The PRISM Scheme

What is Proprietorship?

A sole proprietorship is the simplest form of business where a single individual owns, operates, and manages the business. It isn’t a separate legal entity, meaning the owner and the business are legally identical.

Key Characteristics:

• Full ownership and control: The proprietor has complete control over decisions.
• Unlimited liability: The owner is personally liable for all business debts and losses.
• No formal registration: In many cases, registration is optional, though GST or local licenses may be required.
• Limited access to capital: Raising funds from investors or banks is difficult due to a lack of legal status.
• Common use cases: Freelancers, small shop owners, consultants, and home-based businesses.

What is a Private Limited Company?

A Private Limited Company is a legally registered business entity under the Companies Act, 2013. It offers a distinct legal identity and limits the liability of shareholders to the amount invested in the company.

Key Features:

Following are the key features of a private limited company:

• Separate legal entity from its owners
• Limited liability for all shareholders
• Minimum 2 and maximum 200 shareholders
• Perpetual succession – continues to exist regardless of changes in ownership
• Preferred for scaling due to ease of raising funds, better governance, and investor confidence

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Ready to convert your business? Get expert assistance with company registration and start your private limited journey today.

Difference Between Proprietor and Private Limited Company

Law Governing the Conversion of Proprietorship into a Private Limited Company

The conversion is governed under:

• Companies Act, 2013 – Covers the registration and compliance of private limited companies.
  Income Tax Act, 1961 – Specifically Section 47(xiv), which allows tax-neutral transfer of assets from proprietorship to company, subject to conditions.

Key Legal Points:

• All assets and liabilities must be transferred to the company.
• The sole proprietor must hold at least 50% of the company’s shares for 5 years.
• The business must continue for a minimum of 5 years post-conversion.
• No benefit should accrue to the proprietor other than share allotment.

Benefits of Conversion from Proprietorship to Private Limited Company

Converting to a private limited company offers multiple strategic advantages:

• Limited Liability: Personal assets of owners are protected from business debts.
• Increased Credibility: Appears more professional to clients, vendors, and investors.
• Access to Funding: Equity funding becomes possible through share issuance.
• Separate Legal Identity: Contracts and property can be in the company’s name.
• Tax Benefits: Eligible for lower corporate tax rates and more deductions.
• Ownership Transfer: Shares can be transferred, making exit or succession easier.
• Improved Governance: Structured decision-making via the Board of Directors.

Requirements for Conversion

Here are the key requirements to convert a proprietorship into a private limited company:

• Legal Agreement: A takeover agreement must be executed to transfer the business.
• Memorandum of Association (MoA): Must include a clause to take over the existing business.
• Minimum Capital: While there is no fixed capital requirement, at least ₹1 lakh is commonly shown.
• Shareholding: The proprietor should hold at least 50% shares and voting rights post-conversion.
• Minimum Directors: At least 2 directors (including the proprietor).
• Asset Transfer: All tangible and intangible business assets must be transferred.

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Related Read: Difference between MOA and AOA

Prerequisites for Forming a Private Limited Company

Before converting, the following conditions must be fulfilled to form a Private Limited Company:

• Minimum 2 Directors: At least one must be a resident of India.
• Minimum 2 Shareholders: Can be the same as directors.
• DIN (Director Identification Number) for all directors.
• DSC (Digital Signature Certificate) for signing incorporation documents.
• Unique Name Approval through MCA's RUN or SPICe+ process.
• Registered Office Address: Proof of ownership or rent agreement with utility bill.

Conditions for Converting to a Sole Proprietorship

To legally convert a sole proprietorship into a private limited company, the following conditions must be satisfied:

1. Asset Transfer: All business assets must be transferred to the company without any monetary consideration except shares.
2. Shareholding Requirement: The Proprietor must own ≥50% of the total share capital.
3. No Other Benefits: No additional consideration, like cash or debt relief, is allowed.
4. Continuity of Business: The business must continue post-conversion for at least 5 years.
5. Valuation of Assets: Must be done by a Chartered Accountant to determine fair value.
6. Documentation: Legal agreement (slump sale or asset transfer) must be executed.

