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Business Registrations Articles
21
Aug
17
Promotion and Incorporation of Company

Promotion and Company are the two basic formalities that company that need to face when their Business comes into existence. Business or company need to be promoted through marketing strategies. This makes your company public visible in the market. People invest their initial funds are called the promoters of the company.

There are different forms documents prepared by the promoters to make company according to the need of the market. Documents can be Memorandum of association and Article of association. Promoters also have the right to decide whether the company will be private limited company and public limited company.    

Memorandum of Association

Following are the charter or constitution that provided in MoA

  • Company’s name
  • Company’s Registered Address
  • Activities Company wishes to carry on
  • Amount of Share capital and units

Article of Association

Following are some of the charter or constitution that provided in AoA

  • Set of rules of the internal management of the company.
  • According to the Companies act Article of association can be altered from time to time into pursuance or any previous of this act.
  • AoA are the subordinate and controlled by MoA

Promoter is mainly a person involved in prelimnary work of the company. It can be renumerated for its services. It has its contract before the formation of the company. Promoters are the nominee or first director of the company. They are also required to work compulsorily in the formation of the company. Professionals such as chartered accountant, solicitor also and they are paid for their service. In India promoters generally secure the management of the company.

Functions performed by the Promoters

  • Decision of the name of the company can be accepted by the registrar
  • Arranges printing of MoA and AoA
  • Details of the Company are added such as MoA, AoA, Nomination of the director, Bankers, Auditors and registered office of the company.

Company Incorporation

Company incorporation is a lawful mean forbidden law and contrary to the public policy. Many Companies have Certificate of Incorporation but that does not mean company is lawful. Subscribing names MoA putting their signatures to the memorandum.

Documents to be filed by Registrar

  • Memorandum of Association signed by the subscriber.
  • Articles of Association if any duly signed by the subscribers of the memorandum
  • Statement of the nominal capital   
  • Individual or company proposes to manage whole time director.
  • Notice of the address and registered office of the company.
  • Things can be filed at the time registered.
  • List of the directors and first director of the company.
  • Written consent to be signed by each person.

Certificate of Incorporation

After Company Registration, Registrar will issue whereby he certifies that company is incorporated. Date of incorporation mentioned in the Certificate of the incorporation and company becomes capable of all the functions perpetual, common seal etc. It also shows details about the company are separate from its shareholders. Issued by the registrar all the rules compiled within the rule and regulation.

There are many benefits of company registration or incorporation.

  • Company become legal distinct entity
  • Company acquires perpetual succession
  • Company property is not regarded as the property of shareholder
  • Establishment of Business Account
  • Company can ask ventures to raise funds
  • Employees take interest towards the company

 

 

19
Aug
17
How is One Person Company different from Sole Proprietorship?

A Sole Proprietorship firm is also known as a sole trader or simply a proprietorship. It was a popular form of business prior to the introduction of One Person Company due to its simplicity, ease of setup, and nominal cost. It is a kind of business set up in which a single person owns the business and is solely responsible to pay all the debts of the firm. One of the biggest disadvantages of this type of company is that the identity of sole proprietor is not distinct from the identity of the firm thus the liability of the owner is unlimited.

To overcome the drawbacks of sole proprietorship the concept of One Person Company was introduced through Companies Act 2013. One Person Company contains the features of both the sole proprietor and the company. This concept was introduced to help the sole proprietor in fulfilling their desire to start a business with limited liabilities. One of the major benefits of the one person company over the sole proprietor company is that the one person company formed is a separate legal entity from its members and the liability of the owner is limited.

Difference between Sole Proprietorship and One Person Company is as follows-

Basis

One Person Company

Sole Proprietorship

Liability

The liability of the member is limited to his share.

The liabilities of the members are unlimited.

Legal identity of entity

It has a separate legal identity from its members.

It is not considered as a distinct identity from its members.

Registration

OPC can be registered under Company Act 2013.

Registration of sole proprietorship is not compulsory.

Taxation

OPC will be taxed in the same way as a company.

It will be taxed as an individual.

Existence

An OPC does not get dissolved with the death or retirement of the member.

The life of this form of the company comes to an end with the retirement of the sole proprietor.

Compliance

 

 

 

 

Conversion

 

 

 

    

Maximum number of members    

 

Foreign Ownership                           

It is required to file annual returns and get its accounts audited.

 

 

 

An OPC will be converted into private limited company if has an average turnover of over Rs. 2 crore for three years or a paid-up share capital of over Rs. 50 lakh.

