permanent Account Number), is necessary for various business activities, including opening a bank account, hiring employees, and filing tax returns.

‍

3. Bylaws of the Company (Similar to Articles of Association):

Bylaws are internal rules that govern the operation and management of the company. They outline procedures for meetings, decision-making, and other essential aspects of corporate governance.

‍

In some ways, they are similar to the Articles of Association mandated in India.

‍

4. Banking Resolution:

A banking resolution is a formal document that authorizes specific individuals within the company to open and manage bank accounts on behalf of the corporation. It provides clarity and legal authority for banking-related activities. 

‍

5. Common Stock Certificate:

Common stock certificates represent ownership in the company. When shares are issued, these certificates are given to shareholders as evidence of their ownership stake in the corporation. 

‍

They typically include details such as the shareholder's name, the number of shares, and the date of issuance.

<H2> Compliances for U.S.- Incorporated Companies

Let's dive into the detailed aspects of compliance for businesses in the US, particularly those with C-Corporation structures and operations in Delaware.

‍

1. Federal Income Tax:

The Federal Income Tax rate of 21% applies to C-corporations in the United States. They are required to file a tax return annually using the IRS Form 1120. This form outlines the corporation's income, deductions, credits, and taxes owed, etc.

‍

2. Withholding Tax and Related Party Transactions Disclosure:

Similar to Tax Deducted at Source (TDS), withholding Tax in the U.S. involves deducting a portion of payments made to non-residents for services, dividends, or interest. 

‍

Additionally, disclosure of related party transactions is a key compliance requirement, ensuring transparency in financial dealings with affiliated entities.

‍

3. Delaware State Franchise Tax:

Delaware imposes an annual franchise tax on corporations, and the amount varies depending on the type and size of the corporation. The calculation is often based on factors such as authorized shares or assumed par value capital.

‍

4. Delaware State Corporate Income Tax:

In addition to federal taxes, C-Corporations operating within the state of Delaware are subject to state corporate income tax at a rate of 8.7% on income generated within the state. 

‍

To meet state tax obligations, C-Corporations file the Delaware Form 1100, providing detailed information on income, deductions, and other relevant financial data.

‍

5. Other Regulatory Compliances in Delaware:

Beyond tax-related obligations, businesses in Delaware must adhere to additional regulatory requirements. This includes filing an annual report with the Delaware Secretary of State. 

‍

In a nutshell, be it India or the U.S., there will be a lot of compliances to keep a record of. By diligently meeting these obligations, you can fulfill legal mandates and contribute to a robust and trustworthy business environment.

<H2> Incorporation in U.S. vs India

When expanding operations from India to the United States, a common strategy involves incorporating a new U.S. company, followed by transferring shares from the Indian parent company (which must be a Private Limited Company) to the newly formed U.S. entity. The Indian company would become a subsidiary of the U.S. company, and there is no such limit to the number of subsidiaries an entity can have. 

‍

‍

Keep in mind the compliances and FEMA guidelines to be adhered to during this process, which establishes the U.S. company as a subsidiary of its Indian counterpart, creating a legal and financial separation. The benefits of this approach include improved access to U.S. markets, legal autonomy for each entity, and strategic financial advantages. 

‍

Incorporation in the U.S.

Company Registration in India

Time Duration

4-5 Days (To get a COI)

7-10 Days (To get a COI)

Cost 

Ideally, it ranges around $200-500, including Government Fees, Professional Fees, etc. 

Depends on company type, professional fees, stamp duties, etc. 

Registered Agent 

Required for legal correspondence

Not Mandatory 

Ideal for 

If you want to raise funds in the U.S. or expand, then U.S. incorporation is advisable. 

If your targeted market is in India, then registering your company in India is advisable. 

Name Approval

Simultaneous real-time search and reservation. 

Company Name Search and Reservation happen separately

Documentation 

COI, EIN, Company Bylaws, etc. 

COI, Articles of Association (AoA), Memorandum of Association (MoA), Director’s Identification Number (DIN), etc. 

Compliances 

Federal and state-level compliances, annual reports, IRS filings

Registrar of Companies (RoC) filings, Annual General Meetings (AGMs), Income Tax Returns

‍

<CTA>

‍