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Related Read: Difference Between Sole Proprietorship and One Person Company

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Documents Required for Conversion to Private Limited Company

Here’s a checklist of documents you’ll need:

For Proprietor (Now Director/Shareholder):

• PAN Card
• Aadhaar or Passport/Driver’s License
• Passport-sized photo
• Email and phone number
• Digital Signature (DSC)

For Business:

• Ownership/Rental proof of business premises
• Utility bill (not older than 2 months)
• NOC from the landlord if rented
• Statement of assets and liabilities (certified by a CA)

Procedure for Conversion of Proprietorship to Company

Follow these steps to convert your sole proprietorship into a private limited company:

Step 1: Name Reservation

Apply for the company name through RUN or SPICe+ Part A on the MCA portal.

Step 2: Get DSC

Obtain a Digital Signature Certificate (DSC) for all proposed directors.

Step 3: Draft MOA & AOA

• Include a clause in the Memorandum of Association (MoA) to take over the existing business.
• Prepare Articles of Association (AOA) for internal governance.

Step 4: File Incorporation via SPICe+

Submit SPICe+ forms (Part A and B) along with:

• PAN & TAN application
• MOA, AOA, declarations, affidavits, and other attachments.

Step 5: Execute Takeover Agreement

After the company's incorporation, a business takeover agreement must be signed between the proprietor and the company.

Step 6: Asset Transfer

Transfer all business assets and liabilities to the newly formed company.

Step 7: Post-Incorporation Tasks

• Open a company bank account
• Apply for GST, Shops & Establishment licenses (if required)
• File commencement of business (INC-20A) within 180 days

Frequently Asked Questions (FAQs)

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What is the Nature of a One Person Company in India?

As per the definition provided in the Companies Act 2013, an OPC is a private limited company with only one member. The sole shareholder of the OPC holds 100% of the company's shares and is entitled to all the profits generated by the business. The full form of OPC is "One Person Company," emphasising its single-member structure.

The importance of OPC lies in its ability to provide a formal corporate structure to sole proprietors and small business owners. By registering as an OPC, entrepreneurs can enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. This unique combination of sole ownership and corporate features makes OPC an attractive choice for many budding entrepreneurs in India.

Benefits of OPC Company

Next up, let us understand why an OPC company will be right for you:

1. Benefits of Being Small Scale Industries

One of the key advantages of a one person company is its eligibility to be registered as a Micro, Small or Medium Enterprise (MSME). By obtaining MSME registration, OPCs can avail various benefits provided by the government, such as:

• Priority sector lending from banks
• Collateral-free loans up to ₹10 lakhs
• Subsidy on patent registration
• Reimbursement of ISO certification expenses
• Concession on electricity bills
• Exemption from excise duties

These MSME benefits can significantly reduce the financial burden on small businesses and help them grow faster.

2. Single Owner

Unlike partnership firms or private limited companies, an OPC has only one owner who holds all the shares and has complete control over the company's decision-making process. This streamlined ownership structure offers several benefits for OPC company, such as:

• Faster decision-making without the need for consensus among multiple partners or directors
• Flexibility to adapt quickly to changing market conditions
• Ability to maintain confidentiality of business strategies and plans
• Elimination of potential conflicts among partners or shareholders

3. Credit Rating

OPCs find it easier to obtain loans and credit facilities from banks and financial institutions than sole proprietorships. This is because OPCs have a separate legal identity and their financial statements are available in the public domain, allowing lenders to assess their creditworthiness more accurately. A good credit rating can help OPCs secure funding at competitive interest rates, providing a significant advantage over unregistered businesses.

4. OPC Benefits under Income Tax Law

OPCs enjoy certain one person company tax benefits under the Income Tax Act, 1961. Some of these advantages include:

• Lower corporate tax rate of 25% for OPCs with an annual turnover of up to ₹250 crores.
• Exemption from Minimum Alternate Tax (MAT) for OPCs with an annual turnover of up to ₹5 crores.
• Ability to carry forward and set off losses for up to 8 years.
• Deduction of up to ₹1.5 lakhs under Section 80C for investments made by the OPC owner.

These tax benefits can help OPCs optimise their tax liabilities and retain more profits for reinvestment in the business.

Received Interest Rate on any Late Payment

Under the MSME Development Act, 2006, OPCs registered as MSMEs are entitled to receive interest on delayed payments from their buyers. If a buyer fails to make payment within 45 days of accepting the goods or services, the OPC can charge an interest rate of three times the bank rate notified by the Reserve Bank of India (RBI). This provision helps ensure timely payments and improves the cash flow situation for small businesses.

6. Increase in Trust and Status

By registering as an OPC, small businesses can enhance their credibility and reputation in the market. The formal corporate structure and public disclosure of financial statements instil greater trust among customers, suppliers and other stakeholders. This increased trust can lead to better business opportunities, higher customer loyalty and improved bargaining power in commercial transactions.

