Company Formation in India – A Complete Guide

Introduction

Setting up a company in India is a structured way to conduct business with formal recognition, legal protection, and credibility. Companies offer separate legal entity status, limited liability for shareholders, and the ability to raise funds from investors. Two common forms of companies are:

• Private Limited Company (Pvt Ltd) – Popular for SMEs, startup-friendly, restrictions on share transfer.
• Public Limited Company – Can raise funds from the public, stricter compliance, minimum capital requirements.
  
  

Companies are ideal for businesses aiming for scale, foreign investment, or a formal corporate structure.

Eligibility & Requirements

• Directors & Shareholders: Minimum 2 directors and 2 shareholders (Private Limited). Public Limited requires at least 3 directors and 7 shareholders.
• DIN (Director Identification Number): Mandatory for all directors.
• DSC (Digital Signature Certificate): Required for signing e-forms with MCA.
• Registered Office: A physical or legally valid address in India.
• Capital Requirements: No minimum paid-up capital for Private Limited. Public Limited has ₹5 lakh minimum paid-up capital.
• Foreign Investment: Allowed under FDI policy with reporting in Form FC-GPR (if shares are allotted to foreign investors).

Step-by-Step Formation Process

1. Obtain DSC & DIN:
   1. Class 3 DSC is mandatory for directors.
   1. Apply for DIN via DIR-3 form if not already allotted.
      
      
2. Company Name Reservation:
   1. Apply through RUN (Reserve Unique Name) or SPICe+ Part A.
   1. Ensure uniqueness and compliance with Companies Act, 2013 naming guidelines.
      
      
3. Draft Incorporation Documents:
   1.  Prepare MoA (Memorandum of Association) and AoA (Articles of Association) detailing objectives, shareholding, and rules for management.
   1. Collect KYC documents of directors and shareholders: PAN, Aadhaar (for Indian nationals), Passport & Visa (for foreign nationals), Address proof.
4. Filing SPICe+ (Form INC-32) with MCA:
   1. SPICe+ Part B covers incorporation, MoA/AoA submission, PAN/TAN allotment, and GST registration (optional).
   1. Upload all documents digitally, attach DSCs of directors, and pay applicable fees.
5. Certificate of Incorporation:
   1. MCA issues CIN and CoI upon approval.
   1. The company becomes a legal entity from the date of incorporation.
6. First Board Meeting & Share Allocation:
   1. Convene first board meeting within 30 days of incorporation.
   1.  Issue share certificates to all shareholders.

Post-Incorporation Compliance

– Maintain statutory registers: Register of Members, Directors, Charges, etc.
– Appoint Auditor within 30 days.
– Conduct board and shareholder meetings as required.
– File Annual Return (MGT-7) and Financial Statements (AOC-4) with MCA.
– Comply with GST, TDS, PF/ESI, and other regulatory requirements.

Tax & Legal Considerations

– Taxed as corporate entity under Income Tax Act.
– GST registration mandatory if turnover exceeds threshold.
– FDI compliance for foreign investment, including FC-GPR filing with RBI.
– Legal agreements and contracts executed in company name ensure limited liability protection.