Anyone who is thinking to start a business must understand the comprehensive process of formation of a new company. This includes legal, administrative, and financial processes. These processes are important to lay a strong foundation of the businesses. This blog is a complete guide to explain the major steps of company formation.

Choose the type of business

The very first step of laying the foundation of a business is to choose the type of business you want to start and this includes the nature of the business, number of partners involved, liability, and the goals. Below are the types of businesses explained.

• Private Limited Company: This is the most popular form in India as it allows businesses to have a separate legal identity and ease of raising capital.
• Public limited company: These are the enterprises looking to raise funds from the public.
• Limited Liability Partnership: This is a hybrid business model that offers a partnership and a company with limited liability protection.
• One Person Company: This is a new type of structure that needs a single person to form a company.

Digital Signature Certificate (DSC) and Director Identification Number (DIN)

After choosing the suitable business type, the next step for the formation of a new company includes the digital signature certificate (DSC) and director identification number (DIN). 

• Digital Signature Certificate (DSC): The DSC is an important certificate that is required for the online submission of documents as it provides a digital form identity or authorized signatories of the company.
• Director Identification Number (DIN): Every business owner must have a DIN before appointing their director. 

Approval of Company’s Name

After having the DSC and DIN, the company needs a name. The name of the company should be according to the guidelines set by the Ministry of Corporate Affairs (MCA). One must follow these key considerations: 

• Visit the MCA’s website to check if the name you proposed is available or not.
• Make sure that the name is not already existing or registered with any other business.
• Fill out the Reserve Unique Name form online with two name suggestions

Incorporation Filing

After the name approval, one can move forward with the incorporation process. The formation of a new company requires filing the required incorporation documents. 

• Memorandum of Association (MoA): This includes the scope of the company and its objectives.
• Articles of Association (AoA): This includes the internal management structure, rights of the owners, and other regulations.
• Form INC-32 (SPICe): This is an incorporation form which includes different forms like PAN and TAN application. 

Incorporation Certification

After all the documents are submitted, the Registrar of Companies reviews the application, and if everything is valid and found in order, the ROC issues a Certificate of Incorporation, which means the legal formation of a new company. This certificate also includes the CIN, which means Corporate Identification Number, which signifies that the company is now a legal entity. 

Compliance after Incorporation 

Post-incorporation tasks must be completed after the formation of the company: 

• Bank Account: A corporate bank account is required in the company’s name to manage all business transactions.
• GST Registration: If the business has a turnover of more than 40 lakh then they must register for GST, which stands for goods and services tax.
• Registration for other taxes: Other taxes can be applicable depending on the nature of the business.
• Annual Audits and Filings: Businesses should be ready for the annual audits and tax filings. 

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.