Company Registration Benefits in India

Company Registration Benefits in India

What is a Company Registration?

Company registration refers to the process of formally establishing a business entity as a legal entity in accordance with the laws and regulations of a particular country or jurisdiction. It is the process by which a company is recognized as a separate legal entity, distinct from its owners or shareholders.

When a company is registered, it acquires certain rights, obligations, and legal status that enable it to operate as a business entity. The registration process typically involves submitting the necessary documents and information to the relevant government authority or regulatory body responsible for company registrations.

By completing the registration process, a company gains legal recognition and becomes eligible to engage in business activities, enter into contracts, open bank accounts, acquire assets, hire employees, and enjoy various other benefits and obligations as per the laws of the jurisdiction in which it is registered. The process of company registration in India is also known as company formation or company incorporation.

Benefits of India Company Registration:

  1. The Indian economy presents massive untapped market potential because:
    1. It is the 3Rd largest in Asia by GDP. India is also the world's 2nd largest country (by population) with a massive consumer market.
    2. The Indian government has recently started to allow foreign direct investments (FDIs) in various sectors including retail, finance, insurance, airline, railways and telecom. Healy Consultants Group PLC encourages  its Clients to et up a base in India to top opportunities in sector.
    3. India has signed 85 Double Tax Avoidance Agreements (DTAAs) and 42 Free Trade Agreements (FTAs) with countries around the world. This allows our Clients to not only reduce their withholding taxes but also market their products to large markets such as China and Australia.

  1. Operating a business in India is cost-effective for foreign entrepreneurs because:
    1. An Indian limited liability company can be incorporated with a paid up share capital of just US$1,650.
    2. Electricity retail prices in India are low, at US$0.08 per Kwh.
    3. India has one of the world's lowest consumer cost index; According to the Worldwide Cost of Living 2019 index, Chennai and Bangalore are two of the world's least expensive cities. as a result, living and doing business in India is inexpensive.
    4. Average domestic airfares are lower in India compared to other countries.

  1. India is known fort its labour force:
    1. It has a median population age of 27.3 years, and boasts a labour force of nearly 530 million, of which the majority is under 30 years of age.
    2. It's young population is in sharp contrast to that of other large economies such as China, the USA, and Europe.
    3. New businesses can leverage this opportunity by generating employment and increasing productivity.
    4. India has more than 125 million English speakers, so there are few language barriers to business. Furthermore, all government documentation is in English and the local state language. 

  1. As Asia's 3rd largest economy the value of India's consumer market is expected to reach much more in coming time.

  1. Considering the focus on emerging cities in India, infrastructure development is expected to grow exponentially in the coming years, which will translate into high investment across all industries.


Advantages of Registering a Company

  1. Legal Entity
  2. Perpetual Succession
  3. Limited Liability
  4. Free & Easy Transferability of Shares
  5. Owning property
  6. Can Sue or Be Sued
  7. Dual Relationship
  8. Borrowing Capacity
  9. Equity Raising
  10. Credibility and trust
  11. Brand protection
  12. Tax benefits
  13. Ease of doing business
  14. Expansion opportunities
  15. Expertise and Efficiency
Legal Entity:
A company is a legal entity which has real existence. It is an artificial person created by law, its existence is separate from its directors and shareholders. It is a juristic person established under the companies act. The word “juristic person” denotes recognition of an entity as a person by law. An incorporated company enjoys its own rights, bears it own liabilities and handles its own legal proceedings. On incorporation, a company acquires its own personality. It has a wider legal capacity, as a company can own its property and incur debts, by these the individual company members owe no liability towards the company’s creditors for debts.

Perpetual Succession:
Perpetual succession means continuing or enduring forever, the company is everlasting. It denotes continuous existence of a corporation or company till it is dissolved legally. Perpetual succession is an important factor. As stated previously, it is a separate legal entity unaffected by death or departure of any member. No matter whatever changes; membership, members, staff, shareholders, nothing of this sort is capable to affect its existence, once incorporated, it remains alive complying to the Companies Act.

