Incorporation of a company is a legal process in which a business entity is created and registered with the concerned government authority. Through this process, a company is granted a legal identity that separates it from its owners. The incorporated company has the right to acquire assets, make contracts, sue, and be sued in its name.
This incorporates the procedure includes the incorporation of the company, which includes some legal steps and involves business structure, obtaining some approvals or consents, preparation of legal documents, and ultimately, registration with MCA and follows all provisions of corporate law with various benefits like limited liability, perpetual succession, and much more. In this article, the meaning and types of incorporation of a company, the steps for incorporation, and the advantages of the same in India are discussed in detail.
Incorporation of A Company Meaning
It refers to the legal process of forming a business entity that acts independently of the owners. Incorporation is required by businesses intending to operate within a structured legal framework.
The certificate of incorporation of company law certifies the existence of a company by legal provisions. In this respect, after its incorporation, a company acquires the capacity to undertake business operations, enter contracts, and acquire and own property. It can even request bank loans or investments. Incorporating a company protects business owners with limited liability, assures business continuity, and increases financial credibility.
Key Features of the Incorporation of a Company
Incorporation of a company is a legal process in which a business entity is created and registered with the concerned government authority. Through this process, a company is granted a legal identity that separates it from its owners. The characteristics of incorporation of the company are:-
Separate Legal Identity
The business will be independent of the owners. An unincorporated business is legally viewed as a form of its owner. In such cases, owners risk their assets if there is a possibility of losses and/or lawsuits on the business side. A company acquires a separate legal identity. Thus, incorporation separates the company as a new “person” from its owners under the eyes of the law.
Limited Liability
The liability of shareholders is limited to their investment. If the business cannot pay, the personal assets of the owner or shareholder will not be attached to settle liabilities or debts. This makes incorporation an attractive proposition for entrepreneurs because it reduces the financial risk associated with a venture.
Perpetual Succession
It can survive even after change of ownership. It is different from a sole proprietorship; it ends after the death of the owner but with a company incorporated in the company, the business continues without regard to a change in ownership or management.
Transferability of share
There are certain structures that make shares easily transferable. This means investors and business people can sell stakes or raise capital through the transfer of shares. Companies can expand without taking away their operations since it will be on new setups. Registration and incorporation are the keys for a business that desires stability and growth over a long time.
Incorporation Procedure of A Company
Legal and procedural steps of incorporation of a company. That ensures the formation of the Company is as precise and exactly consistent with Indian Corporate Laws.
Step 1. Identify the Nature of the Company
Lastly, just before starting to incorporate, there is the question of choosing a company. Forms of companies vary along the lines of liability protection, tax considerations, and compliance requirements.
Types of Companies in India
- Private Limited Company – Suitable for small to medium businesses requiring limited liability protection and wanting to raise funds privately. Requires at least two shareholders and directors.
- Public Limited Company – Best for large businesses planning to raise funds from the public. Requires a minimum of seven shareholders and three directors.
- One-Person Company (OPC) – Suitable for solo entrepreneurs who want limited liability but complete control over the business.
- Limited Liability Partnership (LLP) – A flexible structure combining the benefits of a partnership and a corporation, ideal for professionals and small business owners.
Choosing the proper business structure is essential because it will affect tax obligations, liability, and regulatory requirements. Before making a decision, entrepreneurs should consider factors such as ownership restrictions, compliance costs, and future scalability.
Step 2: Select a Unique Company Name
The name of a company plays a very significant role in branding and legal recognition. The business name must be unique and adhere to MCA’s naming guidelines. It is essential to do a name search before applying to ensure that another entity does not already register the name selected.
Guidelines for Name Selection
- Uniqueness: The name should not be the same or resemble any other registered company. A unique name helps avoid legal disputes and ensures brand uniqueness.
- Compliance with the Companies Act, 2013: The name should not violate the government’s naming rules or contain prohibited words. Specific terms like “National” or “India” may require special approval.
- No Trademark Infringement: The chosen name must not conflict with any trademarked name. Business houses have to check their Intellectual Property India database so that, in the long run, legal cases are not dragged.
One can check for name availability using the RUN (Reserve Unique Name) service at the MCA website. After approval of the name, it is held for 20 days, during which the incorporation application must be submitted.
Step 3: Apply for a Digital Signature Certificate (DSC)
As all incorporation documents must be submitted online, DSC is essential. DSC facilitates the secure submission of electronic documents.
How to Apply for DSC?
- Choose a Certifying Authority: DSC can be obtained only from the government-approved CA.
- Provide PAN and Address Proof: Directors and authorised signatories must submit PAN, Aadhaar, and a passport-sized photograph.
- Biometric Verification: Some CAs may demand biometric verification for security reasons.
- DSC in USB Token Format: The DSC is kept in a secure token for signing digital documents.
