Incorporation

The basic steps required to form a company are outlined here. In most cases, you would have to hire the services of an auditor to get these tasks done. Choosing a good auditor is VERY important and might save you a lot of  time and money thereafter. Choose one via references. He would thereafter guide you through all the processes in forming a company. Following are the processes to be followed.

  1. Purchase a digital signature: More information on where to buy this can be found here: MCA: DSC.
  2. Apply for Director Identification Number (DIN): This is a basic requirement for one to become director of a company. You can be a director for any number of companies once you have a DIN.
  3. Check for name availability: Check for name availability for the company name you seek. No two companies can have the same name. Also, names cannot be objectionable or without a proper meaning. You  cannot have just XYZ Private Limited. For example if you are a IT company, you could seek for XYZ technologies private limited. So, choose a name that is relevant and apply using form 1A. You can apply for up to 4 names in order of priority. You can check if your name is available here: MCA-Check Company Name.
  4. Apply for Company PAN: You can apply for PAN  here.
  5. Prepare Memorandum of Association (MOA) and Articles of Association (AOA): These are the most important legal documents of a company. In most cases, only an auditor will be able to frame these documents. Typically both of these are made into a book. These contain everything from the goals and objectives of the company to the authorized capital of the company. More on this at Wikipedia: MOA here. AOA here.
  6. Incorporation: An office space needs to be decided and notified as registered office using Form 18. Founders need to be appointed as directors using Form 32. Thereafter, the company needs to be incorporated by submitting Form 1, MOA and AOA. A meeting will be called by the registrar of companies which typically is attended  by the auditor. Any objectionable issues in the MOA/AOA will need to be sorted out following which the company is officially born. You will get a company identification number (CIN) and a certificate of incorporation will be mailed to you.
  7. Open Bank Account: Open at any bank of your convenience. Keep in mind that the bank will ask for your company’s MOA/AOA.
  8. Register for Value  Added Tax (VAT) and Professional Tax (PT): Register for your  state’s VAT and PT. Either visit the commercial tax office in your city or google if online registration is available in your state. You will then get a (Tax identification number) TIN which needs to be quoted to get tax benefits.
  9. Register for Central Sales Tax (CST) if you trade in commodities between states: If you trade in commodities between states, then register for CST at the commercial tax office in your city. You will then get a CST number which needs to be quoted to get tax benefits.
  10. Register for Import Export Customs (IEC) if you trade in commodities between countries.
  11. Register for Service Tax if you provide services to your customers and charge them for that.
  12. Purchase all stationery: Stationery will have the company name printed on it and includes at least the following:
    • Statutory registers (You can get all registers bundled in a single book format). This is necessary for legal purpose and the contents include shares register, debentures register, minutes register etc.
    • Common seal and share certificates (The common seal is used for creating an embossed effect on the share certificate)
    • Letterhead  copies.
    • Receipt books with TIN number and service tax number if applicable.

That is all you need to have your company up and running. If done well, the processes can be finished in less than a month. Done badly, the processes may take up to one year.

Costs excluding auditor fees as per my  knowledge:

  1. Digital signature: Rs.2000/-
  2. DIN: Rs.100/- per director
  3. Form 1A: Rs.500/-
  4. PAN: Rs.66/-
  5. Form 32: Rs.200/- per director
  6. Form 18: Rs.200/-
  7. Form 1: Calculate using this link: Fee calculator. For example, a company with 10 Lakh authorized capital costs Rs.26,600/-
  8. Sub registrar fees: Rs.1000/-
  9. Professional tax: Rs.2500/-
  10. VAT and CST charges: A deposit is asked which depends on the turnover you declare at the commercial tax office and the tax inspector has the final say in this matter. You may be asked to deposit say 10,000 for a 25 Lakh turnover company.
  11. IEC: Rs.250/-
  12. Common seal: Rs.1300/- to Rs.2500/-

Auditors may charge you around Rs.10,000/- for the entire process. Another Rs.5000 may be required for other charges such as printing MOA, AOA etc. Approximate cost for a company with 10 lakh authorized capital is around Rs.60,000. For a 1 lakh company, it may be Rs.40,000.