Requirements to obtain the Shop and Establishment Act Registration

Jun 14, 2025
Private Limited Company vs. Limited Liability Partnerships

The Shop and Establishment Act is a vital piece of legislation that governs the working conditions and employment terms in shops, commercial establishments, and other non-manufacturing businesses across India. As an entrepreneur or business owner, it's essential to understand the registration process and ensure compliance with the provisions of this Act, which are enforced by the respective State Labour Departments.

Obtaining the Shop and Establishment License is a mandatory requirement for most businesses operating in India. Whether you're setting up a retail store, restaurant, office, theatre, or even an online business, you'll need to register under the Shop and Establishment Act to legally operate in your state.

Table of Contents

The Shop and Establishment Act

The Shop and Establishment Act is a state-specific legislation aimed at regulating and standardising the working conditions in shops, commercial establishments, hotels, restaurants, and other service-oriented businesses. The primary objective of this Act is to ensure fair and humane treatment of workers by stipulating guidelines for:

  • Work hours and overtime
  • Minimum wages
  • Leave and holiday policies
  • Employee welfare and benefits

Since each state has its own version of the Act, the specific rules and regulations may vary depending on where your business is located. However, the core principles of employee protection and standardised work conditions remain consistent across all states.

Registration Under The Shop and Establishment Act

For most businesses in India, registration under the Shop and Establishment Act is mandatory. Any shop, commercial establishment, or service-based enterprise—whether physical, online, or home-based—must obtain this license within 30 days of starting operations, as per state-specific regulations.

The registration process involves submitting an application to the Chief Inspector or Labour Commissioner of your area, along with the required documents and fees. Upon verification and approval, you'll receive a Shop and Establishment License, which serves as proof of your legal compliance and is essential for:

  • Opening business bank accounts
  • Applying for loans and financial assistance
  • Availing government schemes and benefits

Failing to obtain the necessary registration can result in penalties, fines, and legal consequences, so it's crucial to prioritise this process as you set up your business.

Setting up your business? Get expert help with Shop and Establishment Registration and Company Registration today.

Regulations Under The Shop and Establishment Act

To ensure fair and safe working conditions for employees, the Shop and Establishment Act lays down several regulations that employers must adhere to. Some of the key areas covered under the Act include:

  1. Work Hours and Overtime:
    • Standard work hours for adults are typically limited to 8-9 hours per day and 48 hours per week.
    • Overtime wages, usually double the regular rate, must be paid for work beyond the standard hours.
    • Employees are entitled to a weekly off of at least 24 consecutive hours.
  2. Wages:
    • Employers must pay wages on time, typically by the 7th or 10th of the following month, depending on employee count.
    • Men and women must receive equal remuneration for the same work, as per the Equal Remuneration Act, 1976.
  3. Leave and Holidays:
    • Workers are entitled to various types of leave, such as earned leave, casual leave, and sick leave.
    • The number of leave days and paid holidays varies by state.
  4. Employee Welfare:
    • Employers must provide basic amenities such as drinking water, clean toilets, first-aid kits, and a crèche (if employing more than 50 women).
    • The workplace should be well-ventilated, adequately lit, and maintained at a comfortable temperature.
  5. Record-Keeping:
    • Businesses must maintain proper records of work hours, leave, overtime, wages, and other employee-related data.
    • Wage slips must be provided to employees every month, detailing their earnings and deductions.
  6. Display of Notices and Registers:
    • The Shop and Establishment Registration certificate and an abstract of the Act must be prominently displayed in the local language.
    • Employers must maintain registers such as appointment letters, service books, leave records, and wage registers.

By adhering to these regulations, businesses can create a safe, fair, and compliant work environment for their employees.

Eligible Businesses under the Shops and Establishments Act

The Shops and Establishments Act applies to a wide range of businesses, including but not limited to:

  • Shops and retail establishments
  • Commercial offices (e.g. legal, accounting, consulting)
  • Service providers (e.g. IT firms, salons, courier services)
  • Hotels, restaurants, and eateries
  • Educational institutions and training centres (e.g. coaching centres, training institutes)
  • Healthcare facilities and clinics (e.g. clinics, diagnostic centres)
  • Entertainment and recreational centres (e.g. theatres, gyms, amusement parks)

However, the specific applicability may vary from state to state. For example, some states require registration for establishments with a minimum of 10 employees, while others have a lower threshold. Manufacturing units and factories are generally not covered under this Act, as they are governed by the Factories Act.

To ensure compliance, it's essential to verify your business's eligibility with your local state authority and adhere to the specific requirements laid down by your state's Shop and Establishment Act.

Requirements to obtain the Shop and Establishment Act Registration

To obtain the Shop and Establishment Act Registration, you'll need to apply along with the following documents and details:

  1. Business Information:
    • Name and address of the establishment
    • Nature of business activity
    • Number of employees
    • Working hours and shifts
  2. Proof of Identity and Address:
    • Owner's identity proof (Aadhaar card, PAN card, etc.)
    • Proof of business address (rental agreement, property deed, etc.)
  3. Other Documents:
    • Partnership deed or incorporation certificate (for partnership firms and companies)
    • Layout plan of the establishment
    • List of employees with their details
    • Consent letter from the property owner (if operating from rented premises)
  4. Registration Form:
    • Duly filled and signed application form, which can be obtained from the local labour department or downloaded from their website.
  5. Fees:
    • Registration fees vary by state and are typically based on the number of employees and the nature of the business.

