Many people dream of starting their own companies and being their own boss. A lot of people also dream of establishing their company to solve an existing problem, provide jobs and improve the economy of a given country. Whatever the case may be, the first step in that direction is establishing a company. Companies can be established by individuals and businesses alike. This is applicable to companies across different sectors. This is because regardless of the sector, people who carry out commercial activities have to invoice and pay certain taxes for the earnings they get from their work. While establishing a company, businesses must stay mindful of their goals, future targets and capital. For this reason, some people establish small-scale companies, while others establish large-scale companies. This is the perfect article for people and businesses who want to establish a company. We will take a closer look at all the important things that go behind establishing a company. In addition to that, we will also talk about the types of companies such as sole proprietorships, limited liability companies, joint stock companies, which are the most used company types in most countries. Let’s get started.
How To Start A Company in India: All You Need To Know
What is a Company?
The legal structures established by one or more persons with the aim of making profit, producing or selling products and services are called companies. Companies can be established by more than one person as well as legal entities that can be established by one person. Generally, the most important elements that individuals and businesses should pay attention to at this stage are their present goals, capital and future goals.
What is a startup?
This name has become very popular in the business world. A startup is usually a unique business which is not already in the market. Businesses like Airbnb, Ola, Uber, Licious, Dunzo, Zomato, Swiggy etc. were not already in the market, but the creative thinking of some people gave birth to them. Today, these companies have become integral parts of their country’s economies.
How to Establish a Company?
There are certain things that people who want to establish a company have to do before and after the establishment of the company. These are:
- Preparing a Business Plan: Persons and businesses that want to carry out commercial activities by establishing a company must first complete the steps of preparing a business plan, among the things that need to be done in order to establish a company. Although the business plan can be prepared later, preparing a plan before the company establishment process allows businesses to start working quickly.
- Determining the Field of Activity: Another thing to do to establish a company is to determine the field of activity. To determine the field of activity, businesses should consider their future goals. By specifying the work and related works you want to do from the NACE Code list, you can share them during the company establishment and make your company establishment transactions quickly.
- Notary Transactions: One of the things that need to be done to establish a company is the notary process. Transactions such as financial advisor power of attorney, signature circular and signature declaration, and approval of the company’s articles of association according to the company type are the main notary transactions determined during the establishment of the company.
- Office Rental: In order to establish a company, each business must show a specific address as the company address. Generally, people who own a workplace can determine the company address by showing the workplace deed, while people who do not have a workplace can apply to open a workplace with a lease contract by renting a workplace.
In general, these are the things you need to pay attention to. However, it is very important to get support from your financial advisor at this stage, as the things you need to do can vary according to your company type.
What are the different types of companies?
- Capital Company: It is the name given to the types of companies that can be established by real or legal persons, take their reputation from the administration and capital, and the shares of the company partners are not personal.
- Sole Proprietorship: It is the name given to the types of companies that have legal personality and the responsibilities of the company partners are unlimited. Generally, sole proprietorships can be established by one or more people to carry out commercial activities and to address a common purpose.
- One Person Company: One Person Company or One Person Company (OPC) is a newly started company in India since 2013. The inclusion of OPC is allowed only to residents of India. No foreigner can have an OPC. An OPC, as the name suggests, can only have one owner. It was introduced to encourage individual entrepreneurs to start their own businesses. It is a type of private company and can likewise operate as a separate legal entity. In this the liability of the owner is limited.
- Non-Government Organization (NGO)
A non-governmental organization (NGO) or non-profit company is a citizen-based association that operates independently of the government, usually to serve a social purpose. The purpose of these organizations is not to work for any cause or to promote developing projects for the benefit of society.
What is a Sole Proprietorship, How is it Established?
A sole proprietorship is the name given to the type of company that can be established by a single person or a small number of partners and where the responsibilities of the founding partners are unlimited. It is known that sole proprietorships are divided into three in terms of establishment and partner.
