Company Incorporation in India: A Founder's Legal Checklist
Which business structure should a founder choose?
The first decision is the structure, because it affects liability, compliance and the ability to raise funds. Common options under Indian law include the private limited company and the limited liability partnership (LLP), alongside one-person companies and traditional partnerships or proprietorships.
A private limited company under the Companies Act 2013 is often chosen by founders who expect to raise external investment, because it offers limited liability and a recognised share structure, though it carries higher compliance than an LLP.
What are the key features of a private limited company?
A private limited company has the following broad features:
- Limited liability for shareholders, limited to their shareholding;
- A separate legal personality distinct from its members;
- A minimum of two shareholders and two directors (one of whom must be resident in India);
- Restrictions on the transfer of shares and on inviting the public to subscribe.
The company is governed by its Memorandum and Articles of Association, which set out its objects and internal rules.
What documents and steps are involved in incorporation?
Incorporation is carried out through the Ministry of Corporate Affairs portal and broadly involves:
- Obtaining Digital Signature Certificates (DSC) for the proposed directors;
- Obtaining Director Identification Numbers (DIN);
- Name reservation through the prescribed application;
- Filing the incorporation form with the Memorandum and Articles of Association and supporting documents (identity and address proof, registered office proof);
- Issue of the Certificate of Incorporation with the Corporate Identity Number (CIN), along with PAN and TAN.
Founders should also prepare a shareholders' or founders' agreement where there are multiple founders or investors.
What compliance applies after incorporation?
Incorporation is the beginning, not the end. Post-incorporation obligations typically include:
- Opening a bank account and bringing in subscription money;
- Filing for commencement of business where required;
- Maintaining statutory registers and minute books;
- Holding board and general meetings as prescribed;
- Filing annual returns and financial statements with the Registrar of Companies;
- Registrations under tax laws (such as GST) and, where applicable, labour and sector-specific laws.
Failure to keep up with these filings can lead to penalties and, in serious cases, to directors being disqualified.
What else should founders plan for early?
Founders are well advised to address intellectual property (registering the brand and assigning IP created by founders or contractors to the company), employment documentation, and the equity arrangements between founders, including vesting. Putting these in place early avoids disputes once the business grows.
Frequently Asked Questions