Startups established as companies in India are required to get a mandatory registration under the Companies Act. However, most startup-owners lack the legal know-how of the complete procedure and cost of company registration, and are thus compelled to seek professional guidance and services for the same. The additional charges for availing professional services, over and above the government fees, leads to an overall increase in the cost of registration for startup companies.
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To reduce the burden of this cost, the Ministry of Corporate Affairs has introduced a zero filing fee for companies having an authorised capital below Rs.15 lakhs. This has resulted in a drastic decline of the overall government fees, thereby reducing the overall cost of registering a company in India.
Procedure for Company Registration
Private Limited companies are profit-earning businesses, the ownership of which is held by at least 2 shareholders. The maximum number of shareholders in a private limited company is also limited to 200. The liability of the owners is limited to their capital contribution to the business.
A private limited company can be registered and incorporated by applying through the SPICe+ form. Part A of the form is filled to reserve and register a name for the company. The name of the company should not be visually or phonetically the same or similar to an existing company. It should also not be in violation of the Names and Emblems Act. This means that the name of the company should not show patronage of the government.
Part B of the form should be filled out and submitted within 20 days from the date of approval of the company’s name, along with the following supporting documents:
- e-MoA and e-AoA
- Utility bills as proof of residence at the office address not older than 2 months
- Proof of ID and address of subscribers
- Proof of ID and address of the applicant
- All the documents and the application form needs to be signed by the DSC of the applicant.
- Stamped and notarised rent agreement and NOC from the landlord if the property is rented
The linked forms required to be filled are AGILE PRO for opening a bank account ESIC, EPF, GST, and Professional tax registration, and INC-9 as a declaration from the first director of the company. After the documents are successfully verified, the Registrar of Companies issues the Certificate of Incorporation within a week from the date of submission.
The cost of application, filing MoA, and AoA is the same as that for a public limited company.
Cost of Private Limited Company Registration
Cost of DSC:
The first cost component is the Digital Signature of the Promoters. The application for incorporation of the company is filed online on the MCA portal, which is signed electronically by the DSC of the promoters. Hence the promoters must have valid digital signatures with them. The cost of making a digital signature for the proposed shareholder and director varies from vendor to vendor. However, it may range somewhere between Rs. 1500 to Rs. 2000 for each digital signature. At setindiabiz, we have preferred rates for our customers.
The ROC Fee based on Authorised Capital:
The second cost component of company registration would be the Authorised Capital of the company, the ROC fee for the registration of the company is calculated based on the authorised capital of the company. For small companies with capital of up to rupee fifteen lakhs, there is a general exemption on the ROC fee. We advise you to use the ROC fee calculator available on the MCA Portal.
State-Specific Stamp Duty on Company Incorporation:
The State Governments where the companies are incorporated levy state-specific stamp duty on certain documents that are created at the time of incorporation. The state governments impose stamp duty on the following three documents.
- MOA
- AOA
- Spice Form
Every state government has passed their own stamp act imposing different rates of stamp duty, which may be a flat rate or may be based on the authorised capital of the company. Hence while incorporating a company, you must check the stamp duty on MOA, AOA, and Spice Form.
Finally the consultant fee:
Having understood three cost components such as the cost associated with the DSC, the fee of company incorporation levied by the ROC and the respective stamp duty by the state government where the company shall have their registered office, lets us understand the fee that a consultant charges to help you incorporate a company.
The fee charged by the consultant will vary on a case to case basis; In contrast, traditional professional firms charge a hefty amount to assist in the incorporation of companies in India; online service providers like Setindiabiz have revolutionized the way companies are incorporated and offer their services at a very reasonable fee.
Conclusion
The overall cost of registering a company in India depends on the application fee for company registration and related documents. The application for registration is divided into two parts, PART A and PART B. PART A has a fixed application fee of Rs.1000, while the application fees for PART B depend on the authorised capital of the company. In an attempt to encourage startups, the government has permitted a zero filing fees, upto the authorised capital of Rs.15 lakhs. Other necessary documents that affect the overall cost of company registration includes the DSC, DIN, stamp duty, and the charges of filing the MoA and the AoA of the company.