DSC must sign the incorporation application, MoA, AoA, and other filings. Without a DSC, the incorporation process cannot be carried out.
Step 4: Apply for Director Identification Number (DIN)
This is the Director Identification Number a person should be provided with when intending to be a company director. In most instances, a DIN must be provided to every director before incorporating the company.
Steps to Obtain DIN
- File Form DIR-3 This filing form on the MCA portal requires a new director to complete it.
- Submit Supporting Documents: PAN, Aadhaar, and proof of address must be uploaded for verification.
- Pay the Applicable Fees: A small fee is taken to be registered under DIN.
- MCA Verification & approval: The MCA verifies his submitted application and issues the DIN.
If you are already a director, the director must apply for another one. One DIN can be used for more companies.
Step 5 Draft Memorandum & Articles of Association
The Memorandum of Association (MoA) and Articles of Association (AoA) are the two important documents that outline the structure and rules of a company. These must be carefully drafted and submitted during the incorporation process.
Memorandum of Association (MoA)
- Company Name & Registered Office Address – The official address of the company.
- Business Objectives – A clear description of the activities the company would undertake.
- Liability Clause – Whether the liability of shareholders is limited or unlimited.
- Capital Clause – The total authorised capital of the company.
Articles of Association (AoA)
- Rules for Company Governance – Guidelines regarding the roles of directors, decision-making, and rights of shareholders.
- Shareholder Rights & Responsibilities – The rights, obligations, and privileges of shareholders.
- Voting Rights & Meeting Procedures – How company decisions are made and documented.
Both MoA and AoA must be signed by all shareholders and filed with the MCA at the time of incorporation. These documents state how the company will function legally.
Step 6: Filing of Incorporation Application
SPICe+ is an integrated online form used for company incorporation in India. It comprises applications for:
- Company registration
- PAN & TAN issuance
- GST registration (optional but recommended)
How to File the SPICe+ Form?
- Log in to the MCA portal and select the SPICe+ form.
- Fill in company details, including name, type, and registered office address.
- Upload documents, including MoA, AoA, and DSC-signed documents for directors and shareholders. Apply and pay the prescribed fees.
- After verification, the MCA processes the application and hands over the certificate of incorporation of company law.
Step 7: Get a Certificate of Incorporation
Once all documents are verified, MCA issues the certificate of incorporation, proving that the company is legally registered. The certificate includes the following details:
Corporate Identification Number (CIN)
- Company name and incorporation date
- Company type and registered office address
After getting this certificate, the company can begin operations since it has been officially incorporated.
Step 8: PAN, TAN, and Bank Account Application
Once the certificate of incorporation reaches the company’s office, an application for the Permanent Account Number and Tax Deduction and Collection Account Number must be obtained because these PAN and TAN will be crucial for getting tax compliance. These are provided when filing income tax returns or collecting TDS tax deducted at Source.
Application Process of PAN and TAN
- The application is submitted through the SPICe+ form, which integrates these registrations with incorporation.
- After approval, the PAN and TAN are issued to the company’s registered office.
- The company must also open a corporate bank account in its registered name.
- Banks generally require the certificate of incorporation, PAN, MoA, AoA, and board resolution authorising account opening.
- Without PAN and TAN, a company cannot legally conduct financial transactions or comply with tax regulations.
Step 9: Registration of GST and other business licenses
Any business with an annual turnover exceeding ₹20 lakhs or ₹10 lakhs in a special category unique must be registered under the Goods and Services Tax (GST). GST registration empowers businesses to collect and pay taxes on sales.
Steps for GST Registration
- Log on to the GST portal and upload your application form.
- Input company information, including PAN, certificate of incorporation, and bank account information.
- Upload proof of address and authorised signatory details.
- The company receives a GST Identification Number and GSTIN after verification.
- Companies may need to register for MSME if their business deals with small industries, IEC for import export, or FSSAI if it involves food products.
Step 10: Post-In.corporation Compliance
After incorporation, the company has to fulfil legal compliances to keep its status active. Some of the significant post-incorposignificantn compliances are as follows:
- First Board Meeting: The directors shall hold their first meeting and record minutes within 30 days of incorporation.
- Appointment of Auditor: A company must appoint a Chartered Accountant as its statutory auditor within 30 days.
- Share Certificates: Share certificates shall be issued to shareholders within 60 days of incorporation.
- Filing Annual Returns: Companies file MGT-7 (Annual Return) and AOC-4 (Financial Statements) annually in the MCA.
- Keeping Statutory Registers: Under the Companies Act 2013, a company has to keep registers regarding the directors, the shareholders, and board meetings.
Failure to abide by these laws would attract some sort of punishment or even removal of the license.
Documents for Company Incorporation
Identification proof, residence proof, and compliance-related documents of directors, shareholders, and the registered office are required for company incorporation. Here is a comprehensive list of essential documents that must be presented for the incorporation of a company.