 

It can have maximum 2 members.  

 

 

 

Foreign ownership is allowed in case one member is director and the other is nominee. However both director and the nominee cannot be the foreign citizens.                                       

It is required to get its account audited only if its turnover exceeds the threshold limit as per income tax act.

 

A sole proprietor will always remain a sole proprietor irrespective of its turnover.

 

 

It can have only 1 member.

 

 

 

Foreign ownership is not allowed.

 

 

 

 

17
Aug
17
Penalty for Late Filing of Annual Return of Company

As per the Companies (Management and Administration) Rules, 2014 all companies are required to prepare and file an annual return. The annual return of the company shall be filed in MGT-7 containing the annual information about the Company’s general compliances. Further, it is mandatory for every company to file the annual return within 60 days of holding the annual general meeting or within 60 days from the last date on or before which an annual general meeting must have been held by the Company.

Applicability of Annual Return Filing

The following companies incorporated in India are required to file annual return at the end of each financial year.-

  1. Private Limited Company
  2. One Person Company
  3. Limited Company
  4. Section 8 Company
  5. Producer Company
  6. Nidhi Company

Further, even the companies which no longer exist are required to file annual returns till the name of the company is struck off from the Register of Companies by the Registrar. Moreover, nonfunctioning companies or companies with no activity are also required to file the annual return at the end of each financial year. Thus the fact that a company has not been functioning does not exempt the company from its requirement for filing of the annual return.

Penalty for Failure to File Annual Return

A penalty would be levied in case a there is a failure in filing the annual returns of the company or the returns are not filed within the due dates.

Section 9(25) specifies the penalty provision in this regard. As per this section, the company will be punishable with a fine shall not be less than Rs.50000 but which may extend to Rs.5 lakhs. Further, every Officer (Director) of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than Rs.50,000 but which may extend to Rs.5 lakhs, or both.

In addition to this if the company secretary in practice certifies the annual returns, which is not in conformity with the rules made in this regard than he shall be punishable with the fine which shall not be less than Rs 50,000 but which may extend to Rs 5 Lakhs.

Disqualification of Director

To make directors accountable for filing the annual returns of the company properly the provision for disqualification of directors in this regard has been made. Any director of the company will be disqualified, in case the annual return of a company is not filed continuously for three financial years. Further, he would not be eligible for appointment as a Director of any other company for a period of five years from the date on which the defaulting company failed to file annual returns.

Miscellaneous Provisions for punishment regarding failure to file annual returns by company

To ensure proper Corporate Governance and Proper Compliance of provisions of Companies Act, the following action would be implemented by ROC:

  1. The ROC would not accept any other e-filing of the company from Directors of defaulting companies for any other company also.
  2. No certificates will be issued to such defaulting company by the members of ICAI, ICSI and ICWAI.
  3. A strict action will be taken against defaulting companies and their Director in default in coordination with RBI and SEBI.
  4. The Company Secretaries and Auditors of defaulting companies would not be allowed to sign and certify the filing with the MCA-21 system, till the defect is rectified.
16
Aug
17
LLP Compliance Post Incorporation

Limited liability partnership is a corporate structure that contains the features of both partnership firms as well Company. Limited liability Partnership (LLP) was introduced in India under the Limited Liability Partnership Act (2008). The main objective behind the introduction of limited liability partnership was to provide the flexibility of a partnership with the benefit of limited liability of a company.

There are certain compliances and procedural matters that are required to be fulfilled prior to the incorporation of a Limited Liability Partnership (LLP). Mnay other forms of companies like the private company are also required to fulfill certain compliances requirements before their incorporation. However, the overall compliance requirement for an LLP is less cumbersome, as compared to the post incorporation compliances required for a company. 

The LLP must fulfill the compliances requirement to ensure the smooth incorporation of the proposed LLP.

  1. LLP Stationary
  • LLP Seal: LLP is a separate legal entity from its members. Thus, LLP seal would be required for the opening of the bank account of the company and for applying for PAN. Every LLP is required to purchase two rubber seals – round type with LLP name and LLP name with the designation.
  • Letterhead: LLP stationary like letterhead, invoice, official documents, etc., shall be prepared containing the LLP name and registered office of the LLP.
  1. Filing LLP Agreement

The LLP agreement is an agreement between the members of LLP just as the partnership agreement. It plays a very crucial role in an LLP as it states the rights and duties of partner. It is mandatory for every LLP to file LLP agreement within 30 days after incorporation of an LLP. Further, LLP agreement is mandatory for all LLPs and even in the absence of a specific LLP Agreement, an LLP Agreement must be executed, specifically excluding applicability of any or all paragraphs of Schedule I (default LLP agreement).

