General Costs Involved In Incorporating Your Company<!- author name and link for post -->
Incorporation is the formation of a new legal entity that is recognized as a legal person in the eyes of the law. Incorporating a company is not compulsory although, some of the advantages of incorporating a company In India is the protection of owners assets, easy transfer of business ownership, access to finance, legal evidence during disputes, etc.
The types of business entities in India are Private Limited, Public Limited, Limited Liability Partnership, Partnership, Sole Proprietorship, etc. Some of the laws applicable to the incorporation of companies in India are included in the Companies Act, 2013, the Income Tax Act, 1961, Companies (Central Government) General Rules and Forms 2013, and other related Acts, Rules and Amendments.
Incorporation And Registration
Incorporating is not the same as registering a business. Incorporation is used to create a separate legal entity to protect a company owner and his personal assets from business liabilities unless there is a proof of fraud. Registration of a company serves as a license required by companies in different sectors in order to conduct business activities. This means that a registered business/ company would be automatically incorporated, but a separately incorporated business/company can still be registered (there are few exceptions).
All incorporations and registrations must be done at the Registrar of Companies (RoC). Most companies opt for the Simplified Performa for Incorporating a Company Electronically (SPICe INC-32) along with eMOA (INC-33) and eAOA (INC-34). The Registrar issues a Certificate of Incorporation to bring a company into existence after certain conditions are met, such as Digital Signature Certificate (DSC), Memorandum of Association (MoA), Articles of Association (AoA), affidavits and declarations. A Private Company can carry on operations after obtaining a Certificate of Incorporation, but a Public Company must fulfill other conditions such as statutory meeting, etc. and obtain a certificate of commencement to start a business.
The General Costs of incorporating a company in India fall under statutory fees and professional fees. We will be looking at the cost of incorporation from the Statutory perspective:
The application for Incorporation of a company is made to the Registrar of Companies, which can be paid in challan at a bank or online. The application fees to be paid is based on the proposed capital at the time of incorporation of a company. The minimum capital of INR 1,00,000 requirement for Private Companies has been lifted since 2016. This fee can range from INR 1000 – 20000 based on the fee slabs.
|Sr.No.||Application made by||OPC & Small Companies||Other than OPC & Small Companies|
|1.||A Company with an authorized Share Capital of :|
|(a) Upto Rs 25,00,000||1000||2000|
|(b) More than Rs 25,00,000 and upto Rs 50,00,000||2500||5000|
|(c) More than Rs 50,00,000 and upto Rs 5 Crores||–||10000|
|(d) More than Rs 5 Crores and upto Rs 10 Crores||–||15000|
|(e) More Than Rs 10 Crores||–||20000|
|2.||A Company limited by guarantee without share capital||–||2000|
|3.||A Section 8 Company||–||2000|
|4.||A Foreign Company||–||5000|
|5.||Application for Allotment of DIN U/S 153||500||500|
Digital Signature Certificate (DSC)
This is the first step required in registering a company and the procedure is pretty simple. Digital Signature Certificate is quintessential in filing documents online. Without a DSC, a form cannot be filled or signed online. As per the Companies Act 2013, an application for a DIN must be made in e-Form DIR-3, which needs to be signed digitally using a Digital Signature Certificate by the applicant. A DSC can be obtained from any Certifying Authority (CA) and the price for using a DSC varies from vendor to vendor. The charges are generally pay per use, subscription basis and monthly/yearly packages. DSC’s are valid only for a limited period and you need to check when they need renewal. SignDesk.com provides Aadhaar-based electronic signatures (eSign) which makes it really easy for a subscriber to use a DSC at any time, location and with any other party.
Director’s Identification Number (DIN)
The purpose of DIN is to identify and certify the true directors of a company. A company may have 2 or more Directors and the application fee for DIN is INR 500 per DIN. A professional fee is charged by a Chartered Accountant or Company Secretary for electronically certifying a DIN application
For name approval, an application needs to be made in Form-1A with the ROC in the same State which the proposed Registered Office will be situated. Four alternative names must also be given and none of the names should resemble an existing company name under the Companies Act, 1956. The service fee of getting a name approved is INR 500. In 10 days, the ROC makes approvals or rejections to the name approval application.
After acquiring DIN, DSC and name approval, a user/Director are required to register an account with the MCA website for online payment, generating e-forms, SPICe form, linking accounts and transactions. Simplified Performa for Incorporating a Company Electronically (SPICe INC-32) along with eMOA (INC-33) and eAOA (INC-34) must be registered. Creating an account is free of cost. During this process, the company name (INC-7), registered office (INC-22), directors and qualification shares (DIR-12), etc. need to be filled in. Only after name approval can a company receive a Certificate of Incorporation and a company comes into existence based on the date given on the Certificate of Incorporation.
The MOA and AOA are required to be stamped under Rules 10 and 39 of Schedule 1 of the Indian Stamp Act, and stamp duty is payable to the State and Central Government. The amount of Stamp Duty payable varies from State to State in India. The stamp charges for a MOA is under INR 1000 and the stamp charges for the AOA are less than INR 5000. The stamp duty payable is also dependant on the proposed capital of the company as shown in the table below. A declaration in Form 1 stamped for Rs. 20 on non-judicial stamp paper is required to be filed ensuring all requirements of incorporation have been complied with.
|Sr. No||Proposed Capital||Fees per Document|
|1||Less than Rs. 100000||Rs. 200|
|2||Rs. 100000 less than Rs. 500000||Rs. 300|
|3||Rs. 500000 less than Rs. 2500000||Rs. 400|
|4||Rs. 2500000 or more less than Rs. 1 Crore||Rs. 500|
|5||Rs. 1 Crore or more||Rs. 600|
Some other charges or fees involved with the incorporation of a company in India, which may or may not be applicable are:
- File inspection – Rs. 100
- Charges inspection – Rs. 100
- Certified copy of Certificate of Incorporation – Rs 100
- Other certified copies – Rs. 25/page
- Additional fees and charges apply for late filing of documents
How To Incorporate?
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