Some states may have additional requirements, so it's essential to check with your local labour department for the exact list of documents and procedures specific to your state.

Process For Obtaining Shop and Establishment Registration

The process for obtaining the Shop and Establishment Registration may vary slightly from state to state, but the general steps involved are as follows:

  1. Visit the website of your state's labour department or the online portal for Shop and Establishment Act Registration.
  2. Fill out the online application form with the required details, such as:
    • Employer name and contact information
    • Establishment name and address
    • Nature of business
    • Number of employees
    • Working hours and shifts
  3. Upload the necessary documents, as mentioned in the previous section, in the prescribed format (usually PDF or JPEG).
  4. Pay the registration fees online using a credit card, debit card, or net banking.
  5. Submit the application and wait for the labour department to verify your documents and details.
  6. Upon successful verification, you will receive the Shop and Establishment Registration certificate, either electronically or by post.

Alternatively, you can also opt for the offline process by visiting the local labour department office, submitting the physical application form, and paying the fees in person. However, the online process is generally faster and more convenient.

Once you obtain the registration certificate, make sure to display it prominently at your establishment and renew it before the expiry date to maintain compliance with the Act.

Validity of Shop And Establishment Registration

The validity of the shop and establishment license varies from state to state. Some states provide a lifetime registration, while others require periodic renewal. The renewal period can range from 1 to 5 years, depending on the state. Some states, like Maharashtra and Delhi, offer long-term or lifetime validity—up to 10 years or even 21 years—while others such as Karnataka, Tamil Nadu, and Uttar Pradesh require periodic renewal every 3 to 5 years. The registration fees also differ and are typically calculated based on the number of employees, the nature of the business, and the duration of registration selected.

It's crucial to keep track of your registration's validity and initiate the renewal process well before the expiry date to avoid any lapses in compliance. Renewal fees and procedures may also differ by state, so make sure to check with your local labour department for the most up-to-date information.

Conclusion

Registering under the Shop and Establishment Act is a vital step for any business operating in India’s commercial sector. It not only ensures legal compliance but also promotes transparent and fair employment practices. By understanding your state’s specific rules, maintaining accurate records, and renewing your registration on time, you can protect your business and your employees.

Compliance isn't just a legal formality—it's a foundation for sustainable growth and a responsible workplace.

Frequently Asked Questions

rize image

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

Register your business
rize image

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

Register your business
rize image

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

Register your business
rize image

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

What documents are required for shop and establishment registration in UP?

  1. To register your shop or establishment in Uttar Pradesh, you'll need to submit the following documents:
    • Duly filled application form
      (Available online through the UP Labour Department portal)
    • Proof of business address
    • Identity proof of the owner(s)
    • List of employees
    • Layout plan of the establishment
    • Partnership deed or incorporation certificate (if applicable)
    • Consent letter from the property owner (if operating from a rented premises)

What are the documents required for shop and establishment registration in Maharashtra?

  1. In Maharashtra, you'll need to submit the following documents for Shop and Establishment Registration:
    • Completed application form
    • Proof of business address
    • Identity proof of the owner(s)
    • Partnership deed or incorporation certificate (if applicable)
    • List of employees
    • Layout plan of the establishment
    • Fees as prescribed by the state

How do I get permission to open a shop?

  1. To obtain permission to open a shop, you'll need to follow these steps:
    • Register your business under the Shop and Establishment Act by submitting the required documents and fees.
    • Obtain any additional licenses or permits specific to your business.
    • Ensure compliance with local zoning regulations and building codes.
    • Apply for a GST registration if your annual turnover exceeds the prescribed threshold.
    • Open a business bank account and maintain proper financial records.

Related Posts

LLP Form 8 - A Complete Guide for 2025

LLP Form 8 - A Complete Guide for 2025

Limited Liability Partnerships (LLPs) in India are required to file LLP Form 8, the Statement of Account and Solvency, annually to comply with Ministry of Corporate Affairs regulations. This form details the LLP's financial position and solvency status and must be submitted within 30 days after the first six months of the financial year.

Table of Contents

What is the purpose of Form 8?

Form 8 LLP is an annual return that discloses an LLP's financial position and solvency. It is mandatory under the Limited Liability Partnership Act 2008, to promote transparency and ensure that LLPs meet their financial obligations. By filing Form 8 LLP, an LLP confirms its ability to pay debts as they become due in the normal course of business.

The form provides the MCA with an overview of the LLP's assets, liabilities, and cash flows, enabling them to monitor the financial health of the LLP. Banks, creditors, and other stakeholders may also refer to an LLP's Form 8 filings to assess its creditworthiness and make informed decisions.

