How to Register a Small Business?

What are the Types of Small Businesses in India?

Below are the types of small businesses in India -

• One-Person Company (OPC): One-person company is a type of company that has only one person as its member/director. An OPC enjoys the benefits of a sole proprietorship and has the features of a company. An OPC has to follow lesser compliances than a private limited company.
• Limited Liability Partnership: LLP is a type of business structure where the contribution/liability of the members is limited to the amount they have agreed to. It was established with the Registrar of Companies (ROC) under the Limited Liability Act, 2008.
• Private Limited Company: A private limited company is regarded as a separate legal entity. It consists of shareholders and directors and all individuals are considered as the employees of the company.
• Public Limited Company: A public limited company is a voluntary association of people and is incorporated under the company law. It is regarded as a separate legal entity, and the member’s liability is limited to the proportion of shareholding.

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How to Select the Right Business Structure for Company Registration in India

Before you apply for registration of your business entity in India, ask yourself the following questions -

• How many owners or partners will your business have?
  If you are a single person who is providing the entire initial investment required for the business, your best choice is to go for a one-person company. However, if you have two or more members, then an LLP or a Private Limited Company is your ideal choice.
• What will be your initial investment?
  If your initial investment is less, you should go for a sole proprietorship, partnership, or an HUF. On the other hand, if you plan to invest a big amount initially, you can go for a private limited, public limited company, or an LLP. Both must be registered with the Ministry of Corporate Affairs (MCA)
• LLP Vs Private Limited
  Businesses with high turnover that need to raise money from equity funding can opt for a Private Limited company.
  LLPs offer flexible business operations and lower compliance, making them ideal for small businesses or start-ups requiring lower capital costs.
• Are you willing to take the entire liability of the business?
  Businesses like sole proprietorships, partnerships, and HUFs have unlimited liability. In other words, in case of any default, the entire money can be recovered from its members or partners in the ratio of their profit sharing.
  On the other hand, LLPs and companies have limited liability, and the members' liability is limited to the amount of contribution and value of shares held by each member.
• What are the tax rates applicable?
  The income of sole proprietorship and HUF is taxed at the normal slab rates. But in the case of other business structures like private limited companies, LLP, and public limited companies, the income is taxed at a flat 30%.
• How do you plan to arrange funds for business?
  If you want to raise funds for your business, make sure your business structure is registered, as unregistered business structures find it hard to get investment. You can also consider taking the help of an expert to choose the right business structure for yourself.

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How to Register a Business In India

If you are wondering how to register a small business in India, then follow the below-mentioned steps -

Step 1 - Digital Signature Certificate

Since the process of company registration has become completely online, digital signatures are required to file forms on the MCA portal. It is mandatory for all the proposed directors of the MOA(Memorandum of Association - MOA contains the essential details about the company) and AOA( Article of Association includes rules and regulations designed by the company) to furnish DSC(Digital Signature Certificate). You can obtain a DSC from the certifying authorities recognized by the government. The subscribers of MOA and AOA should obtain class 3 DSC certificates.

Step 2 - Director Identification Number (DIN)

DIN, or director identification number, is a number that helps identify the directors of a company. Anyone who wants to be a director in a company has to obtain a DIN number. You need to submit the DIN number and address proof of all the proposed directors and members of the company in the company registration form.

Step 3 - Registration on the MCA Portal

Before you apply for company registration, you have to fill a form and submit it on the MCA portal. The company’s director has to register on the MCA portal to fill out the form and submit the documents. The director can log in to the MCA portal, and get access to the e-filing forms, and view public documents after registration.

GST Registration

Under Goods And Services Tax (GST), businesses whose turnover exceeds the threshold limit of Rs.40 lakh or Rs.20 lakh or Rs.10 lakh as the case may be, must register as a normal taxable person. It is called GST registration.
For certain businesses, registration under GST is mandatory.

Step 4: Certificate of Incorporation

After the registration application is filled, the registrar of companies will examine the application and issue a certificate of incorporation of the company upon verification.

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What is the Checklist for Small business Registration in India?

• Minimum number of partners/directors -
  • OPC (One Person Company) - Minimum 1 director
  • Private Limited Company - Minimum 2 directors
  • Public Limited Company - Minimum 3 directors
  • LLP - Minimum 2 partners
• Minimum number of members required in a company
  • OPC - Minimum 1 member
  • PLC - Minimum 2 members
  • Public Limited Company - Minimum 7 members
• A DSC is required for all directors/partners.
• DIN for all company directors and DPIN for all designated partners of LLP.
• A company name that is unique and not similar to any other existing name.
• Authorised capital in case of a Private Limited Company, OPC or PLC.
• Capital contribution of the partners of the LLP.
• MoA and AoA for OPC, or Private Limited Company.
• LLP agreement between the partners.
• Proof of company’s or LLPs registered office.

It's important to note that the registration process and requirements may vary depending on the business structure and state in which you're registering. It's advisable to consult with a legal professional or chartered accountant to ensure compliance with all applicable laws and regulations. Book an eCA with Tax2win Now!

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