The process of registering a business in India is fun, yet quite rigorous and demands good planning along with legal formalities. Now, the first and the most vital step of it is the Company Registration in India. It’s a process that sounds pretty simple at first but has lots of common mistakes entrepreneurs make that cause delay, trigger legal jargon or extra costs. If avoided from happening in the registration process, then you’ll be able to shift your focus back to your business.
In this article, we will talk about the top mistakes businesses make during company registration and how you can prevent them.
1. Choosing the Wrong Business Structure
During Company Registration in India, the choice of the right business structure is very critical. The type of structure you choose generally decides your liability, tax, and compliance requirements. The most common structures include:
- Private Limited Company
- Limited Liability Partnership (LLP)
- One Person Company (OPC)
- Sole Proprietorship
Major blunders come in the way of selecting any structure without considering the long-term implications. For example, an OPC is best suited for a single owner, but if you are looking to expand or add in more partners, then a Private Limited Company may be in your best interest. Likewise, some structures might help you save tax, whereas on the other hand, certain others may require stringent compliance.
2. Not Reserving the Company Name Correctly
Non-reservation of the company name properly
Company Registration in India: What seems like a very simple process when you are opting for a name for your business. One of the biggest mistakes here is not checking if the name is available or not. It should be as unique as possible to not seem too similar to already existing companies or trademarks. In case the name gets rejected, then the whole procedure is put off, and you may have to reapply.
This can be corrected by doing thorough searches on the MCA portal to ensure name availability before furnishing an application. Secondly, allow the name to be acceptable to your business and reflect its nature since it may come in handy when branding.
3. Inadequate Documentation
The most common mistakes that people commit while registering a company in India are incomplete and sometimes incorrect documentation, which either delays the processes or makes their application get rejected completely. Some of the essential documents required for company registration are as follows:
- PAN card and Aadhar card of the directors
- Address proof of the registered office
- Digital Signature Certificates (DSCs)
- Memorandum of Association (MOA) and Articles of Association (AOA)
All documents should be correct and up to date and as per the requirements of the MCA. Even a small mistake, such as an incorrect address or missing signatures, may cause a delay.
4. Not Getting a Digital Signature Certificate (DSC) Early
Getting a DSC is mandatory before signing the documents that are to be submitted to the MCA. Most new entrepreneurs do not take notice of this, or they get it at the last moment. Although getting a DSC takes a few days, registration will get delayed for that period.
Plan and make sure you and your directors procure a DSC as early as possible, so the registration may not get delayed any longer due to it.
5. Ignoring Director Identification Number (DIN) Requirements
DIN stands for Director Identification Number. It is a unique number necessary for all directors of a company. Many entrepreneurs fail to apply for a DIN before beginning the registration process, which delays the completion of the same. A director cannot be appointed without a DIN and thus this is a critical step during India Company Registration.
Directors of the company shall ensure that they have valid DINs prior to making an application for registration. The DIN is accessible to be applied through the MCA portal.
6. Not Defining Roles and Responsibilities Clearly
The roles and responsibilities must be defined while a company is getting registered, especially with multiple directors or partners. Many of the owners of a business plan fail to lay out this kind of detail while going through Company Registration in India. This might bring about later confusion and disagreement and therefore affect the smooth running of the business.
Before joining, ensure a proper understanding of who will do what. It not only makes management easier but also to draft a Memorandum of Association and Articles of Association.
7. Underestimating Compliance Requirements
Underestimation of Compliance Requirements
After company incorporation, thousands of compliance requirements have to be complied with annually, such as filing annual returns, maintaining proper and adequate books of accounts and records, and audits. Some business entrepreneurs do not pay attention to this during Company registration in India only to find that they have landed up with penalties or even litigations later.
Understanding the compliance requirements based on the structure chosen, for example, a Private Limited Company which has stricter compliance than an LLP. Keep in mind both costing and time taken in compliance while deciding on the structure you would use.
8. Not Specifying the Registered Office Correctly
The registered office is the actual address of your company and needs to be specified at the time of the registration of the company in India. In general, most entrepreneurs use a temporary or wrong address while registering a company, thinking that the place can be changed later with ease. Changing the registered office address after registration is indeed difficult and involves a lot of hassle and waiting.
Make sure that the address you give will be permanent at least, so you won’t have the hassle of changing it later on. It should be an address where all the company’s official documents, notices, and communications will be sent.
9. Overlooking Tax Registrations
Most entrepreneurs fail to register for taxes during the registration. For example, the most necessary tax registration, that is, Goods and Services Tax (GST) besides any other applicable taxes, becomes troublesome after the company starts working because businesses cannot present invoices to clients or claim tax credits without proper tax registration.
Let the procedure for registering a company include registration of all taxes applicable at the very outset to avoid legal hassles. Make sure that your business runs uninterruptedly.
10. Not Seeking Professional Advice
One of the biggest mistakes that entrepreneurs make while registering their companies in India is not taking professional advice. Registration processes involve so many legal, financial, and compliance requirements that might be depressing for first-time business owners. There is a tendency among entrepreneurs to try to do everything by themselves, which may lead to mistakes easily avoided with expert advice.
This could be followed by smoothening the process of company registration with the help of a professional registration consultant or CA. They ensure that all the legal formalities are met in company registration and can also help you choose the right business structure, and compliance will be taken care of by them.
Conclusion
Hence, in registering a company in India, you avoid mistakes common enough to eat away your hard-earned money and some of your precious time. It calls for understanding the complete procedure of registration, getting all sorts of documents, and consulting professionals regarding this matter. Anything that you’re unclear about, always consult with the experts in this matter.MC Maheshwari & Co. is one of the prominent professional service providers that assist clients in company registration with the right compliance of all statutory provisions required to form a new venture. Contact our professionals today for registration of your company in India.