LLP Form 8 - Statement of Account & Solvency

LLP Form 8, or the Statement of Account & Solvency, is an annual filing that every LLP must submit to the MCA, regardless of its size, turnover, or profitability. The form consists of two main parts:

  • Part A: Statement of Solvency
  • Part B: Statement of Account (Financial Statements)

The Statement of Solvency is a declaration by the LLP's designated partners confirming that the LLP is able to pay its debts in full as they become due. This section must clearly disclose any insolvency or inability to pay debts.

The Statement of Account includes the LLP's financial statements, such as the balance sheet, profit and loss account, and cash flow statement. These statements provide a true and fair view of the LLP's financial position and performance.

Timely filing of Form 8 LLP is crucial to avoid penalties and maintain compliance with the LLP Act. The due date for filing falls on October 30th each year for the financial year ending March 31st.

Get Your LLP Registered Seamlessly with Razorpay Rize – Start Today!

Laws Governing Form 8

The filing of Form 8 LLP is governed by the following laws:

  • Section 34(2) and 34(3) of The Limited Liability Partnership Act, 2008
  • Rule 24 of The Limited Liability Partnership Rules, 2009

These laws require all LLPs to file Form 8 annually and prescribe the format, disclosures, and timelines for filing the form. Non-compliance with these provisions can result in penalties and legal action against the LLP and its partners.

Components of Form 8

LLP Form 8 consists of two main sections:

  1. Part A - Statement of Solvency
    • Declaration by the designated partners about the LLP's ability to meet its debts and liabilities
    • Disclosure of any insolvency or inability to pay debts
  2. Part B - Statement of Accounts
    • Balance sheet as of the end of the financial year
    • Profit and loss account for the financial year
    • Cash flow statement for the financial year
    • Notes to accounts and significant accounting policies
    • Details of remuneration to designated partners
    • Auditor's report, if applicable

LLPs must ensure that the financial statements are prepared in accordance with the applicable accounting standards and present a true and fair view of the state of affairs. Depending on the LLP's turnover and contribution, the financial statements may need to be audited before filing.

The Due Date for Filing LLP Form 8

LLP Form 8 must be filed annually, within 30 days from the end of six months of the financial year to which the Statement of Account and Solvency relates. For LLPs following the April-March financial year, the due date for filing Form 8 LLP is October 30th of each year.

It is essential to note that this filing requirement applies to all LLPs, irrespective of their size, turnover, or commencement of business activities. Even inactive LLPs must file Form 8 to avoid penalties.

Failure to file the form by the due date attracts additional fees and penalties, which increase with the delay. LLPs must prioritise timely filing to maintain legal compliance and avoid adverse consequences.

Related Read: What is LLP Form 11?

Required Details for Filing Form 8

To file LLP Form 8, the following details are required:

  • Limited Liability Partnership Identification Number (LLPIN)
  • Name and registered address of the LLP
  • Details of designated partners
  • Jurisdiction of Police Station for the registered office
  • The financial year to which the Statement of Account and Solvency relates
  • Statement of Assets and Liabilities as at the end of the financial year
  • Income and Expenditure Statement for the financial year
  • Details of charges created, modified or satisfied during the year
  • Details of penalties and compounding fees paid during the year

Attachments Required with LLP Form 8

  1. Mandatory attachment:
    1. Details of disclosures under the Micro, Small and Medium Enterprises Development Act, 2006
  2. Conditional attachment:
    1. Statement of contingent liabilities, if applicable
  3. Optional attachments:
    1. Any other relevant information or documents

Small LLP

The concept of "Small LLP" was introduced by the LLP (Amendment) Act, 2021 to reduce the compliance burden and costs for smaller LLPs. An LLP is classified as a Small LLP if it meets the following criteria:

  • The contribution does not exceed ₹25 lakhs (or higher amount as notified by the Central Government, up to a maximum of ₹5 crores)
  • The turnover in the immediately preceding financial year does not exceed ₹40 lakhs (or higher amount as notified by the Central Government, up to a maximum of ₹50 crores)

Small LLPs enjoy several benefits, such as:

  • Lower filing fees for Form 8 LLP and other forms
  • Relaxed penalties for non-compliance
  • Self-certification of documents by designated partners without the need for professional certification

However, Small LLPs must still comply with the filing deadlines and other requirements under the LLP Act. Their classification as Small LLPs is based on self-declaration, and any false or incorrect declaration can attract penalties.

MCA Fees for filing Form 8

Contribution Filing Fee
Up to ₹1 lakh ₹50
Above ₹1 lakh and up to ₹5 lakhs ₹100
Above ₹5 lakhs and up to ₹10 lakhs ₹150
Above ₹10 lakhs ₹200

Inadequate or incorrect payment of fees can result in the form being marked as defective, requiring re-submission with additional fees.

Related Read: LLP Registration Fee in India

Additional Fee (Penalty) for Filing Form 8

Late filing of Form 8 LLP attracts additional fees, which vary based on the period of delay and the type of LLP (Small LLP or Other LLP). The additional fees for late filing are as follows:

Period of Delay Additional Fee for Small LLP Additional Fee for Other LLP
Up to 15 days 1 times the normal fee 1 times the normal fee
15 to 30 days 2 times the normal fee 4 times the normal fee
30 to 60 days 4 times the normal fee 8 times the normal fee
60 to 90 days 6 times the normal fee 12 times the normal fee
90 to 180 days 10 times the normal fee 20 times the normal fee
Above 180 days ₹100 per day ₹200 per day

LLPs should strive to file the form within the due date to avoid these additional fees and maintain compliance with the LLP Act.

