Incorporation of a private limited company is a crucial step in starting a new business in India. It provides legal recognition to the company and protects the personal assets of shareholders by limiting their liability to the capital invested. The company is considered a separate legal entity and can enter into contracts, own assets and sue or be sued. Incorporation also provides better credibility and enhances the reputation of the business. It gives access to credit, as banks and financial institutions are more willing to lend to registered companies. The process of incorporation is also straightforward and provides a range of benefits, making it a crucial step for entrepreneurs.
Step-1: Incorporation of the private limited company
Incorporation of a private limited company is the first step in setting up a new business in India. It involves obtaining the necessary approvals and licenses from the government, registering the company with the Registrar of Companies (ROC), and obtaining the certificate of incorporation. The process of incorporation involves the following steps:
- Selecting the company name and getting it approved by the Registrar of Companies.
- Preparing and filing the necessary incorporation documents, such as the Memorandum of Association (MOA) and Articles of Association (AOA).
- Appointing the directors of the company and obtaining their consent.
- Obtaining the Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the directors.
- Filing the incorporation documents with the ROC along with the required fee.
- Obtaining the certificate of incorporation from the ROC.
Once the private limited company is incorporated, it can start its operations and engage in business activities. However, it must comply with various legal compliances and regulations, as specified under the Companies Act, 2013.
Step-2: Obtain PAN and TAN
After the incorporation of a private limited company in India, the company must obtain a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN). At present, PAN and TAN is allotted with the incorporation of private limited company and the same is also mentioned the certificate of incorporation.
PAN is a 10-digit unique number issued by the Income Tax Department of India to all taxpayers, including companies. It is used for various tax-related purposes, such as filing tax returns, tracking tax liabilities, and more.
TAN is a 10-digit alpha-numeric number that is required for companies to deduct and collect taxes. It is used for the purpose of deducting tax at source and depositing it with the government. They must be quoted in all tax-related communications and transactions.
Step 3: Open a bank account and File Form 20A
After the incorporation of a private limited company in India, the next step is usually to open a bank account in the name of the company. This is necessary for the smooth functioning of the business, as it allows the company to carry out financial transactions, receive payments, and manage its funds.
To open a bank account, the company must provide the following documents:
- Certificate of Incorporation
- PAN and TAN of the company
- Memorandum of Association (MOA) and Articles of Association (AOA) of the company
- Proof of identity and address of the directors
- Resolution passed by the board of directors authorizing the opening of the bank account
Once the bank account is opened, the company must file Form 20A with the Registrar of Companies (ROC) to obtain the Certificate of Commencement of Business. This certificate is proof that the company has completed all the formalities and is now ready to commence its business operations.
Form 20A must be filed within 180 days of the incorporation of the company, along with the following documents:
- Proof of the authorized capital of the company
- Proof of the paid-up capital of the company
- Affidavit confirming the accuracy of the particulars mentioned in the form
Once Form 20A is filed and approved, the ROC will issue the Certificate of Commencement of Business to the private limited company.
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