- limited companies
- ordinary companies
- collective companies
They are the types of sole proprietorships. Persons who want to establish a sole proprietorship can carry out company establishment procedures by preparing certain documents under the consultancy of an accountant or financial advisor.
What are the Documents Required to Establish a Sole Proprietorship?
In order to establish a sole proprietorship, individuals must first collect certain documents. The documents required to establish a sole proprietorship are as follows;
- Copy of identity card
- Place of residence
- passport photo
- Lease contract showing the address of the workplace or deed if the workplace is on you
- Power of attorney given to financial advisor for company establishment procedures
- Sole proprietorship form
- Signature statement
These are the documents you need to submit to your financial advisor for the establishment of a sole proprietorship. After you deliver these documents to your financial advisor or accountant, your accountant will carry out the procedures for establishing a sole proprietorship and your establishment of a sole proprietorship will be completed soon.
What are the Points to Consider When Establishing a Sole Proprietorship?
Persons and businesses that want to carry out commercial activities by establishing a sole proprietorship should have knowledge of certain issues when establishing a Sole Proprietorship. Things to Consider When Establishing a Sole Proprietorship are as follows;
- Working with a personal financial advisor during the establishment of a sole proprietorship ensures that your sole proprietorship establishment processes are carried out more quickly.
- Persons and businesses that will establish a company and benefit from government Incentives must obtain the relevant documents before establishing a company. Otherwise, you won’t be able to enjoy the benefits.
- Preparing your business plan before establishing a company will help you work better and faster.
You should also consider these when establishing a sole proprietorship. Thus, you can both make your transactions easier and establish your company with the right steps.
Advantages and Disadvantages of Establishing a Sole Proprietorship
The most important factor in choosing this type of company for individuals and businesses that will start their commercial activities by establishing a sole proprietorship is the Advantages of Establishing a Sole Proprietorship. The main situations in which individual businesses that want to establish a sole proprietorship are advantageous are as follows;
- Sole proprietorships are the type of company that can be established the fastest. Generally, company establishment procedures can be completed within one day and company opening takes place between 3-5 days.
- The costs of establishing a sole proprietorship are very low compared to other types of companies. Limited and joint stock companies are the types of companies that require capital, while private companies are the types of companies that differ according to the region and can be established with minimal cost.
- The book certification fees required by sole proprietorships are quite low.
- It is known that due to the fact that the transaction volume of individual companies is not very high, the fees of financial advisors and accountants are also low.
- The tax system of sole proprietorships is gradually increasing.
- Generally, sole proprietorship closing procedures can be completed within one day.
Establishing a sole proprietorship has both advantages and disadvantages. The disadvantages of establishing a sole proprietorship are as follows;
- In banks where sole proprietorships carry out their financial transactions, their reputation is less than other types of companies.
- While the tax rate determined in limited and joint stock companies is 20%, there is a gradual tax system in the tax rates of private companies. This causes the tax rate of sole proprietorships to vary between 22% and 40%.
We have shared with you the advantages and disadvantages of establishing a sole proprietorship. Before establishing a company, you can consider these factors and decide whether or not to establish a sole proprietorship.
What is a Limited Company, How is it Established?
A limited company is the name given to the type of company established for commercial purposes by one or more real persons and legal entities. In limited companies, the liability of the partners is limited to their capital. Persons and businesses that want to establish a limited company must collect the necessary documents to establish a limited company and show the minimum amount determined as the capital of the limited company as capital (this amount varies from country to country). Persons and businesses whose relevant documents have been completed and limited liability company capital is ready, can complete the process of establishing a limited company by working with a financial advisor.
What are the Documents Required to Establish a Limited Company?
Persons and businesses that want to establish a limited company must collect the documents required to establish a limited company before the company is established. These documents are:
- Limited company establishment notification form.
- Identity copies and passport photos of limited company partners.
- Residence certificate of the partners of the company (2 pieces).
- Contract signed in the presence of a notary public.