Certification Requirements for Form 8

Form 8 LLP must be certified by the following individuals before filing:

  • Minimum two designated partners of the LLP
  • A practising professional (Chartered Accountant, Company Secretary, or Cost Accountant)

The designated partners must sign the form, declaring that the information provided is true and correct to the best of their knowledge. The practising professional must certify that the financial statements and other particulars in the form agree with the LLP's books of account and records.

Small LLPs are exempted from the professional certification requirement, and the designated partners can self-certify the form. However, it is advisable to seek professional assistance to ensure accurate and compliant filing.

Procedure to file Form 8

The procedure to file LLP Form 8 involves the following steps:

  1. Access the MCA portal and log in using the LLP's credentials
  2. Navigate to the "LLP Forms Download" section and select "Form 8"
  3. Fill in the required details and attach the necessary documents
  4. Save the form as a draft if required, or submit the form
  5. Generate and note down the Service Request Number (SRN) for future reference
  6. Affix Digital Signature Certificates (DSCs) of the designated partners and practising professional
  7. Upload the signed form on the MCA portal
  8. Make the payment of filing fees within 15 days of SRN generation
  9. Upon successful payment, an acknowledgement receipt will be generated

LLPs should ensure that all the steps are completed within the prescribed timelines to avoid any delays or rejection of the filing. 

Annual filings for LLP

Apart from Form 8 LLP, LLPs are required to file other annual forms to comply with the MCA regulations. These include:

  • LLP Form 11 (Annual Return)
  • Income Tax Return (ITR) 5

Timely filing of these forms is crucial to avoid penalties, which can be significant—up to ₹5 lakh for non-compliance. Although LLPs have fewer compliance requirements compared to private limited companies, failure to meet these obligations can lead to serious consequences. Maintaining proper books of account is essential for facilitating accurate and timely filings.

{{llp-cta}}

Example of LLP Form 8 Filing

Let's consider a simple case study to understand the filing of LLP Form 8:

ABC LLP, with total assets of ₹5 lakhs and liabilities of ₹2 lakhs, needs to file its Statement of Account and Solvency for the financial year 2024-25.

The LLP follows these steps to fill the form:

  1. The designated partners prepare the financial statements, including the balance sheet and profit & loss account.
  2. They fill out LLP Form 8, providing the required details and attaching the necessary documents.
  3. The form is then certified by the designated partners and a Chartered Accountant (CA).
  4. The LLP files the form online through the MCA portal, affixing the Digital Signature Certificate (DSC) and making the requisite payment.
  5. The form is submitted within the due date of October 30th, 2025, to avoid any late fees or penalties.

MCA LLP Compliance Chart

The following chart summarises the key compliance requirements for LLPs in India:

Form Name Purpose Due Date
LLP Form 8 (Statement of Account and Solvency) Annual filing of financial statements and solvency declaration October 30th of each year
LLP Form 11 (Annual Return) Annual filing of LLP's details and partners' information May 30th of each year
ITR 5 (Income Tax Return) Annual filing of LLP's income tax return October 31st (if audit not applicable) or November 30th (if audit applicable)

LLPs must prioritise these filings and ensure timely submission to maintain compliance with the MCA and Income Tax Department regulations. 

Frequently Asked Questions:

rize image

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

Register your business
rize image

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

Register your business
rize image

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

Register your business
rize image

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

What is the Statement of Solvency of LLP?

The Statement of Solvency is a declaration by the designated partners of an LLP, stating that the LLP is able to pay its debts in full as they become due in the normal course of business. It is a part of Form 8 LLP and must be filed annually with the MCA.

Is Form 8 mandatory for LLP?

Yes, Form 8 LLP is a mandatory annual filing for all LLPs registered in India, irrespective of their size, turnover, or commencement of business activities. Failure to file the form within the due date can result in penalties and legal action against the LLP and its partners.

When shall the Statement of Account and Solvency be filed by every foreign LLP with registrar?

Every foreign LLP must file the Statement of Account and Solvency in Form 8 LLP with the Registrar within 30 days from the end of six months of the financial year to which the Statement of Account and Solvency relates.

Is LLP liable to maintain books of accounts?

Yes, every LLP is required to maintain proper books of account as per Section 34 of the Limited Liability Partnership Act, 2008. The books of account must be kept at the registered office of the LLP and should give a true and fair view of the state of affairs of the LLP.

Nipun Jain

Nipun Jain is a seasoned startup leader with 13+ years of experience across zero-to-one journeys, leading enterprise sales, partnerships, and strategy at high-growth startups. He currently heads Razorpay Rize, where he's building India's most loved startup enablement program and launched Rize Incorporation to simplify company registration for founders.