7. Easy Funding

Apart from institutional funding, OPCs can also raise capital from individual investors. The Companies Act allows OPCs to issue shares to up to 200 shareholders, providing an alternative route for raising funds. This option can be particularly useful for OPCs with high growth potential, as they can attract angel investors or venture capitalists to fund their expansion plans.

8. Limited Liability

One of the most significant benefits of OPC is the limited liability protection it offers to the owner. Unlike sole proprietorships, where the owner's personal assets are at risk in case of business liabilities, an OPC provides a corporate veil that separates the owner's personal assets from the company's obligations. In the event of any legal disputes or financial losses, the liability of the OPC owner is limited to the extent of their investment in the company.

9. One Person Company Tax Benefits

In addition to the income tax benefits mentioned earlier, OPCs also enjoy several other tax advantages. For instance, OPCs with an annual turnover of up to ₹2 crores can opt for the presumptive taxation scheme under Section 44AD of the Income Tax Act. Under this scheme, the OPC is required to pay tax on only 8% of its total turnover, reducing the compliance burden and tax liability significantly.

10. MSME Benefits

As discussed earlier, OPCs registered as MSMEs are eligible for various government schemes and subsidies. Some additional benefits include:

• Preference for government tenders
• Assistance in marketing and export promotion
• Subsidies for participating in international trade fairs
• Skill development and training programs for employees
• Access to credit guarantee schemes

These benefits can provide a much-needed boost to small businesses, helping them compete with larger players in the market.

11. Ease of Management

Managing an OPC is relatively simpler compared to other business structures. With a single owner and no board of directors, decision-making is faster and less complicated. 

Additionally, OPCs have fewer compliance requirements under the Companies Act. For instance, OPCs are not required to hold annual general meetings or prepare cash flow statements. This reduced compliance burden allows OPC owners to focus more on their core business activities.

Eligibility Criteria for OPC

To register as an OPC, the following eligibility criteria must be met:

• The OPC must have only one member who is an Indian citizen and resident. This ensures that the business is managed by someone who understands local regulations and market conditions.
• The sole member must be a natural person, not a company or an institution. This stipulation reinforces the OPC's structure as a personal enterprise.
• The member should not be a minor to ensure legal competency in business dealings.
• The member should be of sound mind and not be declared insolvent by any court. This criterion ensures that the individual can manage the company's affairs effectively.
• The member should not have been convicted of any offence related to company formation or management in the past five years, which helps maintain the integrity of business practices.
• The member should not be a nominee or shareholder in any other OPC.

OPC Registration Process

The OPC registration process involves the following steps:

The registration process for an OPC is streamlined and can be completed online through the Ministry of Corporate Affairs - MCA portal. Here are the essential steps involved:

1. Obtain a Digital Signature Certificate (DSC): The first step is to acquire a DSC for the sole member, which is necessary for signing electronic documents during the registration process.
2. Apply for Director Identification Number (DIN): Following the DSC, the next step is to apply for a DIN, which is required for the proposed director of the OPC.
3. Name Approval: The applicant must submit an application for name approval using Part A of the SPICe+ form on the MCA portal. It is advisable to propose at least two names to ensure one can be approved.
4. Prepare Necessary Documents: Essential documents include: 

• Memorandum of Association (MoA) and Articles of Association (AoA)
• Proof of registered office address
• Consent from the nominee
• KYC documents for both the member and nominee

5. File SPICe+ Form: Once all documents are prepared, submit Part B of the SPICe+ form along with all necessary attachments to complete the application for incorporation.
6. Payment of Fees: Pay the requisite registration fees online, which may vary based on the company's nominal share capital.
7. Certificate of Incorporation: If all details are accurate and compliant with regulations, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, officially recognising the OPC as a legal entity.

This structured approach not only simplifies the registration process but also ensures that all legal requirements are met efficiently, making it easier for entrepreneurs to start their businesses as a One Person Company in India.

Conclusion

OPC offers a unique blend of sole ownership and corporate features, making them an attractive choice for solo entrepreneurs and small business owners in India. The benefits of an OPC company are numerous, ranging from limited liability protection and separate legal identity to tax advantages and easier access to credit. 

Additionally, the reduced compliance burden and simplified management structure make OPCs well-suited for individuals who want to focus on their core business activities without getting bogged down by excessive paperwork.

