Business Registration a must in 2019!!
You have a business and are you aware whether it’s been legally recognized or striked off by the government of India?
Yes, don’t sit back and relax that your business is running successfully, it is mandatory to have the business registration done. Be it a start up or an existing business it is mandatory to obtain legal status to the business.
Especially with the changes taking place from 2-3 years in the Indian Government, as a business entity we need to be updated and cautious of the new set of rules and regulations.
India is a hub for start-ups and businesses and a whooping 10,000 + company registrations are done every month in India. This figure is enough to potray the importance of business registration in India.
With more number of venture capitalists and corporate offering funding to legally acclaimed companies, it is a must to get the business registered.
Let us first look into what will happen if your business is not registered. Companies are registered with the Ministry of Corporate Affairs (MCA) and the Registrar of Companies (RoC). There are certain stringent rules and regulations laid out by them which if not followed by existing businesses or start ups will lead to unavoidable consequences like:
- You may end up paying a huge amount as penalty for not having a legal status or the required licenses or business registrations.
- Director status may stand cancelled if your DIR3 KYC is not updated regularly and here also you may end up paying penalty.
- If IT Returns for the company are not regulated and file on timely basis your company will get striked off.
Apart from this there are few other requirements which may lead to negative consequences.
2019 may be a year of challenges with more new updates and set of rules coming up for a business. So an existing business or a start up needs to constantly either keep themselves updated or get advise from business consultants on the happenings.
After understanding the importance of why to get your business registered, now let us delve into the benefits of getting a business registered.
Top 5 benefits of Business Registration
- First and foremost if you’re approaching any corporate as your customer they will look into the legal status of the business. If the business is registered it is rest assured that there will be a belief that the business is genuine as they are fulfilling the legal formalities. Following the compliances laid down by the government will also help the business stand apart.
- No person or an entity will be ready to put their funds in a business which does not have atleast an authentic legal status. They will check for the background of the company, the Directors involved and especially if it is a company, limited company or a registered firm. For funding a business it necessitates for business registration.
- It is mandatory to create a business bank account in the name of your business. For this you need to provide you business registered documents to the authorized bank. With this business account you can keep your business and personal transactions separate and also issuing cheques to clients in the name of business is safe and authentic.
- In a registered business like LLP or limited company the personal assets of the partners or directors are protected. The liability is limited to the assets of the company. Also the transferability of shares and ownership is easier in a registered business because of its separate legal status as a company or firm.
- In a registered business the business can be incessantly carried on inspite of the death of the legal promoters due to its separate legal status. It can be taken over by others or can also be sold.
Once you get to know the importance of business registration, we can further discuss the various forms of business registrations prevalent in India.
Having a business registration in India exposes the business to various benefits initiated by the government like easy funding, discounts on various related licenses and registration.
For example in 2018 Budget, the Government of India has declared benefits for the Medium and Scale Enterprises like lowering the tax slab from 30% to 25% for companies with annual turnover of 250 crore from 50 crore, the introduction of Mudra scheme for credit facilities and more.
If your business is in the growing stage or a start up and also if you’re sceptical on what kind of business registration to be done then your worry ends here.
Look out for the most sought after business registrations in India. There are lot of confusions for businessmen to understand what this business registration is and how to choose one.
Important 5 list of Business Registrations in India (Brief Description)
Private Limited Company Registration
Is your business a Private Limited Company? This is what everyone knows as Private Limited Registration is the most sought after form of business registration. It’s always better to understand before you take the decision of getting your company registered as Private Limited Company.
Forming a Private Limited Company you need to have a
- Turnover of atleast 20 lakh and more per annum
- Minimum of 2 Directors
- The type of business you want to start
- Amount to be invested as paid up capital should be 1 lakh and authorized capital as 10 lakh minimum.
Also to keep the business moving in a Private Limited Company as Directors they should have a potential background to sustain any difficulties and to capture funds.
Private Limited is not like once you form it you can be relaxed. There are certain compliances which needs to be followed, failure upon which consequences have to be borne.
One Person Company
As the name goes One Person Company is also a form of Private Limited Company with only difference as to it represents a single Director with a nominee. In this form of business registration the complete ownership rests on you having sole discretionary power.
Here a nominee is appointed only for a proof or untoward consequence. The nominee will not have any Digital signature certificate (DSC) or Director Identification Number (DIN).
Post registration of business there will be compliances to be followed like Private Limited Company. Also you cannot take in shareholders and the funds can be taken only as loans from others.
Sole Proprietorship is nothing but Goods and Service Tax (GST) Registration. It is a simple form of registration which can either be only GST or clubbed with Micro Small and Medium Enterprise (MSME). In this registration the owner will be the sole proprietor and can be taken in the name of the company.
Who can take a Sole Proprietorship Registration?
It can be taken by anyone running a business with a minimum investment below 5 lakh and an annual turnover below 20 lakh. Any startup which doesn’t have an idea of business and needs to start on a low budget, this is the best form of registration.
It does not require any compliances and also the tax slabs depends on individual tax slabs. Also, once you’re business is growing, want to avail more of government benefits and want to get a legal status, then you can always convert it to a Private Limited Company or any other business registration of your choice.
Partnership registration is again a simple business registration which depends on the mutual understanding of the Partners. This is a popular entity because it’s easy to register than a Limited Liability Partnership (LLP).
In this form of business registration, it can be run and the profits can be shared by the partners.
Apart from certain basic compliances, no other compliances are involved in Partnership Registration. Also there is no problem of getting a name approved by Ministry of Corporate Affairs (MCA). Any name can be applied.
Limited Liability Partnership (LLP)
Limited Liability Partnership or popularly known as LLP is again a form of business registration which has to be formed in accordance with the procedures laid down by MCA. LLP is again similar to Partnership, but only thing is that the liability is limited to the contribution of the partners.
The minimum number of partners required is 2. Unlike a Partnership, in LLP there are certain benefits enjoyed by the partners like safeguard, legal status and more. The compliances involved are much relaxed than in a Pvt Ltd Company, hence many businesses prefer LLP today.
In LLP the reservation of the name is for 3 months and it also takes quiet a long time for the registration to be completed.
Many of them have confusions regarding Sole Proprietorship and One Person Company. Hope this would give you a fair understanding on the business entity form. Apart from these popular forms we also have Public Limited Company, Nidhi Company, Trust Registration, Foreign Company Registration and more.
To run a business it is not only these registrations, but also certain licenses are required. You need to understand the requirements upon consulting with few legal entities.
Now once you decide on the kind of registration to be done, there are certain formalities on how to do this business registration.
Today the Government of India has made the process easier by introducing online registration. You need to visit the MCA portal and check for the formalities and there it goes your registration is completed.
Online Business Registration Process includes:
- Applying of the names
- Getting the DSC and DIN number for the Directors
- Drafting and submitting MOA and AOA
- Creating of company PAN and Tan Numbers
- Incorporation Certificate
But, it’s easy to say than done. To complete the entire process you need to have a good hold and understanding of the process. To make things easier consultants like us have cropped up. There is no personal intervention required even if you have to get it done by consultants, only thing is you need to co-operate with us in submitting all the required documents.
Concluding my thoughts on this topic, for sure this the year 2019 will mark for more number of business registrations and also the government will pave way for better business structure which will avoid the occurrence of illegal businesses.