Previously, he founded Natty Niños and scaled it before exiting in 2021, then led enterprise growth at Pickrr Technologies, contributing to its $200M acquisition by Shiprocket. A builder at heart, Nipun loves numbers, stories and simplifying complex processes.

Read more
Articles of Association (AoA) of a Company in India: Meaning and Importance

Articles of Association (AoA) of a Company in India: Meaning and Importance

The Articles of Association (AOA) define a company’s internal rules, governance, and management structure. It regulates the relationship between shareholders and the company, covering voting rights, dividends, and decision-making.

The AOA of a company must comply with the Companies Act, 2013 to ensure legal validity. It works alongside the Memorandum of Association to guide corporate operations. Understanding its role is essential for business owners, investors and stakeholders to ensure smooth management and legal compliance.

Table of Contents

Definition of Articles of Association Under Companies Act 2013

The Articles of Association, as per the section 2(5) of Companies Act, 2013, is a legally binding document that defines a company’s internal regulations and governance. It outlines the rights, duties, and responsibilities of shareholders, directors, and officers, ensuring structured management. Governed by Section 5 of the Companies Act, 2013, the AOA plays a crucial role in decision-making, dispute resolution, and compliance. A well-drafted AOA is essential for smooth company operations and legal clarity.

Objectives Outlined in Articles of Association

Section 5 of the Companies Act, 2013, defines the objective of AOA, outlining the internal rules that govern a company's management. Here are key objectives of Articles of Association:

  • Serve as a regulatory framework, ensuring compliance with legal provisions.
  • Define the company’s matters as prescribed under the relevant rules.

Additionally, companies have the flexibility to add provisions or make necessary alterations to their Articles of Association, provided they comply with legal requirements.

Purpose of Articles of Association

  • Governance Framework: The AOA acts as a rulebook for a company’s management, outlining the rights and duties of directors, shareholders, and officers. It establishes decision-making processes and ensures smooth operations.
  • Legal Requirement: As per the Companies Act, 2013, every company must have an AOA, which must be submitted to the Registrar of Companies (ROC) during incorporation. It serves as a legally binding document governing corporate affairs.
  • Operational Clarity: The AOA defines clear procedures for shareholder meetings, director appointments, and financial management, ensuring all stakeholders understand company regulations and business operations.
  • Shareholder Protection: It safeguards shareholder rights by establishing rules for voting, dividends, and dispute resolution. It also provides mechanisms to address conflicts and protect minority shareholders.
  • Flexibility for Future Changes: The AOA allows modifications to accommodate business growth, structural changes, or legal amendments, provided the changes comply with the Companies Act, 2013.

By setting a lawful, transparent, and structured operational framework, the AOA ensures corporate stability and effective governance.

Scope and Extent of Articles of Association

The Articles of Association are legally binding on all current and future members, including heirs, successors, and legal representatives. They form a contractual agreement between the company and its members, outlining mutual rights, duties, and obligations. The Memorandum of Association sets the company's main objectives and key details, and it can only be changed at an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM) with statutory approval.

The Registrar of Companies ensures that the company follows all legal regulations and operates within the law. Additionally, the shareholders have the right to appoint auditors who review financial records and ensure transparency in the company's finances.

Nature of Articles of Association

The Articles of Association is a legally binding document that governs a company’s internal management and operations. It sets the rules that directors, shareholders, and officers must follow. It also defines their rights, duties, and responsibilities within the company. By ensuring a structured and lawful operational framework, the AOA serves as the foundation of corporate governance, helping companies function efficiently and transparently.

Contents Encompassed Within the Articles of Association

  • Share Capital: It defines shareholder rights, share certificates, and commission payments.
  • Shareholder Rights: It specifies voting rights and dividend entitlements.
  • Share Transactions: It covers share transfer, transmission, forfeiture, and surrender.
  • Capital Alteration: It details processes for increasing, decreasing, or restructuring capital.
  • Governance: It outlines director appointments, qualifications, powers, and board meetings.
  • Financial Matters: It includes provisions on borrowing powers, accounts, audits, and reserves.
  • Winding Up: It specifies procedures for closing the company and settling liabilities.

Components of AOA

  • Name Clause: It states the official name of the company and specifies whether it is a public or private ltd. company.
  • Registered Office Clause: It defines the company’s registered office address, which serves as the official location for all legal communication.
  • Object Clause: It outlines the main objectives of the company and lists the business activities it is legally allowed to undertake.
  • Liability Clause: It explains whether the members (shareholders) of the company have limited or unlimited financial liability.
  • Share Capital Clause: It specifies the authorised share capital of the company, the different types of shares issued, and the rights and privileges of shareholders.
  • Management Clause: It defines the powers, responsibilities, and duties of the directors, along with the procedures for their appointment, removal, and remuneration.
  • General Meetings Clause: It sets the rules for conducting shareholder meetings, including notice periods, quorum requirements, voting rights, and decision-making procedures.
  • Dividend Clause: It explains how and when the company distributes profits in the form of dividends to its shareholders.
  • Winding-Up Clause: It describes the process for dissolving the company in case of liquidation, bankruptcy, or closure.