Limited Liability:
Limited Liability is a legal responsibility towards a limited amount of debts. The liability of the members with reference to company’s debts are limited i.e.; limited to the face value of the share purchased by them. An exception to this is when, the members have contractually agreed to unlimited liabilities, the terms & conditions might vary. Such companies are called unlimited companies.

Free and Easy Transferability of Shares:
Shares of a company is limited by the shares purchased. It is transferable by a shareholder to another person. Shares can be transferred to anyone the shareholder chooses. A signed copy of the share transfer form would be handed over to the buyer of shares along with share certification. Technically, there are no restrictions on transfer of shares in a public limited company. Hence a share holder could transfer the shares to any person he wishes to. Securities or other interest in a public limited company is freely transferable. However, any contract or agreement in respect of transfer of securities is enforceable as a contract. In case of private limited companies, the law allows private limited companies to impose restrictions on the transfer of their shares. There is never a complete ban on shares.

Owing Property:
A company could acquire, own, enjoy and alienate property on its own name. A shareholder is not eligible to claim the company’s property, as they are not owners of the company. A shareholder merely has an interest in the company arising under the articles of association of the company, measuring a sum for liability. The shareholder does not have rights to participate in the profit of the company. However, it is subject to the contract contained in the articles of association. Therefore, property of the company is not the property of the individual member.

Can Sue or Be Sued:
A person can take legal action on his / her name. Similarly, company as an independent legal entity could take legal action in its own name against another person. This includes company name change, mergers or demergers. Because a company is a legal entity that has been conferred the status of an "individual" by the government of India, it now has the potential to file court cases against others or get sued all the same.

Dual Relationship:
The company could form an agreement or contract with any individual member. It is possible for a person to take control of the company operations and remain as an employee of the company. Thus, a person can be a shareholder, creditor, director and employee of the company at the same time.

Borrowing Capacity:
Companies enjoy the privilege of borrowing funds. They have the capacity to issue and accept debentures from the public. Company invites the attraction of banking or other financial institutions too, to render a larger financial assistance.

Equity Raising:
A company is the only type of legal entity which can help the promoters raise equity funding from Angel Investors, Private Equity Firms and the Stock Exchange. A private limited company would suffice for raising equity funds from Angel Investors and Private Equity Investors. On the other hand, in case of listing or allotment of shares to more than 200 shareholders, a Limited Company would be required.

Credibility and trust:
A registered company is perceived as more credible and trustworthy in the eyes of customers, suppliers, and potential business partners. Registration helps build trust and confidence, which can lead to increased business opportunities and partnerships.

Brand protection:
Registering a company allows you to protect your brand name and logo by obtaining trademark registration. This prevents others from using similar names or logos that could confuse consumers and helps establish your brand identity in the market

Tax benefits:
Registered companies in India are eligible for various tax benefits and incentives provided by the government. These include deductions, exemptions, and lower tax rates for specific industries, encouraging growth and investment.

Ease of doing business:
The Indian government has taken numerous initiatives to improve the ease of doing business in the country. Registering a company enables you to take advantage of these reforms, making it easier to comply with regulations, access government schemes, and participate in government tenders.

Expansion opportunities:
As a registered company, you have the flexibility to expand your business operations, open branches or subsidiaries, and enter new markets. This provides scalability and growth opportunities that may not be available to unregistered businesses.

Expertise and Efficiency:
As discussed earlier, the ownership and management are both separate, for every operation that takes place in the firm, a separate expert is appointed. This enhances the workflow and also paces up accountability. When resources become abundant, salary packages increase, and that helps in bagging talented people from the market.


Created & Posted by Sony Garg

Accountant at TAXAJ


TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/BusinessTrademark & Brand RegistrationDigital MarketingE-Stamp Paper OnlineClosure of BusinessLegal ServicesPayroll Services, etc. For any further queries related to this or anything else visit TAXAJ

 

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