Register Your Start-up

Registering a start-up is a big challenge in India. It was more difficult in earlier when start-ups faced with the lack of money, sources, information and legal advice. As per Kunal Mehta, Co-Founder, Director, Forysta Ventures Limited, “When we started, we did not have any idea about a privately held, a partnership or proprietorship entity. We got all required information from our CA and options were laid out before us with a comparative analysis. We went ahead with his suggestion to form a privately held public limited company and launched SalenOffers.com in 2009.” He says, “However, today the situation is different. We have enough sources and planning to launch new ventures under experts’ guidance.” The situation is similar for many other start-ups as in early days, they have lack of money to hire any consultant for registering their companies. They prefer to register their companies by their own and face the hassles. Anand Shrivastav, Chairman and MD, Beam Money, explains, “It requires a number of online and offline submissions and take a long time to get registered. For example, in our case, it took us almost five-and-a-half years to get regulatory approval from RBI.” May the process of registration is pestering, but every start-up wants to register his company earliest as the greater trust attached with the company that is registered with ROC. It also protects the company in any financial loss. The other benefits include easier access to capital (equity and debt) and relatively easier approvals from regulators also. Now, the question is how you can register your company and who the helping body in this matter? Here, we put across the detailed procedure and required information on registration of a start-up company.

Before Registration

Before the registration, every entrepreneur needs to decide on the form of company – whether he wants a partnership, sole proprietorship or a limited company. Different form of companies needs to follow different procedures for registration. However the basic requirements like name and firm address, residence address, photos, identity proof remain same for all. After collecting all these documents, the process of registering your company with ROC starts. 

Registration Procedure

The registration process needs to follow the several steps. It starts with checking the name availability from the Ministry of Corporate Affairs (MCA). It can be done online from MCA website. As per the information by CA. Manoj K Pahwa, Manoj Pahwa & Associates, Chartered Accountants, “Private limited and limited company can be registered by filing certain specified e-forms with MCA, which  is the governing body in India that is a liable for the administration of the Companies Act, 1956, other allied Acts and rules and regulations framed thereunder mainly for regulating the functioning of the corporate sector in accordance with law, i.e. MCA.” First of all you, need to apply for allotment of Director Identification Number (DIN)) for all proposed directors of the company. For applying DIN, you required, latest photograph, PAN card copy, address proof and an affidavit on non-judicial stamp paper. Moreover, attestation by a professional, such as CA/CS, is required on form. After that you can apply for Digital Signature Certificate (DSC) on selected director name and check for the availability of the name in the e-form 1A.”

Following that the memorandum and articles of association are the other two significant documents needs to be submitted to the ROC. The Memorandum of Association sets out the constitution of the company and the Articles of Association contains the rules and regulations of the company for the management of its internal affairs. Pahwa says, “The memorandum states the objective of company and the articles framed the rules and regulations for fulfilling those objectives.” After submitting all these documents, the company can receive a certificate from ROC to start work.

Service Tax Registration

It is a well- known fact that almost services are taxed in India and are being covered under purview of Service Tax except some exceptions. Therefore, to provide taxable services and to comply with law prevalent in India one has to take compulsory registration under Service Tax subject to limit of value taxable services provided in last financial year. Pahwa informs, “If you are liable for ST Registration and do not have taken it then you will be liable for a penalty of Rs. 5,000 or Rs. 200 for every day and stop working till the date of compliance.”

Once you done with all these formalities then you can apply for PAN (Permanent Account Number) and TAN (Tax Account Number). Pahwa informs, “To get a PAN number, you need to fill the Form 49A, and submit it to authorised assessing officer of the Income Tax Department. When you have PAN after that you can apply for TAN.” For the formalities of TAN you can approach National Securities Depository Ltd (NSDL), which has made it easy for you to get it via online. Finally, register for the profession tax at the state-level Profession Tax Office. Further, you need to register with Employees’ Provident Fund Organisation (EPOF) and at the regional office of the Employees’ State Insurance Corporation (ESI) for medical insurance.

CA Role

The registration process is a bit complex, and it is difficult for you to understand all requirements and legal formalities. You would need to submit certain documents based on the type of firm you wish to register. The best way to do all these work through a full-time practicing CA. There are a number of consultancies like Manoj Pahwa & Associates, MyCompanyRegisteration.com and startbizindia, that help you to register your company without any botheration. As far as the fees are concerned, the statutory fees payable to ROC is as per the Company Act and is dependent upon the authorised capital of the company to be incorporated. In addition to the statutory fees there would be other expenses, for example legal vetting of Memorandum and Article of Association and stamping. The registration fees generally range anywhere from Rs 15,000 to 50,000, give or take, depending on the professional fees which your CA charges for such work. Professional fees vary from CA to CA.

Analysis

When you are private or public limited registered company clients and customers acknowledge you. They have more trust in you in comparison proprietorship or partnership based firm. Hence, registered companies are more likely to generate confidence and trust when it comes to awarding a project or contract. However, according to a start-up point of view, sole proprietorship or partnership firm would be cheaper. In this case, you hardly need any CA or legal advisor. You just need to get a bank account in the name of your company. However, when you wish to convert your company to a private limited, you may need the guidance of a CA.

The Bottom Line

Before incorporating limited firm, it is advisable to start-ups to initiate the idea as a proprietorship first. Once they see positive results for concept, only then it would be prudent to incorporate company because as per Indian laws to incorporate a company is the easier but maintain the same is much tougher and costlier. Registration is not that big a hurdle but crossing it is critical. So focus on the things that you need to do to get your operations kick started and let professionals handle the registration of your company.