- Document showing that the limited company capital has been deposited.
- Rental agreement or deed for the address where the company will be established.
- Documents showing the shares and capital of limited company partners in the company.
- Documents showing the representative and manager who will manage the limited company.
- Declarations for chamber registration.
These are the documents required from individuals and businesses in the establishment of a limited company. After you collect these documents, you can work with a financial advisor for your limited company establishment procedures and carry out your company establishment procedures.
What are the Points to Consider While Establishing a Limited Company?
There are important points that people and businesses that want to establish a limited company and operate under the roof of this company should pay attention to when establishing a limited company. In this section of our article on how to set up a company, we will answer your question. By examining this section, you can get information about these elements and establish your company correctly.
- Persons and businesses that want to establish a limited company must adjust their capital shares accordingly.
- While preparing the limited company establishment agreement, an article regarding the capital should be created and the value of the capital shares of the partners should be indicated in this article.
- Limited companies must not have partners who are more than 50 legal or natural persons.
Considering these factors, you can start your limited company establishment process and establish a company correctly.
Advantages and Disadvantages of Establishing a Limited Company
One of the most researched issues by individuals and businesses before establishing a limited company is the advantages and disadvantages of establishing a limited company. In this section, we will give you information about the advantages and disadvantages of establishing a limited company. The biggest advantages that enable this type of company to be chosen by people who want to establish a limited company are as follows;
- Limited companies are a type of company that pays taxes at a flat rate.
- In limited companies, the shares are divided equally or at a determined rate to show the rights of the partners.
- In limited companies, the responsibilities of the partners are up to the amount committed as capital during the establishment of a company.
- Partners have no liability for debts.
- Limited companies do not have to have a lawyer.
- If the company share determined when establishing a limited company is kept for two years, VAT is not payable when the company share is sold.
These are known as the advantages of establishing a limited company. However, there are advantages and disadvantages of establishing a limited company. The disadvantages of establishing a limited company are as follows;
- The number of partners of limited companies is limited to a maximum of 50.
- If there are public debts, the partners are held responsible for these debts in proportion to their capital shares.
- Limited companies cannot issue bonds and bills.
- During the process of establishing a limited company, the partners of the company cannot reveal their efforts and commercial reputations as capital.
Before you establish a limited company, you can examine the Advantages and Disadvantages of Establishing a Limited Company and decide whether or not to establish this type of company. However, it is very important to consider your capital and future goals during the establishment of a company in order to decide on the right type of company.
What is a Joint Stock Company, How is it Established?
A joint stock company is a capital company whose capital is determined and divided into shares, and whose debts are held liable only with its assets. Joint stock companies are a type of company that is brought to life by individuals and businesses with big goals. Persons and businesses who want to establish a joint stock company should first collect the documents for establishing a joint stock company. Then, the company establishment procedures are carried out by working with a financial advisor.
What are the Documents Required to Establish a Joint Stock Company?
Persons and businesses that want to establish a joint stock company are required to collect the documents required to establish a joint stock company before the establishment of the company and then carry out the company establishment procedures. The Documents Required to Establish a Joint Stock Company are as follows:
- Joint stock company main contract approval.
- Signature statement of joint stock company partners (must be taken for each partner).
- Copy of identity card (must be required for each partner).
- Bank receipt showing that the joint stock company capital has been deposited.
- Residence certificate (can be obtained from e-government for each partner).
- Rental agreement showing the address where the company will be established.
- Company title.
- Document showing the company representative.
- Bank letter showing that 1/4 of the capital is blocked.
- Registration documents.
What are the Points to Consider When Establishing a Joint Stock Company?
The important points that individuals and businesses should pay attention to when establishing a joint stock company are as follows;
- Persons and businesses that want to establish a joint stock company must specify the names and surnames of all partners, their residence documents showing their place of residence, identity card showing their citizenship.
- The residence, identity etc of the members of the board of directors of the joint stock company. Documents such as identity cards must be prepared.
