COMPANY INCORPORATION

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What is Company Incorporation?

Company Incorporation is the legal process of forming and registering a company as a separate legal entity under the law.

Once incorporated, the company:

Has its own identity (distinct from its owners or founders)
Can own property, enter into contracts, sue and be sued
Is governed by the Companies Act, 2013 in India

What Happens During Incorporation?

The incorporation process includes:

Choosing the business structure (e.g., Private Limited, LLP, OPC, etc.)
Applying for Director Identification Number (DIN) and Digital Signature Certificate (DSC)
Filing incorporation documents with the Registrar of Companies (RoC)
Getting a Certificate of Incorporation (COI) from the Ministry of Corporate Affairs (MCA)
Getting PAN, TAN, and bank account for the company

Why Incorporation is Important?

Provides legal recognition
Limits the personal liability of the owners
Helps in raising funds
Enables perpetual succession (the company continues to exist even if ownership changes)

Common Types of Incorporated Entities in India

Type of Entity	Description
Private Limited Company	Popular for startups; allows equity funding
Limited Liability Partnership (LLP)	Flexible, low-compliance option for professionals
One Person Company (OPC)	For solo entrepreneurs
Public Limited Company	For large businesses intending to list on stock exchanges

Private Limited Company (Pvt Ltd)

A Private Limited Company is the most popular legal structure for startups and businesses in India. It offers limited liability, separate legal identity, and easy funding options.

Key Features:

Feature	Details
Governing Law	Companies Act, 2013
Minimum Members	2 Directors & 2 Shareholders
Maximum Members	200 shareholders
Legal Identity	Separate from its owners
Liability	Limited to shareholding
Name Suffix	Must end with “Private Limited”
Annual Compliance	Mandatory audit & ROC filings every year

Documents Required:

PAN & Aadhaar of Directors
Address Proof (Bank Statement/Utility Bill)
Passport-size photos
Business address proof (Rent Agreement/NOC)
Digital Signature Certificate (DSC)
Director Identification Number (DIN)

Benefits:

Limited liability protection
Easy access to equity funding (Angel, VC)
Suitable for Startup India and DPIIT recognition
Separate legal entity (company can own property, sue/be sued)
Easy to scale and sell shares

Best For:

Startups
Tech Companies
Businesses seeking investment or scalability

Limited Liability Partnership (LLP)

An LLP blends the flexibility of a partnership with the benefits of limited liability. It is ideal for professional services, consultants, and small businesses.

Key Features:

Feature	Details
Governing Law	LLP Act, 2008
Minimum Partners	2 Designated Partners
Maximum Partners	No upper limit
Legal Identity	Separate from partners
Liability	Limited to agreed contribution
Name Suffix	Must end with “LLP”
Annual Compliance	ROC filing + Statement of Accounts, audit only if turnover > ₹40 lakhs or contribution > ₹25 lakhs

Documents Required:

PAN & Aadhaar of Partners
Passport-size photos
Address proof
Digital Signature Certificate (DSC)
LLP Agreement
Registered Office Proof

Benefits:

Easy and cost-effective to incorporate
Lower compliance cost than Pvt Ltd
No dividend distribution tax (DDT)
Limited liability of partners
Suitable for family-owned or service-based businesses

Best For:

Small & Medium Enterprises (SMEs)
Professional firms (CA, architects, consultants)
Businesses with low external funding needs

Comparison: Pvt Ltd vs LLP

Feature	Pvt Ltd Company	LLP
Legal Entity	Separate	Separate
Liability	Limited	Limited
Minimum Members	2 Directors, 2 Shareholders	2 Partners
Annual Compliance	High	Moderate
Tax Rate	22% (plus surcharge & cess)	30% (if profit > ₹1 cr) or flat 30%
External Funding	Easy (Equity investment)	Difficult (No shares issued)
Ideal For	Startups, scalable businesses	Professionals, small businesses
Transfer of Ownership	Easy via shares	Requires LLP agreement change

Government Fees (Approximate):

Type	Government Fees
Pvt Ltd	₹7,000 – ₹12,000 (based on capital)
LLP	₹3,000 – ₹6,000

Note: Professional charges may vary depending on service providers (legal, CA, CS, etc.)

Final Advice

Choose Pvt Ltd if you plan to raise funding, scale nationally/internationally, or apply under Startup India.
Choose LLP if you’re a consulting firm, bootstrapped business, or professional partnership looking for limited liability with lower compliance.

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