Incorporation of a Company requires able advise and guidance of a professional, expert in the field, in terms of assessing the Correct Share Capital requirement, structuring of the Share Capital, Choosing the apt Name for the Company, listing of the various Objects of the company, etc.
ADVANTAGES OF A COMPANY
Though it is not as easy to form as a Sole Proprietorship, a Company, whether it is Private Limited or Limited, has many advantages, as briefly stated below
- Limited Liability
A Private / Public Limited Company has limited liability conferred on its Directors / Shareholders. The liability is limited to the extent of the Sharecapital invested in the Company.
- Status as a Separate Legal Entity
A Limited Company enjoys the status of a separate legal entity since it is an Artificial Juridical person, as defined under the Act. Thus, it has an existence as separate from its Shareholders and Directors.
- Easy Transferability of Shares
The shares, denoting the ownership of the business, is easily transferrable, thereby facilitating sale / transfer of the business in whole or in part.
- Better Tax Planning
A Limited Company enjoys a wider range of expenses and allowances before arriving at its Profits that are subject to Corporate Taxation.
- Dual Relationship
The status of Artificial Juridical person allows a Company to make valid and effective contracts with all / any of its Shareholders and Directors. It is also possible for a person to be in control of a company and at the same time, be in its employment.
- Borrowing Capacity / Raising of Additional Funds
A Public limited Company can raise large amount of funds from the general public by way of issue of shares and accepting public deposits. Companies can also have better borrowing capacity since they can issue Debentures, secured as well as unsecured.
CHECKLIST FOR INCORPORATION
- Before proceeding with the procedures for Company Incorporation, it is better to ensure that it is the best suited form of entity for your business.
- List the Promoters of the Company. The minimum number of promoters required for a Private Limited Company is two and for a Public Limited Company, it is seven. They can be individuals or Companies registered within or outside India
- Identify the Directors for the Company and proceed to obtain their Director Identification Number (DIN). The Law requires a minimum of two Directors for a Private Limited Company. They need not be the Shareholders of the Company.
- Select an apt name for your Company that will reflect the main objects of the business you plan and that satisfies the guidelines as laid down by the Ministry of Corporate Affairs.
- Determine the location of the Registered Office of your Company. Once incorporated, a Company can operate in any other State too, without any additional registration under the Ministry of Corporate Affairs.
- Select the Main and Ancillary objects / activities of the Company. Ensure that the objects are in the same domain, and that they are also reflected in the name selected.
- Decide on the proposed investment into the Company in the form of Share Capital. The minimum Authorised and Paid up Capital requirement is Rs. 100000 for a Private Limited Company and Rs. 500000 for a Public Limited Company. The Registration fees payable is on the basis of the Share Capital.
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