Most of the Company founders are coders, designers, marketers, and folks from different professions. One critical thing that most founders aren’t the best at are the basic legalities when it comes to starting and registering a company.

So, read carefully our detailed guide about Company.

What Is Company?

The Companies Act 2013 of India defines a company as-

A registered association which is an artificial legal person, having an independent legal, entity with a perpetual succession, a common seal for its signatures, a common capital comprised of transferable shares and carrying limited liability.

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Features & Characteristics Of A Company

Incorporated association: A company comes into existence when it is registered under the Companies Act (or other equivalent act under the law). It has to fulfil requirements in terms of documents (MOA, AOA), shareholders, directors, and share capital to be deemed as a legal association.

Artificial Legal Person: In the eyes of the law, A company is an artificial legal person which has the rights to acquire or dispose of any property, to enter into contracts in its own name, and to sue and be sued by others.

Separate Legal Entity: Company has a distinct entity and is independent of its members or people controlling it. A separate legal entity means that only the company is responsible to repay creditors and to get sued for its deeds. The individual members cannot be sued for actions performed by the company. Similarly, the company is not liable to pay personal debts of the members.

Perpetual Existence: Unlike other non-registered business entities, a company is a stable business organisation. Its life doesn’t depend on the life of its shareholders, directors, or employees. Members may come and go but the company goes on forever.

Common Seal: A company being an artificial legal person, uses its common seal (with the name of the company engraved on it) as a substitute for its signature. Any document bearing the common seal of the company will be legally binding on the company.

Limited Liability: A company may be limited by guarantee or limited by shares. In a company limited by shares, the liability of the shareholders is limited to the unpaid value of their shares. In a company limited by guarantee, the liability of the members is limited to the amount they had agreed upon to contribute to the massets of the company in the event of it being wound up.

Types of company

A company can be classified into various types depending upon the following requirements:

Classification of Companies by Mode of Incorporation

Royal Chartered Companies

These companies are formed under a special charter by the monarch or by a special order of a king or a queen. Few examples of royal chartered companies are BBC, Bank Of England, etc.

Statutory Companies

These companies are incorporated by a special act passed by the central or state legislature. These companies are intended to carry out some business of national importance. For example, The Reserve Bank of India was formed under RBI act 1934.

Registered or Incorporated Companies

These companies are formed/incorporated under the companies act passed by the government. These companies come into existence only after these are registered under the act and the certificate of incorporation is passed by the Registrar of companies.

Classification of Companies based on the liability of the members

The registered companies can be classified into the following categories based on the liabilities of members:

Companies Limited By Shares

A company limited by shares can be described as an incorporated business structure and is regarded as a legal person or entity, which is held responsible for its own debts.

It is the most popular company structure out there and is normally created by people who wish to earn profits from their business ventures.

The biggest advantage of such a company is that it can be started by any business irrespective of its size and this includes startups as well.

It can be owned by at least one person or more. These owners are also referred to as member or shareholders. In order to become a shareholder you should have at least one share in that particular company.

Here if business in question becomes insolvent a shareholder would only need to pay the price of his shares. Beyond that the company itself would be held responsible for all the debts incurred by itself.

In these companies the shareholders get shares of the profits made by the business. This is proportionate to the amount of shares held by them or the percentage of the same with respect to the total shares offered by the company.

In most cases the shareholders employ themselves as the directors of such a company.

Companies Limited By Guarantee

These companies may or may not have a share capital and the liability of each member is limited by the memorandum to the extent of the sum of money she/he had promised to pay in the event of liquidation of the company for paymenmts of debts and liabilities of the company.

Unlimited Companies

There is no formal restriction to the amount of money that the shareholder/member of the firm has to pay in the event of the liquidation of an unlimited company.

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Classification of Companies based on The Number of Members

Public Limited Company

A public company is a corporation whose ownership is open to the public. In other words, anyone can buy the shares of a public company. There are no restrictions to the number of members of a public company or to the transferability of shares. However, there are some other restrictions:

(In India) A public firm should have at least 7 members and 3 directors, and issue a prospectus or file a statement in lieu of prospectus with the Registrar before allotting shares.

Private Limited Company

A private company cannot be owned by the public; it restricts the number of members, the right to transfer its shares and prohibits any invitation to the public to subscribe for any shares or debentures of the business.

(In India) A private company is a separate legal entity with a suitable firm name, an address, at least 2 members and at most 200 members, and at least two directors with one being an Indian resident.

One Person Company

Indian private limited company has only one founder/promoter. The founder should be a natural person who is a country resident. There is also a threshold of paid-up capital (₹ 50 lakh) and average turnover (₹ 2 crores in 3 immediate preceding financial years) for a one-person

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How to register a company ?

Want to start a business but too intimidated by all the legal requirements for setting up a business ? Here are some of the procedures for registration under companies’ act 2013.

There are four critical steps to register a company in India.

Obtaining DSC (Digital Signature Certificate)

Obtaining DIN (Director Identification Number)

Filling a New User Registration or eForm

Incorporating the firm

Obtaining a DSC

The first step is to apply for the DSC of the directors also derived as Digital Signature Certificate. DSC is e-signature which enables you to complete the online company registration process in India. It takes two days to obtain DSC after submitting the documents.

The Information Technology Act, 2000 has included provisions for utilising digital signature on every submitted document in the form of electronics to make sure the authenticity and security of the documents are filed electronically.This is an authentic and secure way to submit a document electronically.

Similarly, all filings done by the LLP and companies under the government program of MCA21 are needed to be filed utilizing the digital signatures by the person who is authorized to sign the documents.

Obtaining DIN (Director Identification Number)

The second step is to acquire an identification number. Obtaining a DIN is mandatory according to the amendment act of 2006. Every intending and existing directors need to acquire DIN. To get this, file a DIN e-form.The form can be taken from the official State of Ministry of Corporate Affairs.

Once receiving the generated DIN, they should let know about their organisation about DIN. The director can let them know about their organisation using DIN 2 form. The company should then intimate the ROC (Registrar of Corporate) regarding all DIN of the directors via DIN-3 form.

In the case of any changes in DIN or if there is anything to be updated like personal details, address, etc., then the director needs to initiate the changes to be done through the eForm DIN- 4 forms.

Filling a new user registration or e-form

This part is about having an MCA portal or registered user account for e-Form filing, for different transactions, for online fee payment as business and registered user. Creating an account is free.

Incorporating the Firm

How to get a certificate of incorporation in India? Here you go! The final part of the registration online is incorporating the company name, notice for appointment of managers, secretary, and directors, and registering the opinion of the situation of office and office address.

Checklist of documents needed

DSC – Digital Signature Certificate

Form – 1 for Incorporation of business in India

Form-32 for particulars of managers, secretary, and proposed directors

Director Identification Number of all proposed directors

Original copy of the formal letter published by ROC about firm name availability

Form- 18 for address or situation of the proposed company.


Obtain a TAN card

Documents obeying act of shop and establishment if required

Registration document of STPI (Software Technologies Parks of India) if required

Both foreign and Indian directors need to have authorized agencies digital signature certificates

Obtain a PAN (Permanent Account Number) from the income tax department of India

Registration documents of IEC (Import Export Code) from foreign trade director general for international trade if required

RBI approval for investing in FIPB and India support of foreign companies if required.

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