Company Formation in India
Updated on Friday 08th December 2023
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India is a great place to form a company and as a future investor you should choose which business entity type best suits your interests. There are five types of business entities in India:
- partnership firm;
- sole proprietorship;
- private limited liability company;
- public limited company;
- limited liability partnership.
Steps for setting up a company in India
If you wish to set up a company in India, the first things that you should take into account are the following: decide on at least four names for your future company and then get the one name you want to be approved.
Of course, you first need to make sure that the name has not been used by another company. The words "public limited" will be at the end of the name you choose in case you prefer a public type of company and "private limited" in case you choose the private type.
For the company registration procedure in India you also need to have a Digital Signature Certificate required in order to prove your identity in various situations. Last, but not least, as of 2006, you need to apply for a Director Identification Number as well.
Requirements for opening a private limited liability company in India
Then, as we have mentioned above, you can choose if the company is going to be private, public or of another type. As businessmen and entrepreneurs usually choose to incorporate private limited liability companies in India, for this type of company, one should know there are some requirements to be met:
- a minimum number of 2 directors;
- minimum 2 shareholders (with the specification that the shareholders can be directors at the same time and vice versa);
- a minimum required capital of INR 100,000, (about EUR 1,400).
For the Indian private limited liability company, the aspects presented below by our consultants in company formation in India represent the standard conditions of this legal entity:
- it can have minimum 2 members and maximum 200 (members refer to shareholders);
- the minimum number of directors is 2 and the maximum is 15;
- it is also worth knowing that at least 1 director must have residency in India;
- the ownership of shares can be transferred from current shareholders to third parties;
- given that the company is formed as a private one, the subscription of public shares is not allowed (those interested in this option can set up a public company);
- the company must comply with the Indian accounting formalities.
Of course, just like in the case of all other entities with legal personality, investors must complete the formalities for the setup of a corporate bank account. You can rely on this procedure on our consultants, who can address local banks on matters concerning the types of accounts, the yearly fees and services they apply, so that you can select the most suitable option.
It may also be necessary to obtain business permits and licenses, depending on the field of activity you will develop. If your company hires employees, is the company’s responsibility to prepare the necessary paperwork and registration formalities associated with employment, such as employment contracts, addressing the Ministry of Labor and others.
It may also be necessary to obtain business permits and licenses, depending on the field of activity you will develop. If your company hires employees, is the company’s responsibility to prepare the necessary paperwork and registration formalities associated with employment, such as employment contracts, addressing the Ministry of Labor and others.
Companies must follow many national acts regulating employment, safety in the work environment, transparency concerning employment and many others, such as the Employees Provident Fund & Miscellaneous Provisions Act 1952, the Employees State Insurance Act 1948, etc.
Rules and regulations on employment can vary based on the field of activity, therefore if you want to start the process of company formation in India, we advise you to request in-depth legal assistance from our team of specialists, who can advise you in any legal matter concerning work and workforce.
Important matters for company formation in India
Investors have to be aware of the local regulations, basic requirements they need to comply with, minimum capital to be invested and many others. When opening a company in India, the following must be respected:
- the rules for the trading name assigned for the company must follow the regulations of the Companies Act 2013 and the Companies (Incorporation) Rules 2014;
- businessmen are required to obtain a Digital Signature Certificate (DSC), in accordance with the rules of the Information Technology Act 2000;
- those who will set up a structure with legal personality must prepare the Articles of Association, where the company’s rules are stated in accordance with the Section 5 of the Companies Act 2013;
- the registration of the company is completed through the online platform of the Ministry of Corporate Affairs (MCA), by submitting the forms SPICe – INC – 32 (Simplified Proforma for Incorporating Company electronically);
- for those who opt to open a company in India as a limited liability partnership, the rules of the Limited Liability Partnership Act 2008 will apply.
In order to open a company in India, a foreign investor must also know that the process itself should not take more than 15 days and that the costs of the company formation process depend on the share capital. Once a foreign company is registered in India, it is seen as a local Indian company and therefore it is treated as such.
Income taxes must be paid after a Permanent Account Number is obtained. The Revenue Department is the responsible authority for issuing this number. If the company is liable for withholding taxes, then it also has to obtain a Tax Deduction Account Number.
Furthermore, the company formation procedure in India does not require the physical presence of the director during the entire process, as the documents can easily be sent there; however, it is important to mention that some papers need to be certified in your home country.
Our consultants can also help you in offshore company setup (for a limited liability company or another company type - the procedure can be different from one country to another, in terms of capital, number of accepted shareholders - minimum and maximum, transfer of ownership and many others).
When deciding to start the process for offshore company formation, many aspects have to be taken into consideration, including immigration formalities. We can also help you set up an offshore bank account for corporate purposes.
Another component of the offshore incorporation process refers to employment matters (you can employ local and foreign workforce) and for all these, our team remains at your disposal. For more information about how to open a company in India, please contact our local company incorporation specialists.
Our consultants can also help you in offshore company setup (for a limited liability company or another company type - the procedure can be different from one country to another, in terms of capital, number of accepted shareholders - minimum and maximum, transfer of ownership and many others).
When deciding to start the process for offshore company formation, many aspects have to be taken into consideration, including immigration formalities. We can also help you set up an offshore bank account for corporate purposes.
Another component of the offshore incorporation process refers to employment matters (you can employ local and foreign workforce) and for all these, our team remains at your disposal. For more information about how to open a company in India, please contact our local company incorporation specialists.