These components work together to create a structured framework that governs the company’s operations, financial management, and legal compliance.

Different Forms of Articles of Association

The Articles of Association must follow specific formats outlined in Schedule I, with forms categorised under Tables F, G, H, I, and J, depending on the type of company. Companies are required to adopt the form that aligns with their legal structure while registering their AOA.

Table Details of the Form
Table F Form for the Articles of Association for a company limited by shares
Table G Form for the Articles of Association for a company limited by guarantee and having a share capital
Table H Form for the Articles of Association for a company limited by guarantee and not having a share capital
Table I Form for the Articles of Association for an unlimited company and having share capital
Table J Form for the Articles of Association for an unlimited company and not having a share capital

Role of AOA in Company Registration

The Articles of Association play a crucial role in the company registration process. Along with the Memorandum of Association, it is a mandatory document required for incorporation under the Companies Act, 2013. The AOA defines the company’s internal governance, specifying rules for management, the rights and duties of members, and operational procedures. A well-structured AOA ensures legal compliance, protects stakeholders' interests, and provides clear guidelines for future operations. It also helps in conflict resolution by outlining decision-making processes and responsibilities, ensuring the smooth functioning of the company.

Difference Between Memorandum and Articles of Association

Particulars Memorandum of Association Articles of Association
Purpose Defines the company's constitution, objectives, and operational scope. Establishes internal rules for management and governance.
Contents Includes mandatory clauses such as name, registered office, object, liability, and capital. Contains provisions for administration, shareholder rights, and director responsibilities.
Scope Regulates the company's relationship with external parties. Governs the relationship between the company, its members, and directors.
Legal Requirement Must be filed with the Registrar of Companies during registration. Drafting is mandatory, but filing with the ROC is optional.
Hierarchy Supreme legal document, subordinate only to the Companies Act. Subordinate to both the MOA and the Companies Act.
Interrelation Acts as the primary document guiding the drafting of the AOA. Any provision contradicting the MOA is invalid.
Acts Beyond Scope Actions beyond the MOA are void and cannot be ratified. Actions beyond the AOA can be approved by shareholders.
Alteration Changes require a special resolution at an AGM and, in some cases, government approval. Can be amended through a special resolution at an AGM.
Retrospective Changes Cannot be amended retrospectively. Can be amended retrospectively.

Conclusion

The Memorandum of Association and Articles of Association are essential documents for company formation and governance. While the MOA defines the company’s objectives and its relationship with external entities, the AOA outlines the internal rules for management, ensuring smooth operations. A well-drafted AOA, aligned with legal provisions, helps establish clear roles for directors, shareholders, and stakeholders, fostering transparency and efficiency. Together, these documents provide a strong legal foundation, guiding the company's growth and compliance with regulatory requirements, making them indispensable for long-term success.

Frequently Asked Questions

rize image

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

Register your business
rize image

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

Register your business
rize image

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

Register your business
rize image

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

What are the conditions for the provisions of entrenchment in the AOA?

The provisions for entrenchment can be included in AOA either at the time of company formation or through an amendment. In both cases, the company must notify the ROC.

The inclusion of entrenchment provisions can be done:

  • At the time of company formation by incorporating them in the initial AOA.
  • Through an amendment with the approval of all company members.
  • In a public limited company by passing a special resolution.

Can the AOA be altered?

Yes, the AOA can be altered at any time through a special resolution. The revised AOA must be filed with the Registrar of Companies to be legally valid.

Can the AOA go beyond the scope of the MOA?

No, the AOA cannot go beyond the scope of the MOA. Any provision in the AOA that exceeds the scope of the MOA is considered ultra vires (beyond legal authority) and is deemed invalid.

How do Articles of Association differ from Articles of Incorporation?

The Articles of Association govern a company’s internal management, outlining rules for operations, shareholder rights, and director responsibilities. In contrast, Articles of Incorporation (also known as a Certificate of Incorporation) are legal documents filed with the government to officially register a company.

Who creates Articles of Association?

The founders or promoters of a company draft the AOA at the time of company incorporation. It is then submitted to the Registrar of Companies along with the MOA for approval.

Sarthak Goyal

Sarthak Goyal is a Chartered Accountant with 10+ years of experience in business process consulting, internal audits, risk management, and Virtual CFO services. He cleared his CA at 21, began his career in a PSU, and went on to establish a successful ₹8 Cr+ e-commerce venture.

He has since advised ₹200–1000 Cr+ companies on streamlining operations, setting up audit frameworks, and financial monitoring. A community builder for finance professionals and an amateur writer, Sarthak blends deep finance expertise with an entrepreneurial spirit and a passion for continuous learning.

Read more
Advantages of One Person Company: OPC Benefits Explained

Advantages of One Person Company: OPC Benefits Explained

An OPC is a unique business structure introduced by the Companies Act 2013 in India. It allows a single individual to form and operate a company, combining the benefits of both a sole proprietorship and a private limited company. OPC's meaning is straightforward - it is a company with only one member who is the sole shareholder and director. 

The primary objective behind introducing the OPC concept was to encourage solo entrepreneurship and facilitate the corporatisation of micro, small and medium enterprises (MSMEs) in India.

