Written by : Rajiv Singh

A Chartered Accountant in UK with 15+ years of experience in FinTech Consulting, Accounting & International Taxation. I enjoy being a Social, Foodie and Father of two young children, reachable at linktr.ee/RajivSingh.

Things To Avoid During Company Registration In India

Rajiv Singh
Rajiv Singh, CA, FAIA

Jun 29, 2021 03:23

Registering a company is the most crucial part of the entire company incorporation process. The company registration requires the fulfillment of several legal formalities.

Companies are one of the most fetching forms of business organizations in the country. As of 2020, there were approximately 1.26 million active registered companies in India. Generally, the business world sees registering a company as a great way to build a brand name for any venture. Moreover, registering as a company improves your entity's social reputation by manifolds. The credibility and legality will surely win many hearts as legal approval make a sizeable difference in India. However, one needs to give due consideration to the adherence of various thresholds and parameters.

The Companies Act, 2013 governs the registration and operational aspects of corporate entities in India. A lengthy and detailed process goes into getting a company registered, and one should duly follow the same.

Preventing errors or certain omissions during the company registration phase is integral for minimizing any hassles. Our expert team at Gotaxfile has stated certain mistakes which one should avoid at all costs during registration of a company below –

* Selection of appropriate legal framework –

There are various types of companies that your venture can incorporate in India. For instance, Public Company, Private Limited Company, OPC company. You can start the company as any of the structures mentioned above. However, each of these has its pros, cons, benefits, and terms and conditions. Therefore, the choice of company structure should be made judiciously, keeping in mind all the features and requirements of your business organization. The structure type will act as a determining factor in many aspects, including the ownership, capital raising capabilities, and extent of legal compliances to be followed. You can find consultation during the decision-making stage with the help of professionals such as Chartered Accountants and Company Secretaries. Our adept Gotaxfile team can also offer effective guidance.

* Providing incorrect information and description of the company structure –

Provide accurate and reliable information when submitting documents regarding the company's name and other details. It is crucial to provide credible and reliable information to maintain accuracy and transparency throughout the process. The kind of business dealings your company shall undertake. You shall have to give details regarding the products you plan to offer. It would be ideal if you had precise information and understanding on a couple of other fronts. How different shareholders can support the company and how the members can sell additional shares and further details.

All documentation, including the MOA and AOA, must be in line with set rules. It will help in preventing any potential dispute regarding these issues in the future.

* Incorrect company forms and wrong names in the registration process-

While registering the company via the online mode, correctly filling up all the forms is paramount. Choosing a unique and valid name of the company is crucial. Names are given approvals by forms RUN and SPICe+. A company gains identity through its name, trademark and logo first. Therefore one cannot possibly afford to go wrong with the company's name as it would harm its fundamental essence. Ensure to cross-check all the information furnished in the documents during the definitive assessment step and make required modifications if needed.

* Absence of founders agreement or shareholder's agreements –

Another pivotal point to keep in mind while selecting a company's structure is a good partnership. Always make an adequate contract with the consent of all parties to avoid any future conflicts. While venturing into a new business or company, entrepreneurs look for factors such as financial support, business growth, desired sales, excellent infrastructure. But here, the key is ensuring the correctness of the documents, especially the contract or agreements related to the shareholder(s). As unimportant as it may sound, it may lead to dire consequences in the future if you do not stay cautious about this step. A shareholder agreement forms an important part of the foundation of your company. Hence, the shareholder agreement must include the terms for the course of action in the case of the death or removal of the proposed company's shareholder(s), breach of contract by a member, and so on. Attention to detail is required in all legal documents for company registration as the agreements will not apply to future disputes.

* Confusion regarding critical taxes, licenses, and additional registrations-

For company registration in India, you have to take into account other permits as well. For example, to register a food-related company that'll deal with the import and export of food products, you must have an FSSAI license and IEC code. Various authorities control business policies and activities at the central and state level. The authorities require companies to have due permits under laws such as the Shops and Establishments Act, the Income Tax Act, the Customs Act, the Goods and Service Tax (GST) Act.

You might end up paying heavy fines and penalties for non-compliance if you are ignorant about the applicability of particular registration.

Some of the important legal essentials to keep in mind while you register a company in India cover the following:

  • Shop and Establishment Licence
  • IEC (Import And Export Code)
  • GST Registration
  • Professional Tax Registration
  • Employee Provident fund Compliances (EPF)
  • FSSAI registration

With Gotaxfile, confidently step on your Startup journey without the stress of making major registration-related mistakes.

Ignorance in obtaining the registration of Intellectual Property like trademark registration, copyright, or patents -

A company consists of many tangible as well as intangible assets. Intangible assets, like patents and copyrights, hold equivalent significance, if not more, than tangible assets, like machinery, procured for it. Unfortunately, there have been many instances where the company's logo and name get embezzled and misused? So what steps should be taken to secure the company's name and logo from any form of theft? Well, the answer is Intellectual property registration. Intellectual property registration prevents others from using your business identity. Thus, it enables the avoidance of any loss in business and financial embarrassments due to the same.

The unique design of the package, name, logo, packaging, business logo form a distinctive combination of ingredients that helps your product stand out from the other products in the market. Together these principles, trademarks, designs are considered intellectual property. The registration of intellectual property offers a legal backing to ensure ownership over a self-created, artistic concept. To protect your company's intangible assets, you have put your heart and soul to assure. You should store your company's IP and obtain legal protection by registering them with patents, copyrights, and trademarks under the relevant protections available.

These were some of the numerous points that become very important when dealing with company registration in India.

Register your company in India with the astute support of Gotaxfile!

It can be a hectic task to secure all the rules without making any mistakes and leading to heavy fines. However, Gotaxfile makes the difficult task of company registration as easy as a cakewalk for you! You can avail of our services and better understand the entire company registration process, the primary requirements needed to register a company successfully and prevent common mistakes. With the assistance and guidance of the experienced, skilled, and honed team, the complexities involved will get eased to a great extent, and the chances of faltering diminish considerably.

Rajiv Singh
Rajiv Singh, CA, FAIA

Jun 29, 2021 03:23

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