In case any LLP fails to file LLP Agreement within 30 days of incorporation of an LLP, a heavy penalty of Rs.100 per day of default with no ceiling on the maximum fine will be levied on the LLP. Hence utmost care must be taken to ensure that the LLP agreement is properly executed and filed within the due-date.

  1. LLP PAN Application

Every LLP is required to make an application for obtaining a valid PAN card prior to its incorporation. An applicant can make a PAN application in form 49A. As soon as an application is submitted online, the PAN acknowledgment must be signed and sealed by a Designated Partner of the LLP. The signed application must then be couriered to the NSDL office for issue of PAN card. Within 10-20 days the PAN card of the LLP will be sent to the registered office address of the LLP.

LLP Bank Account Opening

By submitting the documents mentioned below the bank account for an LLP should be opened-

  • Copy of the LLP agreement
  • Copy of the Incorporation document and DPIN of the designated partners
  • Copy of the LLP Registration Certificate issued by the ROC
  • Copy of LLP-IN issued by the ROC
  • Copy of the Resolution to open a bank account
  • List of authorized person/s with the specimen signatures to operate the account duly attested by Designated Partners
  • Copy of PAN allotment letter

An important point to be noted here is that all the above documents must be signed by a Designated Partner and must have the seal of the LLP.

 

05
Aug
17
How to Get PAN Card for Company?

Permanent account number (PAN) is a 10 digit alphanumeric number that is issued by the Income tax department to every person who filed an application in this regard.  Through PAN card number the taxpayer is connected with the tax department. It is a mandatory requirement for the incorporation of various forms of the company like the private limited company, public limited company and one person company etc. 

Why is it important to have a PAN card number?

As per the Income Tax Act, 1961 it is mandatory for individuals and any form of entity to generate a PAN number while the payment of counterpart in India. Any person that fail to do so will be charged with the concealing tax which can be at the rate of more than 30% of the total invoiced payment i.e. the government will deduct tax at the highest rate possible.

Also, having a valid PAN number will grant benefits while paying the invoices, income tax returns and remittances to the holders.

Documents required

Following documents are required for obtaining a PAN card number-

  1. Any one of the following documents shall be submitted as the Proof of identity
  • A valid copy of the certificate of incorporation
  • A valid copy of the business registration certificate
  • An authentic copy of articles of association
  1. For the proof of address a valid copy of the company’s bank statement bearing the company’s name and full current address for any kind communication. The PAN card will be delivered to this address.

How to apply for PAN card?

Following steps shall be undertaken to acquire a PAN card-

  1. To begin the process of acquiring PAN number an application form 49A shall be downloaded.
  2. In the form, downloaded the applicant is required to fill all the necessary details.
  3. The applicant is required to acquire a bank draft for the payment of the pan card fees.
  4. The Column of name and the details of accessing officer can be left blank
  5. As soon as the form has been filled by the applicant he can download it and take a printout of it.
  6. The downloaded form shall be signed by the authorized director on behalf of the company and should be sent to any PAN agent or broker
  7. The applicant can send the form directly to any NSDL processing centers in India in case he does not prefer online services.
  8. The applicant is required to note down the PAN card number in order to track down the status of his application.
  9. A PAN number will be provided in around 15 days to 5 weeks to the applicant.
04
Aug
17
How to Get a TAN Number for a Company?

The tax deduction account number is a 10 digit alpha numeric number that is allotted to all the Persons/Employers who are responsible for deducting tax at source or collect tax at source on the behalf of income tax department.  The TAN number is allotted by the income tax authorities to the applicant. As per section 203 A of the Income Tax Act 1961 it is mandatory for every tax deductor to quote the tax deduction number in all TDS returns and all other communication with the tax authorities and failure to do so will attract a penalty of Rs 10,000.

Structure of TAN number

TAN number is a 10 digit number. In which first 3 alphabets represent the jurisdiction code, the 4th alphabet is the initial of the name of the TAN holder who can be a company, firm, individual, etc further five numbers and the last digit makes the TAN number of every person unique.

Who can apply for TAN Registration?

The following legal bodies collecting TDS are responsible for obtaining TAN Number

  • Central/state government or local authority.
  • Statuary/ Autonomous body.
  • Company
  • Branch/Division of a company
  • Individual/Hindu undivided family
  • Branches of the individual business.
  • Firm/ Association of persons.