To register as an OPC, an individual must meet certain eligibility criteria and follow the prescribed registration process. Once incorporated, an OPC can enjoy various benefits available to MSMEs and small-scale industries, helping them compete effectively in the market.

In conclusion, the One Person Company is a progressive business structure that encourages solo entrepreneurship and facilitates the growth of small businesses in India. By providing a formal corporate framework with minimal compliance requirements, OPCs have opened up new avenues for aspiring entrepreneurs to turn their ideas into successful ventures.

Benefits of OPC - FAQs

Difference Between Limited Liability Partnership and Private Limited Company

The fundamental difference between a Pvt Ltd and an LLP lies in ownership and management. While a Pvt Ltd company is governed by shareholders (owners) and directors (managers), an LLP is managed by partners who own and operate the business. Additionally, compliance requirements, taxation and funding options differ significantly between the two.

Here is a table outlining the difference between LLP and a private limited Company:

While the differences between LLPs and Private Limited Companies are numerous, they share similarities in key aspects:

• Limited Liability
• Separate Legal Identity
• Registration Process with the MCA
• Perpetual Succession

Let’s understand the key features and registration process in detail for both Private limited companies and LLPs.

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) is a privately held business entity that operates under the legal framework of the Companies Act of 2013 in India (or similar laws in other countries). It combines the benefits of limited liability protection for its shareholders with certain restrictions to maintain its private nature.

This structure is popular among startups and small to medium-sized enterprises due to its ability to attract investments while offering limited liability protection and operational flexibility.

Features of Pvt Ltd Company

Listing down some key advantages of a Private Limited Company below:

1. Limited Liability

The liability of Shareholders is limited. Personal assets are generally protected from business debts.

2. Separate Legal Entity

A Private Limited Company is considered a distinct legal entity from its owners (shareholders). It can enter into contracts, own property, and sue or be sued in its own name.

3. Ownership

Owned by shareholders who hold shares in the company. Transfer of ownership is facilitated through the buying and selling of shares.

4. Management

Managed by directors who are appointed by the shareholders. The day-to-day operations are overseen by the management team, while major decisions are often subject to shareholder approval.

5. Number of Shareholders

Requires a minimum of two shareholders and can have a maximum of 200 shareholders.

6. Regulation and Compliance

Governed by the Companies Act and regulated by the Ministry of Corporate Affairs in India. Compliance includes filing annual financial statements, conducting annual general meetings and maintaining statutory records.

7. Investment and Funding

Easier to attract investment and funding compared to other business structures due to the well-defined ownership structure and limited liability.

8. Perpetual Succession

The company continues to exist even if its shareholders or directors in private limited company change, retire, or pass away. Ownership can be transferred seamlessly through the sale of shares.

Private Limited Company Registration

The Ministry of Corporate Affairs (MCA) has introduced a streamlined process for incorporating companies called the Simplified Proforma for Incorporating Company Electronically Plus (SPICe+). It consists of two parts: Part A and Part B.

1. Step 1: Acquire a Digital Signature Certificate (DSC)

• A Digital Signature Certificate (DSC) is a digital method of verifying or attesting documents.
• It is typically issued with one or two-year validity and is mandatory for all witnesses in the Memorandum of Association (MOA) and Articles of Association (AOA).
• Class 2 or 3 DSCs can be obtained through listed Government Certifying Agencies (CAs).

2. Step 2: Apply for Name Approval using SPICe+ Part A

• Part A facilitates 'Name Reservation' with two proposed names and one re-submission (RSUB).
• In case of name rejection due to various reasons, a re-filing with the specified fee is required.

Note: Simultaneous application for name approval (Part A) and Incorporation (Part B) through SPICe+ is possible, but only one name can be reserved.

3. Step 3: Apply for Company Registration using SPICe+ Part B

After name approval, Part B completes the registration process, including:

• • Application for allotment of Director Identification Number (DIN)
  • Incorporation of the new company
  • Submission of e-MoA (INC-33) and e-AoA (INC-34)
  • Application for PAN and TAN (mandatory)
  • Application for EPFO registration (mandatory)
  • Application for ESIC registration (mandatory)
  • Application for Professional tax registration (only for Maharashtra)

The entered information in SPICe+ Parts A and B is automatically transferred to associated forms like AGILE-PRO, eAoA, eMoA, URC1, and INC-9, as applicable.

4. Step 4: Open a Bank Account

Open a current account for your company to facilitate seamless financial transactions and business operations, handling various aspects such as receiving payments, making supplier payments and managing payroll.