Table of Contents

What is the Nature of a One Person Company in India?

As per the definition provided in the Companies Act 2013, an OPC is a private limited company with only one member. The sole shareholder of the OPC holds 100% of the company's shares and is entitled to all the profits generated by the business. The full form of OPC is "One Person Company," emphasising its single-member structure.

The importance of OPC lies in its ability to provide a formal corporate structure to sole proprietors and small business owners. By registering as an OPC, entrepreneurs can enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. This unique combination of sole ownership and corporate features makes OPC an attractive choice for many budding entrepreneurs in India.

Benefits of OPC Company

Next up, let us understand why an OPC company will be right for you:

1. Benefits of Being Small Scale Industries

One of the key advantages of a one person company is its eligibility to be registered as a Micro, Small or Medium Enterprise (MSME). By obtaining MSME registration, OPCs can avail various benefits provided by the government, such as:

  • Priority sector lending from banks
  • Collateral-free loans up to ₹10 lakhs
  • Subsidy on patent registration
  • Reimbursement of ISO certification expenses
  • Concession on electricity bills
  • Exemption from excise duties

These MSME benefits can significantly reduce the financial burden on small businesses and help them grow faster.

2. Single Owner

Unlike partnership firms or private limited companies, an OPC has only one owner who holds all the shares and has complete control over the company's decision-making process. This streamlined ownership structure offers several benefits for OPC company, such as:

  • Faster decision-making without the need for consensus among multiple partners or directors
  • Flexibility to adapt quickly to changing market conditions
  • Ability to maintain confidentiality of business strategies and plans
  • Elimination of potential conflicts among partners or shareholders

3. Credit Rating

OPCs find it easier to obtain loans and credit facilities from banks and financial institutions than sole proprietorships. This is because OPCs have a separate legal identity and their financial statements are available in the public domain, allowing lenders to assess their creditworthiness more accurately. A good credit rating can help OPCs secure funding at competitive interest rates, providing a significant advantage over unregistered businesses.

4. OPC Benefits under Income Tax Law

OPCs enjoy certain one person company tax benefits under the Income Tax Act, 1961. Some of these advantages include:

  • Lower corporate tax rate of 25% for OPCs with an annual turnover of up to ₹250 crores.
  • Exemption from Minimum Alternate Tax (MAT) for OPCs with an annual turnover of up to ₹5 crores.
  • Ability to carry forward and set off losses for up to 8 years.
  • Deduction of up to ₹1.5 lakhs under Section 80C for investments made by the OPC owner.

These tax benefits can help OPCs optimise their tax liabilities and retain more profits for reinvestment in the business.

Received Interest Rate on any Late Payment

Under the MSME Development Act, 2006, OPCs registered as MSMEs are entitled to receive interest on delayed payments from their buyers. If a buyer fails to make payment within 45 days of accepting the goods or services, the OPC can charge an interest rate of three times the bank rate notified by the Reserve Bank of India (RBI). This provision helps ensure timely payments and improves the cash flow situation for small businesses.

6. Increase in Trust and Status

By registering as an OPC, small businesses can enhance their credibility and reputation in the market. The formal corporate structure and public disclosure of financial statements instil greater trust among customers, suppliers and other stakeholders. This increased trust can lead to better business opportunities, higher customer loyalty and improved bargaining power in commercial transactions.

7. Easy Funding

Apart from institutional funding, OPCs can also raise capital from individual investors. The Companies Act allows OPCs to issue shares to up to 200 shareholders, providing an alternative route for raising funds. This option can be particularly useful for OPCs with high growth potential, as they can attract angel investors or venture capitalists to fund their expansion plans.

8. Limited Liability

One of the most significant benefits of OPC is the limited liability protection it offers to the owner. Unlike sole proprietorships, where the owner's personal assets are at risk in case of business liabilities, an OPC provides a corporate veil that separates the owner's personal assets from the company's obligations. In the event of any legal disputes or financial losses, the liability of the OPC owner is limited to the extent of their investment in the company.

9. One Person Company Tax Benefits

In addition to the income tax benefits mentioned earlier, OPCs also enjoy several other tax advantages. For instance, OPCs with an annual turnover of up to ₹2 crores can opt for the presumptive taxation scheme under Section 44AD of the Income Tax Act. Under this scheme, the OPC is required to pay tax on only 8% of its total turnover, reducing the compliance burden and tax liability significantly.

10. MSME Benefits

As discussed earlier, OPCs registered as MSMEs are eligible for various government schemes and subsidies. Some additional benefits include:

  • Preference for government tenders
  • Assistance in marketing and export promotion
  • Subsidies for participating in international trade fairs
  • Skill development and training programs for employees
  • Access to credit guarantee schemes

These benefits can provide a much-needed boost to small businesses, helping them compete with larger players in the market.

11. Ease of Management

Managing an OPC is relatively simpler compared to other business structures. With a single owner and no board of directors, decision-making is faster and less complicated. 

