1. Choose business structure
The very first step is to select the business structure your choose of business structure affects the way you file for taxes, your everyday tasks, and how much your personal assets are at risk if your business fails. Because the business structure you choose affects so much, it’s important to choose a business structure suited to you.
Below is listed a brief overview of some of the most common business structures.
- Sole proprietorship: This is the default business structure. If you never select a business structure but operate your business, then you are considered a sole proprietorship. In a sole proprietorship your business and personal assets and liabilities are not separated.
- Partnership: This is the business structure for two or more people that own a business together. There are various types of partnerships. In a limited partnership (LP) there is typically one partner (the general partner) who is exposed to personal liability while the other partners (the limited partners) enjoy limited liability. Limited liability partnerships (LLP) protect all partners from the debt of the business.
- Limited liability corporation (LLC): This business structure allows the business owner to protect personal assets from the business’ liabilities. The profits and losses of an LLC are typically taxed as personal income or loss to the members.
- C-Corp: This structure makes your business a separate entity from the owners (the shareholders). That means the business can be taxed, make a profit, or be held legally liable for its actions separate and distinct from the shareholders. For this reason, this structure offers the most protection for an owner’s personal assets. Because the IRS typically views a C-Corp as a separate entity for tax purposes, it is possible to be taxed twice: once when the C-Corp makes a profit, and again when dividends are paid to shareholders.
2. Find a location
Once you are done selecting the business structure which is best suited for you, you will need to choose a location. This doesn’t mean that your business needs to have a brick-and-mortar location. As far as registering your business/company goes, it means the address you use for tax filings, receiving important documents from government agencies, or your business bank account.
3. Selecting a company name
As per the Name Availability Guidelines 2011, while selecting the company name, the following points should be considered:
- The proposed name should not be undesirable or is identical with or too nearly resembling with the name of a Company / LLP (Limited Liability Partnership) already registered or names approved by ROC. For this purpose, the name availability search facilities provided on the portal of the Ministry of Corporate Affairs (MCA) shall be used.
- The proposed name is not infringing any registered trademarks or a trademark for which an application is filed.
- The proposed name is not in violation of the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950 as amended from time to time.
- The use of the proposed name(s) should not constitute an offence under any law.
- The proposed name is not offensive to any section of people.
4. Register your business name
Next comes registering your business/company name. Registering a business/company name is part of the registering process of registering distinct entities like LLCs and corporations. But if you’re starting a sole ownership or partnership operating under a name that isn’t your own, you may need to file a DBA (“doing business as”) name.
A DBA can also be used by existing LLCs and corporations to register other businesses under them. For example, if you own a cafe and want to open another one under a different name, you would file a DBA. It keeps both the first and second cafe as one legal entity but with two different names.
4. – Obtaining Direct Identification Number (DIN)
Obtain Directors Identification Number (DIN) for proposed Directors of the new Company Registration.
DIN is a unique Director identification number allotted by the Central Government to any person intending to be a Director or an existing director of a company.
It is an 8-digit unique identification number which has a lifetime validity. Through DIN, details of the directors are maintained in a database.
DIN is specific to a person, which means even if he is a director in 2 or more companies, he has to obtain only 1 DIN. And if he leaves a company and joins some other, the same DIN would work in the other company as well.
5. Obtaining Digital Signature Certificate (DSC)
A Digital Signature Certificate is a secure digital key that is issued by the certifying authorities for the purpose of validating and certifying the identity of the person holding this certificate. Digital Signatures make use of the public key encryptions to create the signatures.
A digital signature certificate (DSC) contains information about the user’s name, pin code, country, email address, date of issuance of certificate and name of the certifying authority.
6. Checking Name Availability
The MCA (Ministry of Corporate Affairs) has a regulatory framework set up that you have to consider while naming your company. If your company name does not fall under the set of rules given by MCA, your application might be rejected
File Form 1A with the ROC for proposed name approval
7. MOA/AOA and Forms
MOA is a document containing the charter of a company and fundamental objectives which the company seeks to achieve. The registration of a company depends fundamentally on how effectively the MOA is framed. Articles of Association, on the other hand, contain the guidelines and other rules and regulations to regulate the internal management of the company.
8. Stamping
Make an application to the Superintendent of Stamps or an authorized bank requesting for stamping of the Memorandum of Association and Articles of Association.
9. Filing with Registrar of Companies (ROC)
Present the required documents along with the registration fee to the Registrar of Companies to get the certificate of incorporation.
10. Certificate of Incorporation and Company Seal
Company seal (sometimes referred to as the corporate seal or common seal) is an official seal used by a company. Company seals were predominantly used by companies in common law jurisdictions, although in modern times, most countries have done away with the use of seals.
11. Certificate of Commencement of Business (only for public company)
As per the Companies (Amendment) Ordinance 2018, there is a requirement for all the companies registered on or after 2 November 2018 to file a certificate of commencement of business. Form 20A is a declaration filed by the directors within 180 days of the date of incorporation of the company.
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