Directors & Shareholders Documents
The following documents shall qualify as proof of incorporation for directors and shareholders.
Identity Proof (Any One of the Following)
- PAN Card (For Indian nationals compulsory)
- Passport (For international citizens compulsory)
All Indians, along with foreign nationals, have to furnish a PAN Card. They also have to get a notarized and apostille copy of their passport. That will be genuine proof for either taxation or lawful purposes.
Address Proof (One of Any of the Following)
- Aadhaar Card
- Voter Id
- Driving license
- Passport
The name of the address proof has to be the same as that on the PAN card. The document serves to verify the residence address of company directors and shareholders.
Residential Proof (Any One of the Following, Not Older than 2 Months)
- Bank Statement
- Utility Bill (Electricity, Gas, Water, or Telephone)
- Credit Card Statement
The proof verifies the current residence of directors or shareholders and should not be more than two months old.
Address of Registered Office Address
The documents that are considered for address proof of registered office are:-
Proof of Address (Any One of the Following)
- Electricity Bill
- Water Bill
- Property Tax Receipt
- Gas Bill
The document must be recent and not more than two months old. It serves to prove that the registered office location is not false.
No Objection Certificate issued by the Owner of the Property
If office space is rented, then a No Objection Ceracertificatee is required from the landlord. This document guarantees that the owner does not object to using that address to register the business.
Rent Agreement or Lease Deed (if rented)
If it is a rent sIt should have a notarized rent agreement ifce for the registered office, then it should depict the terms and conditions of renting and usage purposes for business reasons.
Documents for DSC
- Colour Passport size Photograph
- Recent colour
- Self-attested PAN Card
- Self-attested Aadhaar Card or Passport
- For foreign nationals, Self-attested Address Proof- Utility Bill or Bank Statement
A DSC is filed for e-filing incorporation documents. Each director and authorised signatory will apply for a DSC during this process.
DIN Documents
- PAN Card (For the Indian citizen compulsory)
- Passport (For Foreign nationals)
- Address Proof through Aadhaar, Voter ID, or Driving License
- Residential Proof through Bank Statements, UtilityBillsl, and Credit Card Statements
- Recent Passport-size Photograph
Din has to be applied for by the person who will become a company’s director, and it gets issued by the Ministry of Corporate Affairs.
Memorandum of Association (MoA) And Articles of Association (AoA) Documents
MoA and AoA are crucial company documents that define how the business will operate legally.
Memorandum of Association, MoA
This document mainly gives the business’s intention to the shareholders’ profiles with the capital structures.
Articles of Association (AoA)
It includes the governance rules, roles of directors, and decision-making process. These documents need to be signed, stamped, and attested before submitting.
Other Required Documents
- Declaration by Directors and Shareholders (Form INC-9): Confirms compliance with the Companies Act, 2013.
- Consent to Act as Director (Form DIR-2): This confirms that appointed directors have accepted their roles.
- Board Resolution (In Case the Shareholder is a Company); If the existing company invests in the new entity.
All these ensure that the company has strictly followed the company strictly follows all legal and compliance requirements for incorporation.
Why Incorporate a Company in India?
Several entrepreneurs ask why they should go through the hassle of the incorporation process as it is pretty complex compared to conducting business as a sole proprietorship or partnership. The answer lies in the benefits offered by the incorporated companies.
- Legal Protection & Limited Liability- This process safeguards the owner’s business assets as the liability of an individual company shareholder gets restricted after it becomes incorporated, after all, following their percentage in a firm.
- Business Credibility & Brand Recognition – It is very natural that registered companies enjoy the investor’s greater trust, as does the bank and other customers.
- Perpetual Succession & Ownership Transferability – An incorporated business lives on even if the owner changes, resulting in long-term stability.
- Easy Access to Financing & Tax Benefits – Companies can raise funds through equity, bank loans, and venture capital investments. They also get tax incentives and deductions not enjoyed by unregistered businesses.
Advantages of incorporating a company that makes this such an important milestone in the business entity’s further growth and law safeguarding.
Incorporation of Company FAQs
1. What documents are needed for Company Incorporation
The documents are PAN, Aadhaar, Proof of Address, DSC, etc. MoA, AoA, and Directors Declaration.
2. How company incorporation is performed in India
Company incorporation: The company’s processes involve registration of DIN, DSC selection, filing forms of incorporation, and receipt of a certificate of incorporation.
3. How long does it take for a company to incorporate?
These working days depend on the documentation verification and the MCA’s approval.
4. What is the benefit of incorporation of the company?
Some of the advantages of incorporation are: There is limited liability, perpetual succession, credibility, and easier funding.
5. Can a foreigner incorporate a company in India?
Yes, foreign nationals can register a company in India, with government approval, following the registration and incorporation of company laws.