Additionally, OPCs have fewer compliance requirements under the Companies Act. For instance, OPCs are not required to hold annual general meetings or prepare cash flow statements. This reduced compliance burden allows OPC owners to focus more on their core business activities.

Eligibility Criteria for OPC

To register as an OPC, the following eligibility criteria must be met:

  • The OPC must have only one member who is an Indian citizen and resident. This ensures that the business is managed by someone who understands local regulations and market conditions.
  • The sole member must be a natural person, not a company or an institution. This stipulation reinforces the OPC's structure as a personal enterprise.
  • The member should not be a minor to ensure legal competency in business dealings.
  • The member should be of sound mind and not be declared insolvent by any court. This criterion ensures that the individual can manage the company's affairs effectively.
  • The member should not have been convicted of any offence related to company formation or management in the past five years, which helps maintain the integrity of business practices.
  • The member should not be a nominee or shareholder in any other OPC.

OPC Registration Process

The OPC registration process involves the following steps:

The registration process for an OPC is streamlined and can be completed online through the Ministry of Corporate Affairs - MCA portal. Here are the essential steps involved:

  1. Obtain a Digital Signature Certificate (DSC): The first step is to acquire a DSC for the sole member, which is necessary for signing electronic documents during the registration process.
  2. Apply for Director Identification Number (DIN): Following the DSC, the next step is to apply for a DIN, which is required for the proposed director of the OPC.
  3. Name Approval: The applicant must submit an application for name approval using Part A of the SPICe+ form on the MCA portal. It is advisable to propose at least two names to ensure one can be approved.
  4. Prepare Necessary Documents: Essential documents include: 
  • Memorandum of Association (MoA) and Articles of Association (AoA)
  • Proof of registered office address
  • Consent from the nominee
  • KYC documents for both the member and nominee
  1. File SPICe+ Form: Once all documents are prepared, submit Part B of the SPICe+ form along with all necessary attachments to complete the application for incorporation.
  2. Payment of Fees: Pay the requisite registration fees online, which may vary based on the company's nominal share capital.
  3. Certificate of Incorporation: If all details are accurate and compliant with regulations, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, officially recognising the OPC as a legal entity.

This structured approach not only simplifies the registration process but also ensures that all legal requirements are met efficiently, making it easier for entrepreneurs to start their businesses as a One Person Company in India.

Conclusion

OPC offers a unique blend of sole ownership and corporate features, making them an attractive choice for solo entrepreneurs and small business owners in India. The benefits of an OPC company are numerous, ranging from limited liability protection and separate legal identity to tax advantages and easier access to credit. 

Additionally, the reduced compliance burden and simplified management structure make OPCs well-suited for individuals who want to focus on their core business activities without getting bogged down by excessive paperwork.

To register as an OPC, an individual must meet certain eligibility criteria and follow the prescribed registration process. Once incorporated, an OPC can enjoy various benefits available to MSMEs and small-scale industries, helping them compete effectively in the market.

In conclusion, the One Person Company is a progressive business structure that encourages solo entrepreneurship and facilitates the growth of small businesses in India. By providing a formal corporate framework with minimal compliance requirements, OPCs have opened up new avenues for aspiring entrepreneurs to turn their ideas into successful ventures.

Benefits of OPC - FAQs

rize image

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

Register your business
rize image

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

Register your business
rize image

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

Register your business
rize image

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

What is a one person company?

A one person company is a type of private limited company that has only one member who is the sole shareholder and director of the company. It was introduced in India by the Companies Act 2013, to encourage solo entrepreneurship and facilitate the corporatisation of small businesses.

What are OPC benefits in India?

Some of the key advantages of one person company in India include:

  • Limited liability protection for the owner
  • Separate legal identity from the owner
  • Easier access to credit and funding
  • Lower tax rates and tax benefits
  • Reduced compliance requirements
  • Simplified management structure
  • Eligibility for MSME benefits and schemes

However, OPCs also have certain limitations, such as restricted capital infusion and dependency on a single individual for decision-making. Together, these broadly sum up the advantages and disadvantages of a one person company. 

Who is eligible for OPC?

To be eligible for OPC registration, an individual must:

  • Be an Indian citizen and resident
  • Be a natural person, not a company or institution
  • Not be a minor or declared insolvent by any court
  • Not have been convicted of any offence related to company formation or management in the past five years
  • Not be a nominee or shareholder in any other OPC

What is the limit of OPC?

An OPC can have a maximum of one member and one director, who should be the same person. The paid-up share capital of an OPC is limited to ₹50 lakhs, and its average annual turnover should not exceed ₹2 crores in the immediately preceding three financial years. If an OPC crosses these thresholds, it must convert into a private or public limited company.

What is the importance of OPC?

The one person company concept is important because it provides a formal corporate structure to sole proprietors and small business owners, allowing them to enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. OPCs help promote entrepreneurship, facilitate the growth of MSMEs and contribute to the country's overall economic development.

Rize.Start

Hassle free company registration through Razorpay Rize

in just 1,499 + Govt. Fee
With ₹0 hidden charges

Make your business ready to scale. Become an incorporated company through Razorpay Rize.

Made with ❤️ for founders

View our wall of love

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/
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/