Starting a startup is a fun ride, and prior to approaching the investors or raising funds, proper company registration is a requirement. In India, investors are not ready to invest in startups that are not registered and are in breach of government laws. Registering the company provides your business with a legal personality and creates confidence in the investors.
The blog outlines the legal considerations of registering a company that all startups need to be aware of prior to raising funds in very easy-to-understand language.
The Importance of Company Registration to Start-Ups
Registration of the company is not an incidental legal process. Company Registration in Delhi is very critical in raising funds and business development.
A registered company:
- Has an independent legal personality.
- Earns investor trust and credibility.
- Be in position to issue shares and raise funds legally.
- Guarantees the founders against personal liability.
- Makes compliance and taxation transparent.
Unregistered business is not funded by most angel investors, venture capitalists, and banks.
The Indian Type of the Best Company to fundraise
The most important thing is to select the appropriate company structure prior to raising funds.
Popular startup structures are:
- Private Limited Company
- Limited Liability Partnership (LLP).
- One Person Company (OPC)
Best option for startups:
👉 Private Limited Company
It is preferred because:
- Investors can be issued with shares.
- Transfer of ownership can be made easy.
- It is governed in the Companies Act, 2013.
- More compliance structure and transparency.
Legal Regulations of registering the company
The legal requirements necessary in order to register a company in India include:
1. Directors and Shareholders
- At least 2 shareholders and 2 directors.
- Directors should be 18 years and above.
- A director should be an Indian citizen.
2. Digital Signature Certificate (DSC)
- Required for all directors
- Signed on online forms in MCA portal.
3. Director Identification Number (DIN)
- Mandatory for each director
- Published by the Ministry of corporate affairs (MCA).
4. Company Name Approval
- The name of the company should be distinctive.
- It must not be identical or similar to other existing firms or brands.
- The process of name approval is via MCA portal.
5. Registered Office Address
- Should be a genuine address in India.
- Rent agreement, utility bill, or ownership documents are required as proof.
MOA and AOA - Legal Documents that are mandatory
The registration of the company needs two important documents:
Memorandum of Association (MOA)
Establishes what the company is aiming to accomplish and the business operations.
Articles of Association (AOA)
Holds in-house rules and regulations of the company. These are documents necessitated by the law and have to be created with caution.
Corporate Compliances On registration of Company
Once registered, startups will need to continue with legal compliance in order to remain funded.
Significant compliances are:
- PAN and TAN registration
- Opening a bank account of the company.
- Registration of GST (where required)
- Keeping of good books of accounts.
- Filing annual ROC returns
- Carrying out statutory audit (compulsory to companies)
Failure to comply may result in punishments, fines and refusal by investors.
The importance of Legal Compliance before Raising Funds
Prior to investment, investors look:
- Certificate of registration of the company.
- Capital structure and shareholding.
- ROC filing status
- Financial reports and auditing.
- Tax and GST compliance
Even the slightest error may postpone or cancel financing transactions.
The way SS Fintax Advisor Assists Starting ups
SS Fintax Advisor is a reputable Accounting Firm located in Janakpuri, Delhi that offers end-to-end startup and accounting services, that is,:
- Company Registration (Privated Limited/ LLP/ OPC).
- ROC compliance and filings
- Bookkeeping and accounting services.
- Registration and filing of returns GST.
- Income tax return filing.
- Statutory audits
- Startups accounting and compliance.
Under professional guidance, the startups can concentrate on the growth and remain legally abided by.
Conclusion
The key to a prosperous startup is company registration. It is important that one has the proper legal structure and complies with the Indian company law prior to raising funds. Proper registration of your company and compliance would create confidence in the investors and prevent future legal problems.
SS Fintax Advisor is the partner that startups should use when they need proper and trouble free company registration and accounting services in Delhi and in the rest of India.