- It is very important that there is a clause in the articles of association of joint stock companies that indicates the purpose for which the company was established.
- Joint stock companies must be confirmed in the trade registry.
- Since joint stock companies are a type of capital company, it is very important that the company title is related to the business subject.
Advantages and Disadvantages of Forming a Joint Stock Company
One of the most important factors in choosing this type of company for people who want to establish a joint stock company is the advantages of establishing a joint stock company. Establishing a joint stock company provides both individuals and businesses the opportunity to benefit from many advantages. Some of them are:
- Share transfer of partners in joint stock companies is easy.
- Joint stock companies can easily issue stocks and bonds.
- The liability of joint stock companies for debts is limited to assets only.
- In joint stock companies, the responsibility of the partners is as much as their capital.
- The shares of joint stock companies are divided into one establishment and its multiples.
- Joint stock companies are a type of company that is prioritized by banks.
- Joint stock company partners are not liable for public debts.
While establishing a joint stock company has many advantages, there are also disadvantages. The main disadvantages of establishing a joint stock company are as follows;
- The minimum capital to establish a joint stock company is quite high.
- If the capital of the company is over a certain value (varies from country to country), there is an obligation to have a lawyer in joint stock companies.
- During the general assembly meetings, the representative of the ministry is obligated to attend the meeting.
- The establishment and closing processes of joint stock companies can take a long time.
What is a Collective Company?
A collective company is a type of company established with real persons under a trading name to carry out commercial activities. The liability of the partners of the collective company towards the receivables of the company is not limited.
Collective Company Characteristics
- Collective companies are among the companies that are easy to establish and manage.
- The capital of the collective companies is determined by the capital put forward by the partners of the collective companies.
- In the establishment of a collective company, there is no minimum capital amount required to be disclosed in some of the other company types.
- The responsibilities of the partners of the collective company within the company are limited to the capital they put forward while being a partner in the collective company.
- The partners of the company are responsible for the receivables and debts of the company.
- During the establishment of a collective company, a collective company agreement is required. It is very important that this contract is made in the presence of a notary public.
- Unless otherwise stated in the collective company agreement, all company partners are held responsible for company management. If there is a related article in the contract, the authority of the company can be given to the determined partners.
- The partners of the collective company have the right to audit the company. They can work in the field of Documentation, Information and Balance Sheet.
- The income of the company at the end of the year is taken into account and the partners receive a share of the earnings at the end of the year. While the partners buy their shares, the share ratios in the collective company are taken as a basis.
How to Establish a Collective Company?
A collective company is a type of company that gains legal personality by registering with the trade registry, and at least two people are required to establish a collective company. During the establishment of a collective company, the name and surname of at least one of the partners must be included in the trade name to show the company and its type. If you say how to establish a collective company, let’s take a look at the stages of collective company establishment together.
- In order to establish a collective company, a trading name must first be chosen.
- After the company title is selected, the commercial title and the signatures of the partners under this title must be certified in the presence of a notary public.
- After the relevant process is completed, those who want to establish a collective company must take the company contract and the signature declaration signed in the presence of a notary public to the trade registry office in the region where their company operates within 15 days and have it registered.
- When visiting the trade registry office, copies of the identity cards of the partners of the collective company should also be taken.
- Photocopies of identity cards and residence documents of the partners of the collective company must be submitted to the trade registry office.
- After these processes are completed, they should register with the chamber of commerce and industry in their region.
- An announcement should be made in the Trade Registry Gazette after the establishment of the collective company.
- Tax office transactions and SSI records should be made.
After these procedures are completed, the establishment of a collective company is carried out.
What is a limited partnership?
A limited partnership is the name given to the type of company established for the purpose of operating a commercial enterprise of two or more persons jointly under the same trade name. Since limited partnerships are usually established with a contract:
- Limitation of the partners of the company against the creditors of the company
- The liability of some company partners against these receivables is limited to a certain extent.
