Registering a Company in India: Common Pitfalls and How to Avoid Them

Setting up a business in the Indian market can present you with many opportunities. However, to register a company in India, you have to go through various channels and it is a complicated process. Even a slight mistake in documentation can be disastrous and result in long delays and penalties.

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A well-established business setup service provider can assist in avoiding these common errors during the company registration procedure. This will ensure an efficient and smooth start for your business.

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Let us now discuss some top five mistakes that you can avoid for business set up in India

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1. Wrong business structure - Selecting a wrong structure for your company can have negative implications. For instance, the decision between a LLP or a private limited company or a project office has to be based on your main business objectives, goals, and futuristic plans. Business setup in India with the wrong structure can also lead to heavy financial losses and legal issues.

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2. Insufficient documentation - Inadequate documentation is one of the most common reasons for unforeseen delay in the registration procedure. Ensuring that you submit all vital documents like KYC, business forms, address proofs, and other related papers. All documentation should be completed and must be accurate in its details. Missing documents or inaccurate documents can lead to rejection of application and you may have to resubmit all the documents to the authorities, which will cause unnecessary delays to register a company in India.

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3. Lack of Legal Compliance - Sometimes, simple mistakes while preparing registration forms like spelling errors, incorrect KYC documents, wrong information related to government document forms can be reasons for rejection of applications. Therefore, it is critical to go through all the forms and facts before submission to the Registrar of Companies. This is to certify that all the information provided in the submitted forms are factually correct and match with the actual  documents.

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4. Incorrect Name in Registration Forms - The company name that you decide must be unique and distinct from names of other registered companies. Registering a particular name that already exists or is very similar to an already existing business entity may end up in cancellation of your registration. you need to conduct a name check using online resources or the Ministry of Corporate Affairs website to confirm the fact that your chosen name is indeed unique and follows the name guidelines meant for business setup in India.

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5. Ignoring Tax Registrations - All businesses must register for different kinds of taxes such as income tax, GST, local taxes, and more. they cannot afford to miss this crucial step otherwise businesses may have to face penalties and also interest on those unpaid dues. foreign businesses have to get a PAN card, a Permanent Account Number and  a TAN or Tax Department and Collection Account Number; these cards can be acquired through the income tax department. To register a company in India, you can consult with a reputed and experienced business setup consultant to fulfill all tax obligations.

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Checklist for smooth registration with VJM Global’s support.

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To register a company in India under the Companies Act is all about good compliance with fulfillment of foundational requirements.

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Let us go through the requirement checklist

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Shareholders - To register a company in India, minimum two shareholders are required for a private limited company. For a public limited company, seven shareholders are needed to form the company. For an OPC or an individual personal company, just one shareholder is needed. Every director must procure a DIN or Director Identification Number given by the Ministry of Corporate Affairs.

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Company Name - Business setup in India is not possible with a legally proper company name. Choosing a proper name for the company is a vital step towards completing your registration process. It should be done adhering to the 'Prevention of Improper Use Act' guidelines, so as not to misuse the country's national emblems and other symbols. The name can represent the nature of your business and depending on the registration, the name must conclude with the words, Private Limited' or Public Limited'.

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Registered Office - A company must have a registered office space in India to complete the incorporation. If a permanent location cannot be obtained, the company heads must use a temporary postal address to register a company in India. Post-incorporation, a permanent address needs to be presented within a period of thirty days. The registration process requires the company to submit proof of the negotiator's location, which can be a recent utility bill issued in the negotiator's name, to confirm its occupancy proof and readiness to register a company in India. 

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Capital Requirement - The Companies Act in India does not force a specific minimum amount of capital for companies. However, shareholders must disclose their capital-related matters prior to proceeding with the company registration. This can include raising the authorized capital and the maximum capital through share issuance.

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Such steps are necessary to prove that the company has significant financial power to support its own business operations and register a company in India. In addition to the documents supplied, to smoothen the entire registration process, the Indian government has introduced SPICe or Simplified Proforma for Incorporating a Company Electronically procedure. This is a convenient and legal platform helping to meet the requirements for incorporation.

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Must-have Documents from Shareholders & Directors:

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Proof of Identity:

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• Permanent Account Number (PAN) Card
• Aadhaar Card, Passport, Driving License, or Voter Identity Card (submit any one).

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Proof of Address:

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• Recent Telephone or Mobile Bill
• Recent Electricity or Water Bill
• Bank Passbook or a Bank Statement of last two months
• Passport-Size Photographs: Each company stakeholder must present 3 photographs.

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Business setup in India with VJM Global

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Foreign investors who want to register a company in India may have numerous options and offers from reliable business setup consultants.  At VJM Global, we wish to guide you to navigate the entire process of business setup in India in a smooth and uncomplicated way.

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Hiring a specialist team comprising professional and highly qualified legal experts, company secretaries, chartered accountants, and business consultants can offer invaluable support and guidance to you and your startup venture so that the whole process goes off smoothly.