5. Step 5: File for the Commencement of Business Certificate

The Commencement of Business Certificate, filed through Form INC-20A within 180 days of incorporation, is a declaration by the Director of the Company submitted to the Registrar of Companies.

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After the SPICe+ Form receives approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation, confirming the successful registration of your company.

This certificate includes vital information such as the Company's name, registration number (CIN), date of incorporation, registered office address, and so on.

Example of CIN: U72200KA2013PTC097389

Read more about what each letter in a CIN signifies here.

What is a Limited Liability Partnership?

A Limited Liability Partnership (LLP) is a business structure combining features of a traditional partnership and a limited company.

Limited Liability Partnerships are often chosen by professional services firms, small businesses and ventures where the partners want the flexibility of a partnership along with the protection of limited liability.

Features of LLP

A Limited Liability Partnership (LLP) is a business structure that combines features of both a traditional partnership and a limited company. Limited Liability Partnerships are often chosen by professional services firms, small businesses, and ventures where the partners want the flexibility of a partnership along with the protection of limited liability.

Some key characteristics of a Limited Liability Partnership are:

1. Limited Liability

Similar to a private limited company, partners in an LLP have limited liability.

2. Separate Legal Entity

An LLP is a distinct legal entity from its partners. It can own property, enter into contracts, and sue or be sued in its own name.

3. Ownership

Owned by partners, and the ownership structure is defined by the LLP agreement. Transfer of ownership usually requires the consent of other partners.

4. Management

Managed by partners or a designated management team, as specified in the LLP agreement. Each partner typically has an equal say in the management decisions, making it a more collaborative structure.

5. Number of Partners

Requires a minimum of two partners, and there is no maximum limit on the number of partners in an LLP.

6. Regulation and Compliance

Governed by the Limited Liability Partnership Act in India, with less stringent regulatory requirements compared to a private limited company. Compliance involves filing annual returns and maintaining statutory records.

7. Flexibility

Offers greater flexibility in terms of internal management and decision-making processes compared to a private limited company.

Limited Liability Partnerships Registration

Here's a simplified guide on the steps for Limited Liability Partnership (LLP) registration:

1. Step 1: Apply for DSC

• Obtain a Digital Signature Certificate (DSC) from Government Certifying Agencies with one or two-year validity.

2. Step 2: Name Reservation

• Reserve the LLP's name using the LLP-RUN form.

3. Step 3: Apply for Registration through FiLLiP

• Complete the FiLLiP (Form for Incorporation of Limited Liability Partnership) and submit it to the Registrar. Alongside FiLLiP, submit the Subscriber sheet and Partner's consent (Form 9) as additional documentation.

4. Step 4: File LLP Agreement

• File the LLP Agreement using Form 3 on the MCA portal within 30 days of LLP registration.

After the FiLLiP Form receives approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation, a crucial legal document confirming the successful registration of your company.

This certificate includes vital information such as the LLP's name, registration number (LLPIN), date of incorporation, registered office address, and more.

Example of LLPIN: AAA-1234

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LLP vs Pvt Ltd Ownership

• Shareholders vs. Partners
  • Pvt Ltd Ownership: Shareholders own the company but may not be involved in day-to-day management. Primarily managed by Directors.
  • LLP Ownership: Partners typically manage the business and have a direct role in decision-making.
• Transfer of Ownership
  • Pvt Ltd: Shares can be easily transferred from private limited company members, making it simpler to onboard or exit shareholders.
  • LLP: Ownership transfer requires the consent of other partners, which can be complex.