- limited to business
It is among the types of companies. Today, there are two types of limited partnership companies. These are ordinary limited partnership companies and limited partnership companies whose capital is divided into shares.
Limited Partnership Features
- The liability of some of the partners is limited.
- The liability of some of the partners is unlimited.
- It allows people who do not want to deal with trade but want to be an investor to earn easily.
- Thanks to limited partnership companies, people who do not have sufficient capital to carry out commercial activities can also participate in commercial activities.
- There are supervisory and administrative boards.
- The number of partners must be at least five.
- At least one of the partners must be a real person with unlimited liability.
How to Establish a Limited Partnership?
A limited partnership is a type of company established with at least two partners, and the responsibilities of one of these partners must be unlimited. Firms cannot apply for a limited partnership company to have limited and limited partnership partners. In the establishment of a limited partnership, some of the partners whose capital is divided into shares are called a collective company against their receivables, while other partners are called a limited partnership whose capital is divided into shares, like a joint stock company partner. In this type of company, when giving trade names, at least one of the limited partners must be given the name and surname.
Establishing an Online Company
In general, online company formation is a service provided by consulting firms. People initiate the online company establishment process by submitting the documents required to establish a company to consultancy firms. If the online company establishment process starts, individuals and businesses can follow all company formation processes through the online systems provided by the consultancy firm. If you do not want to deal with company establishment procedures, you can contact a consultancy firm and start your online company establishment process.
Establishing an E-commerce Company
All persons who will sell products and services online with e-commerce must establish a company. Since individuals and businesses have to issue invoices and pay taxes for the products they sell online, there is an obligation to establish a company. Generally, people who want to establish an e-commerce company;
- The sector in which they will operate in e-commerce
- capital in their possession
- future goals
Generally, people who will operate on a small and medium scale prefer limited and sole proprietorship companies, while those who plan to do large-scale businesses prefer limited liability and joint stock companies. If you want to establish an e-commerce company, you can consider these and decide on the type of company you will establish.
How To Start a Company: FAQs
What is the Cost of Establishing a Company?
One of the most frequently asked questions by people who want to establish a company is the question of what is the cost of establishing a company. Generally, the cost of establishing a company varies according to the type of company to be established. Sole proprietorships cost the least to establish while joint stock companies tend to cost the most. Limited companies cost somewhere in the middle. While determining the cost of establishing a company, the most important factors that individuals and businesses should consider are company capital, workplace rent, notary public and establishment procedures.
What should the company type be?
When determining the type of company they will establish, people who want to establish a company should choose a company type, especially considering their capital, future targets, the sector in which they will operate and their goals. In general, it is known that small and medium-sized enterprises tend to be sole proprietorship or limited liability company type, while large-scale enterprises tend to prefer the limited liability company or joint stock company type. Before establishing a company, you can get information about the types of companies we shared at the top of our How to Establish a Company article and decide on the type of company you will establish.
Can a company be established on behalf of someone else?
Another question that people who want to establish a company are wondering about is whether a company can be established on behalf of someone else. Establishing a company on someone else’s behalf is a behavior that will result in great sanctions by law. Therefore, you should avoid establishing a company on behalf of someone else. Otherwise, you may be subject to heavy sanctions and you may have to pay tax debts.
In which country is it advantageous to establish a company?
People who want to start a company often want to start a business in countries with low tax rates and good business potential. When examined in general, Hungary, Georgia, Sweden, Norway and Singapore are the countries with low tax rates and high business potential.
What are the Advantages of Establishing a Company?
The advantages of establishing a company vary according to the type of company to be established. The biggest advantage of establishing a sole proprietorship is that it can be easily set up and closed. The biggest advantage of limited companies is that this type of company is a capital company and the company is started with low capital. The biggest advantage of joint stock companies is that they have the authority to issue bonds and bills.
How Long Does It Take to Establish a Company?