Documents required for obtaining a TAN number

Following documents are required obtaining a TAN number-

  • Applicant proof of identity.
  • Applicant proof of identity.
  • Form 49-B for filing application

How to apply for TAN

An application for TAN can be filed through online mode or offline mode.

Offline

Form 49B in duplicate shall be submitted to any TIN-FC to file an application for allotment of TAN. Addresses of TIN-FCs are available at NSDL-TIN website.

In the case of an applicant, being a company which has not been registered under the Companies Act, 2013, the application for allotment of Tax Deduction Account Number may be made in Form No INC-7.

Online

To initialize the process of obtaining TAN through online mode form-49B shall be filed.

  1. The applicant is required to pay the fees of Rs 62 for filing the TAN application. The payment can be made by cash, cheque, demand draft or net banking.
  2. After the successful payment, a 14 digit acknowledgment number will get generated. The applicant shall submit the duly signed acknowledgment along with the required documents to the NSDL within 15 days from the date of the online application.
  3. After the documents and application are verified by NSDL, the TAN number will be communicated to the applicant.
04
Aug
17
Subsidiary Company Registration

A subsidiary company is a company in which more than 50% of the stock is held by a company known as the parent company or the holding company. Parent company substantially holds the controlling interest in the subsidiary company. Partial or complete control can be exercised by the parent company over the subsidiary company. The subsidiary company controlled completely by the holding company is called the wholly owned subsidiary company. In cases a foreign subsidiary is held by the principal company, the subsidiary must follow the laws of the country where it is incorporated and operates, and the parent company carries the foreign subsidiary's financials on its consolidated financial statements.

Documents required for registering a Subsidiary Company

Following documents are required for registering a subsidiary company-

  1. Proof of address
  • Electricity bill or rent agreement and latest electricity bill in case of rented accommodation.
  1. Indian National
  • PAN Card (mandatory)
  • Address proof
  • Photo ID Proof
  1. Foreign National
  • Passport (mandatory)
  • Address Proof (Document must be certified by the Indian Consulate)
  • Photo ID Proof (Document must be certified by Indian Consulate)

Minimum Requirements to Register Subsidiary Company

  1. Two directors
  2. Two shareholders

Procedure of obtaining registration for subsidiary company is as follows-

Step-1

To initialize the procedure of subsidiary company registration, any of the two directors are required to apply for DSC (Digital Signature Certificate)

Step-2

Then all the directors must apply for DIN (Director’s Identification No.)

Step-3

Through form INC-1 applicant shall apply for the name approval of the proposed subsidiary company.

Step-4

Once a name approval is obtained from ROC (Registrar of Companies), an applicant is required to file the following forms –

  • Form INC-7- Containing the Application for Incorporation of subsidiary Company of any private limited company or public company etc except one person company.
  • Form DIR-12- Containing the particulars of appointment of directors and the key managerial personnel and the changes among them.
  • Form INC-22- Containing the notice of change of situation or change of address of the registered company along with the Memorandum and Articles of Association of the Company.

Step-5

Once the incorporation documents are filed, the applicant is required to make an online payment ROC fees and Stamp duty. The fees paid shall be based on the authorized capital of the company.

Step-6

After receiving the fees and stamp duty, ROC verifies the filed documents. Form INC-22 and DIR-12 are approved through the Straight-Through-Process (STP) and the ROC Form INC-7 is verified in detail. The ROC may suggest some changes in the form or attachment submitted.

Step-7

Once the changes have been affected and the ROC is satisfied, Certificate of Incorporation is sent to the applicant through email.

01
Aug
17
Annual Compliance Checklist for Startups

In today’s time, many people aspire to become an entrepreneur. Thus the concept of the startup is becoming very popular amongst people. Every person who is aiming at setting up a startup should keep in mind that there are certain mandatory annual compliances which all the companies are required to fulfill.

Every form of a company like Private Limited Company, Public Company and Government Company is required to fulfill certain annual compliances requirements. Likewise, startups are also required to fulfill these annual compliance requirements.

