Incorporating a company is not just a legal requirement but also a crucial step in establishing the credibility and structure of your business. It also helps build trust with stakeholders and lays the foundation for sustainable growth.
But what exactly does incorporation mean? Incorporation is the legal process through which a business becomes a separate legal entity from its owners. It establishes the company’s identity, gives it the right to operate under its chosen name, and provides it with certain legal benefits like limited liability and perpetual succession.
In this guide, we’ll walk you through the steps of incorporation in a simple and clear way, so you can confidently take the first step toward making your vision a reality.
1. Selection of the Type of Company
The first and most crucial step in incorporating a company is deciding what type of company you want to register. The type of company depends on the business goals, the number of people involved, and the vision for growth. Here are the common types of companies to choose from:
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Private Limited Company: This type is ideal for small to medium-sized businesses. It requires at least two members and limits personal liability to the extent of shareholdings. To know more about it, read the full blog on Private Company.
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Public Limited Company: Suitable for larger enterprises planning to raise funds from the public. It requires a minimum of seven members and allows shares to be traded publicly. To know more about it, read the full blog on Public Limited Company (PLC).
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One-Person Company (OPC): Designed for solo entrepreneurs. It provides the benefit of limited liability and a single owner.
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Section 8 Company: Ideal for charitable organizations, research institutions, or non-profit ventures. These companies use their profits to achieve objectives instead of distributing them as dividends.
Choosing the right type of company lays the groundwork for compliance and governance requirements.
2. Preliminary Requirements
Before the actual incorporation, certain preparations are necessary to ensure a smooth process. These include:
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Digital Signatures (DSC): All documents are filed online, making digital signatures mandatory for directors and shareholders.
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Director Identification Number (DIN): Every proposed director must obtain a unique DIN from the Ministry of Corporate Affairs (MCA).
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Identity and Address Proofs: Directors and subscribers must provide valid government-issued IDs (like PAN, Aadhaar, or passport) and address proofs.
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Address for Correspondence: Decide where all official communications will be sent until a permanent registered office is set up.
These requirements help in preparing documentation and ensure there are no delays during the filing process.
3. Reservation of Name
A company’s name is its identity and brand. Selecting and reserving a suitable name is an important step in the incorporation process. The steps involved are:
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Conducting a Name Search: Check the Ministry of Corporate Affairs (MCA) portal to ensure the name is unique and doesn’t conflict with existing trademarks or company names.
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Applying for Name Reservation: Use the RUN (Reserve Unique Name) service or include the application as part of the SPICe+ form. Provide two name options in order of preference.
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Approval by Registrar: The Registrar of Companies (ROC) reviews the application and reserves the selected name for 20 days (or 60 days for existing companies applying for a name change).
A thoughtful and compliant name ensures your company’s distinct identity in the market.
4. Preparation of MOA & AOA
The Memorandum of Association (MOA) and Articles of Association (AOA) are essential legal documents defining the company’s framework.
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MOA specifies:
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The company’s name.
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The state where the registered office is located.
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The objectives of the company include primary and secondary activities.
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Liability details of members.
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Share capital structure and subscriber details.
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AOA defines:
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Internal rules and regulations.
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The roles and responsibilities of directors.
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Procedures for conducting meetings.
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Rights and duties of shareholders.
Both documents must be signed by all subscribers and appropriately witnessed. For OPCs, the MOA must include the name of a nominee who will assume ownership in case of the member’s death or incapacity.
Read more about the Memorandum of Association (MOA) and Articles of Association (AOA).
5. Filing of the Documents with the ROC
Once the MOA and AOA are prepared, they must be filed with the Registrar of Companies (ROC) along with other necessary documents. The filing process involves:
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Submission of MOA and AOA: These must be duly signed and submitted online.
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Declaration of Compliance: A professional (CA, CS, or advocate) certifies that all requirements have been met.
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Details of Directors and Subscribers: Identity proofs, residential addresses, and DIN details must be provided.
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Correspondence Address: Specify the initial address for receiving communications.
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Declaration of Non-Conviction: Directors must declare they have not been involved in fraudulent activities in the past.
The SPICe+ form is used for electronic filing, and all documents must be digitally signed to ensure authenticity.
6. Certificate of Incorporation and Allotment of Corporate Identity Number (CIN)
After verifying the submitted documents, the ROC issues a Certificate of Incorporation (CoI). This certificate is a significant milestone in the incorporation process, as it:
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Confirms the legal formation of the company.
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Includes a unique Corporate Identity Number (CIN), which acts as the company’s identifier in all official dealings.
The date on the certificate marks the company’s official incorporation, signifying its legal existence.
7. Effect of Registration
Once registered, the company gains a legal identity and enjoys several advantages:
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Limited Liability: Members’ personal assets are protected from business liabilities.
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Perpetual Succession: The company’s existence continues despite changes in ownership or management.
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Legal Entity: The company can own property, enter into contracts, and engage in legal proceedings under its name.
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Credibility and Trust: A registered company enjoys higher credibility among stakeholders, including investors, customers, and lenders.
Registration formalizes your business and provides a strong legal framework to support its operations and growth.
Conclusion
Incorporating a company means officially starting a business that is recognized by law. It is a big step that gives your business its own name and identity. By following simple steps like choosing the type of company, preparing the documents, reserving a name, and registering with the government, you make your business real and official. This process helps protect you, builds trust with others, and allows your business to grow in the right way.
Even if the steps might seem hard at first, taking them one at a time makes it easier. With good preparation, you can turn your ideas into a real company. Every successful business begins with this important step of incorporation.