The procedures for establishing a company differ according to the type of company to be established. Generally, private companies are a type of company that can be established in a day or two, while the establishment periods of limited companies and joint stock companies vary between 3 days and 10 days. The most important factors affecting the prolongation or shortening of the company’s establishment period are the province and district where the company will be established, the density of the tax office and chambers, and the competence of the financial advisor.
Which company is more advantageous to establish?
While it is more advantageous to establish a sole proprietorship for small-scale enterprises, it is more advantageous to establish limited and joint-stock companies for medium and large-scale enterprises. You can access and compare the advantages and disadvantages of establishing a sole proprietorship, joint stock company and limited liability company from the previous sections of our article.
What are the Differences in Establishing a Company by Sector?
When the sectors and types of companies are compared, it is seen that establishing a company differs according to the sector. Generally, private companies are preferred in small and medium-sized sectors such as barbers, tailors, shops and businesses that serve in stores. It is known that limited liability and joint stock companies are preferred in large-scale sectors such as banking, software, tourism and informatics.
Which is the ideal kind of company for people looking to start their own business?
People who want to start their own business should first consider their capital, future goals and objectives when determining the type of company they will establish. People who want to do small-scale business can run their business by establishing a sole proprietorship. It will be more advantageous for people who will do large or medium-sized businesses to establish limited liability or joint stock companies.
How to start a new company in India?
In today’s era, starting a new company is the dream of many people, but not everyone’s dream is fulfilled because very few people are able to succeed. Well, the reason for this is not because it is very difficult to open a company and become a boss, but because people are not aware of its basic rules and process. That is why they dream of starting and growing their own business. remains incomplete.
What is the criteria for starting a company in India?
The minimum age should be 18 years
If you have a private limited company, then the applicant should not be less than 18 years of age to become its director. A common man can also become a director without the need for a degree. Most importantly, a foreign national can also become a director of a private limited company.
The company should have a unique name
The most important thing is that the name of your company should be attractive and unique so that your customers can also be attracted.
It is important to choose the right place for the new company.
Where there is work in the company, there is a need for a place to start your company. This place can also be inside commercial, industrial and residential areas.
It is mandatory to register for the new company
If you meet the above-given points, then first of all you should complete the registration process. Nowadays this process has become very easy by going online, but still, it takes two weeks to register a private limited company. The registration form can be submitted both online and offline.
The new company should have minimum two shareholders
It is mandatory to have at least two directors and not more than 15 directors and at least 2 shareholders in a private limited company. Apart from this, after the permission of the Ministry of Corporate Affairs (MCA), 200 shareholders can also be kept.
Which are the important documents required for registering a company in India?
- To register the company, it is necessary to have a photocopy of the identity proof of all the managers present in the company as well as their address proof.
- It is also mandatory to have a photocopy of the PAN card of all the directors at the time of registration of the company.
- If you have purchased your land for office, then its certificate, otherwise, if you have mortgaged or rented any land for the office, then photocopy of its lease agreement / rent agreement is also necessary at the time of registration.
- If you have taken any land on rent, then it is mandatory for you to have a no-objection certificate from its owner.
- The person who wants to register his company, it is mandatory for him to present his own identity proof and also the certificate of his registered e-mail id there.
- At the time of company registration, it is mandatory to submit a photocopy of the bank statement of the owner of the company and a photocopy of any other type of bill (electricity bill, telephone bill).
How to register a new company in India?
- Apply for DIN on MCA Portal
- Apply for DSC on MCA Portal
- Check presence of company name in MCA portal
- Draft MOA and AOA
- Pay E-Stamp Duty
- Obtain Incorporation Certificate from ROC
- Apply for company PAN card and TAN card.
Once the company has been registered, hiring of employees must commence. The employees will need to be paid a salary and their salary will be taxable. On top of that, there will also be tax deducted at source (TDS). With all that in mind and everything else sorted out, you should be ready to start your company if you have read the article till here. Good luck!