Some of the annual compliances to be followed by every startup are as follows-

  1. Appointment of Auditor- Every start up is required to appoint a statuary auditor and file ADT-1 within 30 days of its incorporation in the first board meeting held. Further, subsequent auditors shall be appointed for 5 years in annual general meeting.
  2. Holding Boards Meeting- First board meeting shall be conducted within 30 days of incorporation and minimum 2 meetings shall be conducted in a calendar year. Also, a minimum gap of 90 days should be there between two meetings.
  3. Holding Annual General Meeting- Every startup is required to one annual general meeting in one year and the maximum gap between 2 annual general meetings shall not exceed 15 months.
  4. Filing electronic forms- Every startup is required to file following electronic forms annually-
  • MGT 7- Every startup is required to fill this form electronically within 60 days of holding of Annual general meeting for the period from 1st April to 31st March.
  • AOC 4- Within 30 days from the conclusion of annual general meeting form AOC-4 containing the financial statement that is Balance Sheet along with Statement of Profit and Loss Account and Directors’ Report shall be filed by every startup.
  • Form MBP 1- Through MBP-1 every director of the company in the first meeting of the Board of Director in each Financial Year needs to disclose his interest in other entities. Further, fresh MBP-1 shall be filed whenever there is a change in his interest from the earlier given MBP-1.
  • Form DIR 8- Through form DIR-8 the director of the startups in each financial year are required to file with the company disclosure of non- disqualification.
  1. Directors’ Report- A Directors report signed by the chairperson and authorized by the board shall be filed by every startup.
  2. Statuary registers and books of accounts- Every start up is required to maintain certain statuary registers. Also, it is required to maintain the minute book of the board meeting and annual general meeting. In addition to this, books of accounts and register of directors attendance shall be submitted to the registrar.
  3. Other statuary compliances like maintaining of books under income tax act and statutes applicable.

Further, the compliance requirement for start-ups differs from case to case based upon the nature of the business, size etc. 

29
Jul
17
NRI shareholders incorporating in a Private Limited Company in India

Non Resident Indian abbreviated as NRI are the people with Indian origin but live in Foreign Countries. They have their and professional and personal relation with people living in India. Let’s make it more clear by making things classified as two types of Non Resident Indian    

  • Person do not live in India but have an Indian passport
  • Non-resident Indians holding foreign passport but Person of Indian Origin (PIO)

Private Limited Company is a popular mode for the NRI or Foreign Investors to start on with business in India., This classification is done by FEMA Act, 1999.

 Are NRI's allowed to establish any Company type they want in India?

Private Limited Company and other Limited Company is the only type of company that can be incorporated by NRI and Foreigners. Any NRI or Foreigner is not allowed to form One Person Company, Sole proprietorship or Partnership type of business unless its limited Company.

Registration of Business Type

Foreign Direct Investment (FDI) is allowed in Private Limited Company in India under Automatic route. It can be possible in Limited liability Partnership but there is a need of prior approval from the Reserve Bank of India for the same.

Shareholding

According to the Companies Act, 2013 NRI or foreigners can be Directors and Shareholders of the Private Limited Company. As you know private limited company need minimum of two shareholders and can have a maximum of 200 shareholders. As per certain FDI norms in India NRIs are subjected to the process of shareholding making things simpler as the Reserve Bank of India allows 100% FDI in many sectors in India under the automatic route.

Procedure of Incorporation

There is no difference in the process of registration of the Company for the NRIs as compare to the Indian Directors and Shareholders. There is a need of at least one Director and one shareholder of Indian Origin. The documents are same as of the Indian Shareholders, but all must be notarized. The ID-proof, Address Proof and other documents of foreign documents need to be Notarized by a licensed professional.

Purchase & Transfer of Shares by NRIs in a Private Limited Company

There are several conditions on which the purchase of the shares of NRI depends, a person staying out of India can purchase share/equity/stock/preference shares/convertible debentures that are offered by an Indian Company based on the following conditions:

  • It is permitted under FDI Scheme should not increase with the purchase of shares by the NRI or the percentage of the Foreign Equity which is already approved.
  • Sectored cap of FDI for the share should not be exceeded.
  • Stock Purchase should be by a person who is already staying out of India
  • Indian shareholders should not amount of share more than NRI or Foreigner.

Transfer of shares depends on who is transferring the share to whom. It can be the following situations

NRI to another NRI

The Reserve Bank of India has given permission to carry forward this transfer of shares of a Company from one NRI to another NRI/PIO.

NRI to Person Resident in India

This needs prior permission from the Reserve Bank of India as the shares are being transferred to person resident outside India to a person resident in India.

 NRI to Indian Resident

The transfer of share by NRI to an Indian Resident is permissible by the Reserve Bank of India, and can be done by way of gift to a resident of India.

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