Steps in forming a Business Organisation

By | March 10, 2019

Steps in forming a Business Organisation

After identifying which type of business organisation fits to your needs i.e. Proprietorship / Partnership / Private Limited Company / Public Limited Company then, next step is to form the particular organisation.

  • Proprietorship firm:

    • The process of formation of a Proprietorship firm is very easy and simple. All you need to do is to obtain the necessary firm registration from the local authority / Government department.

  • Partnership firm:

    • For establishing a Partnership firm you need to draft the partnership deed and obtain the permissions on the firm’s name and carry on the business (a s in the case of proprietorship firm).

  • Private Limited / Public Limited company:

    • The process of formation of Private Limited Company and Public Limited Company is slightly different from what we discussed earlier. However, both (public ltd and private ltd ) carry similar process of formation.

    • Steps in formation of a Private Limited Company / Public Limited Company:

        • Registering with MCA

        • Obtaining DSC and registering the same with MCA

        • Identifying the name for the company

        • Obtaining approval of the name of the company

        • Applying for registration of the company

        • Preparation and submission of Memorandum of Association

        • Preparation and submission of Articles of Association

        • Obtaining Certificate of Incorporation

        • Obtaining Certificate to commence business (required for Public Ltd Company only )

  • Registering with MCA :

    • Required papers for formation of a company can be submitted online. To submit all these, you need to register yourself as a registered user in the Ministry of Corporate Affairs (MCA) website. This can be done by yourself.

  • Obtain Digital Signature Certificate:

    • Digital Signature Certificate (DSC) is required for submission of various documents, forms in electronic form to MCA. DSC of a director is required to be obtained and the application form for DSC should be counter signed by the promoters of the company. After obtaining the DSC, the same should be registered in the MCA website.

  • Identifying the name for the company :

    • Good business names should be easy to remember, unique and should reflect its core business activity. It should be an original one. It should not resemble name of any other enterprise. It should be unique. Further, before finalising the name of the enterprise you should consider that the name should not violate the provisions of Prevention of improper use act . The name be available i.e. no other organisation has registered the same name. Therefore, before going for registration, keep in mind few options say 5 to 6 names in mind. Further, the availability of names can also checked online.

  • Obtaining approval of the name of the company and Registering with ROC :

    • Once the name is shortlisted and verified about the availability in MCA website, the Directors should apply for the approval of the name of the company in the MCA website by authenticating the DSC. Along with the name of the company, you need to submit some more information like, Authorised Capital, Objectives of the company, location of the company, trademark / logos ( if any) etc also need to be submitted.

      The Registrar of Companies (ROC) (designated authority to approve by MCA), is satisfied and otherwise eligible the name will be approved within a period of 7 days. A communication will also be sent to the applicants.

      Once the name is approved, now, you need to apply for registration of the company. This has to be done within a period of 30 days form the date of approval of the name of the company.

  • Preparation and submission of Memorandum of Association:

    • Once the company is registered, then comes the preparation and submission of memorandum of association. Memorandum of association is a very important document and generally it contains the information of the company viz.

        • The main objects of the company

        • Other objects of the company

        • Registered office details

        • Authorised capital details.

      (For further details you may go through the article on ‘Model Memorandum of Association’. As said earlier this is to guide you only. You may amend the deed as per your needs and requirements.)

  • Preparation and submission of Articles of Association:

    • Once the memorandum of association is formed, within the rules finalised Articles of Association should be prepared. Articles of Association deals with the internal management of the company. It prescribe the rules to manage the company. As this is the subset of Memorandum of Association (MOA) , the Articles of Association should not contradict the MOA.

      (For further details you may go through the article on ‘Model Articles of Association’. As said earlier this is to guide you only. You may amend the deed as per your needs and requirements.)

  • Obtaining Certificate of Incorporation :

    • Once these Memorandum of Association and Articles of Association are finalised these need to be stamped as per the state government stamp duty. Now, complete the required forms (Form 1/ Form 18 / From 32 ) and submit the forms and physical documents in 3 copies to ROC.

      After due verification of the forms ROC will approve the Company and a Corporate Identification number is generated and a certificate of incorporation will be issued by the ROC.

      With this certificate, a Private Limited Company can commence its operation. For Public Limited Companies another certificate called ‘Certificate of Commencement of Business’ needs to be obtained before commencement of operations.

  • Obtaining Certificate of Commencement of Business:

    • If the company is a public limited company, then, it needs to obtain permission to commence business. For that purpose the company needs to submit the details of the share capital raised and to be raised, certificate duly signed by the directors that they have not started the business. Further, they need to submit the board approval for preliminary expenses.

      Once all these are enclosed to the required forms the ROC will issue certificate of commencement of business and now the public limited company can start its commercial operations. Please note, that this certificate is not required in case of private limited companies and they can start commercial operations once they receive the Certificate of Incorporation.

Steps in formation of a company (summary):

1. Identify the name of the company and obtain approval from ROC

2. Prepare Memorandum of Association

3. Prepare Articles of Association

4. Subscribing to the capital (minimum contribution)

5. Certificate of incorporation

6. Certificate of Commencement of Business

(required in case of Pub Ltd Co, not required in case of Pvt. Ltd Co)

7. Now, the company can commence operations.

All the best

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