LLP vs Pvt Ltd Compliance

• Compliance for Private Limited Companies
  • Hold the First Meeting of the Board of Directors within 30 days of the Incorporation of the Company. It is compulsory to host four meetings in a year with a gap not more than 120 days.
  • Hold an Annual General Meeting every year, on or before September 30^th, during business hours and in the registered office.
  • Appoint the company's first auditor within 30 days of incorporation, who will serve until the end of the first AGM.
  • File Form ADT 1 within 15 days of the appointment of the subsequent auditor.
  • File Annual Returns (AOC 4 and MGT 7) within 30 and 60 days of holding the AGM, respectively.
  • File Form ITR-6 for Income Tax Return annually.
  • File Form DIR-3 KYC to disclose details of the Directors.
• Compliance for Limited Liability Partnerships
  • File an LLP agreement within 30 days of incorporation. The penalty of ₹100/day will be levied if an LLP fails to comply with this condition.
  • File the form DIR3 for the DIN allotment in case of an existing company.
  • File two annual statements for Annual Return and Statement of Accounts and Solvency using Forms 11 and 8, respectively.
  • Sign, verify and file the Income Tax Return (ITR) annually.
  • Depending on their shareholding capacity, you and your partner must deposit their contribution into the relevant bank account within the specified time frame.
  • Get a GST registration since it is a legal compulsion per the GST Act.
  • Audit your accounts through CAs if the company's annual turnover exceeds Rs 40 lakhs or the contribution surpasses ₹25 lakhs of the threshold limit.
  For businesses that prefer a simpler and cost-effective compliance framework, LLPs are the better option. With fewer regulatory requirements, LLPs reduce the administrative burden, making them ideal for small businesses, professional firms and startups not seeking external funding. However, for companies planning rapid growth, attracting investors or requiring a formal structure for credibility, Pvt Ltd companies are worth the added compliance effort.

LLP vs Pvt Ltd Funding

• Equity Financing
  • Pvt Ltd Company funding: Easily attracts investors by issuing shares, making it suitable for startups seeking venture capital or private equity.
  • LLP funding: Equity financing is not possible since partners cannot issue shares.
• Debt Financing
  • Both structures can access loans, but Pvt Ltd companies have additional options like issuing debentures or convertible notes.

LLP vs Pvt Ltd Foreign Direct Investment (FDI)

• Pvt Ltd Company funding: Easily attracts investors by issuing shares, making it suitable for startups seeking venture capital or private equity.
• LLP: FDI in LLP is allowed only in sectors where 100% FDI is permitted and is subject to approval in other cases, making it less flexible.

LLP vs Pvt Ltd Taxation

• Taxation for Pvt Ltd CompaniesIncome tax for Pvt Ltd companies:
  • 25% if the turnover is up to ₹400 crore (as per recent provisions).
  • 30% for larger companies.
  A cess of 4% applies to the tax amount, along with surcharges for higher income levels.
• Taxation for LLPsLLP taxation rate is 30% on their total income plus a surcharge (if applicable) and cess.Both LLPs and Pvt Ltd companies are treated equally under the GST regime:
  • GST registration is mandatory for businesses with annual turnover exceeding ₹20 lakhs (₹40 lakhs for goods in some states).
  • Compliance includes filing monthly or quarterly GST returns, depending on turnover.

Company Registration with Razorpay Rize

You can experience a hassle-free, 100% online business registration process with Razorpay Rize, featuring the lowest professional fees and absolutely no hidden charges.

Explore the diverse range of services tailored to suit the needs of both startups and established businesses.

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Our package includes:

• Company Name Registration
• 2 Digital Signature Certificates (DSCs)
• 2 Directors’ Identification Numbers (DINs)
• Certificate of Incorporation(COI)
• MoA & AoA [Applicable for Private Limited Companies and OPCs]
• LLP Agreement [Applicable for LLPs]
• Company PAN & TAN

*Prices and documents can differ based on the company type.

Which Company Type Should You Register Your Business With?

Before proceeding with the registration of either an LLP or a company, it is crucial to evaluate the following factors carefully.

• Consider the nature and size of your business

• If you operate a small business with a limited workforce, opting for LLP registration might be more favourable, given the relatively lighter compliance requirements compared to a company. On the other hand, for larger businesses with substantial employee numbers and capital needs, registering as a company provides greater flexibility in raising capital.

• Fundraising requirements

• If your goal is to raise funds through equity, choosing a company structure is imperative. However, if your fundraising needs are more straightforward, the LLP structure may be a more suitable option.

• Tax rates

• It's essential to compare the tax rates applicable to both company and LLP structures, as there can be significant differences. Opt for the structure that aligns with your financial goals based on total income or turnover.

• Personal liability protection

• While an LLP offers limited liability protection, a company structure treats the company as a distinct legal entity, safeguarding shareholders' personal assets.

Ultimately, the choice between a company structure and an LLP structure hinges on the unique characteristics of your business, including its nature, size, and capital requirements.

Find Your Ideal Company Type

If you still need more help deciding which company type to register with, don't worry! We’ve got you covered with our latest tool - "Know Your Company Type."

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For the first time in India, simply answer a quick set of questions about your startup, and this tool will leverage your responses to identify the ideal company registration type. Find your perfect fit with just one click!

Explore side-by-side comparisons of popular company types for added clarity and make informed choices effortlessly!

Frequently Asked Questions