The first step in the formation of a company is the approval of the name by the Registrar of Companies (ROC) in the State/Union Territory in which the company will maintain its Registered Office. This approval is provided subject to certain conditions: for instance, there should not be an existing company by the same name. Further, the last words in the name are required to be "Private Ltd." in the case of a private company and "Limited" in the case of a Public Company.

The application should mention atleast four suitable names of the proposed company, in order of preference. In the case of a private limited company, the name of the company should end with the words "Private Limited" as the last words. In case of a public limited company, the name of the company should end with the word "Limited" as the last word.

The ROC generally informs the applicant within seven days from the date of submission of the application, whether or not any of the names applied for is available. Once a name is approved, it is valid for a period of six months, within which time Memorandum of Association and Articles of Association together with miscellaneous documents should be filed. If one is unable to do so, an application may be made for renewal of name by paying additional fees. After obtaining the name approval, it normally takes approximately two to three weeks to incorporate a company depending on where the company is registered.

APPLY FOR NAME : Form No. 1-A

Check the availability of Name : http://dcasearch.nic.in/feecal.asp

Memorandum and Articles

The Memorandum of Association and Articles of Association are the most important documents to be submitted to the ROC for the purpose of incorporation of a company. The Memorandum of Association is a document that sets out the constitution of the company. It contains, amongst others, the objectives and the scope of activity of the company besides also defining the relationship of the company with the outside world.

The Articles of Association contain the rules and regulations of the company for the management of its internal affairs. While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and purposes.

The ROC will give the certificate of incorporation after the required documents are presented along with the requisite registration fee, which is scaled according to the share capital of the company, as stated in its Memorandum. A private company can commence business on receipt of its certificate of incorporation.

A public company has the option of inviting the public for subscription to its share capital. Accordingly, the company has to issue a prospectus, which provides information about the company to potential investors. The Companies Act specifies the information to be contained in the prospectus.

The prospectus has to be filed with the ROC before it can be issued to the public. In case the company decides not to approach the public for the necessary capital and obtains it privately, it can file a "Statement in Lieu of Prospectus" with the ROC.

On fulfillment of these requirements, the ROC issues a Certificate of Commencement of Business to the public company. The company can commence business immediately after it receives this certificate.

Certificate of Incorporation

After the duly stamped Memorandum of Association and Articles of Association, documents and forms are filed and the filing fees are paid, the ROC scrutinizes the documents and, if necessary, instructs the authorised person to make necessary corrections. Thereafter, a Certificate of Incorporation is issued by the ROC, from which date the company comes in to existence. It takes one to two weeks from the date of filing Memorandum of Association and Articles of Association to receive a Certificate of Incorporation. Although a private company can commence business immediately after receiving the certificate of incorporation, a public company cannot do so until it obtains a Certificate of Commencement of Business from the ROC.

Download Form No. 1

Miscellaneous Documents

The documents/forms stated below are filed along with Memorandum of Association and Articles of Association on payment of filing fees (depending on the authorised capital of the company):

• Declaration of compliance, duly stamped
• Notice of the situation of the registered office of the company
• Particulars of Directors, Manager or Secretary
• Authority executed on a non-judicial stamp paper, in favour of one of the subscribers to the Memorandum of Association or any other person authorising him to file the documents and papers for registration and to make necessary corrections, if any
• The ROC’s letter (in original) indicating the availability of the name.

Rules Applicable

Companies (Central Governments') General Rules and Forms,1956.

Filing Registering/Approving Authority

One copy has to be submitted along with a forwarding letter addressed to the concerned Registrar of Companies.

Enclosures

The declaration must be submitted with the following annexures

• Document evidencing payment of fee
• Memorandum and Articles of Association
• Copy of agreement if any, which the proposed company wishes to enter into with any individual for appointment as its managing or whole-time director or manager
• Form 18
• Form 32 (except for section 25 company)
• Form 29 (only in case of public companies)
• Power of Attorney from subscribers
• Letter from Registrar of Companies making names available
• No objection letters from directors/promoters
• Requisite fees either in cash or demand draft

Time-Limit

It should be submitted before incorporation or within 6 months of the name being made available.

Practice Notes

The declaration has to be signed by an advocate of Supreme Court or High Court or an attorney or pleader entitled to appear before the High Court or a secretary or chartered accountant in whole-time practice in India who is engaged in the formation of the proposed company or person named in the articles as director, manager or secretary.

The Registrar of Companies has to be satisfied that not only the requirements of section 33(1) and (2) have been complied with but be also satisfied that provisions relating to number of subscribers, lawful nature of objects and name are complied with.

The Registrar will check whether the documents have been duly stamped and also whether the requirements of other laws are met.

Any defect in any of the documents filed has to be rectified either by all the subscribers or their attorney, or by any one subscriber holding the power of attorney on behalf of other subscribers.

This form is to be presented to the Registrar of Companies within three months from the date of letter of Registrar allowing the name.

This declaration is to be given on a non-judicial stamp paper of the requisite value . The stamp paper should be purchased in the name of the person signing the declaration.

This declaration is to be given by all the companies at, the time of registration, public or private.

The place of Registration No. of the company should be filled up by mentioning New Company therein.

The Registrar of Companies will now accept computer laser printed documents for purposes of registration provided the documents are neatly and legibly printed and comply with the other requirements of the Act. This will be an additional option available to the public to use laser print besides offset printing for submitting the memorandum and articles for the registration of companies.

Where the executant of a memorandum of association is illiterate, he shall give his thumb impression or marks which should be described as such by the subscriber or person writing for him.

An agent may sign a memorandum on behalf of a subscriber if he is authorised by a power-of-attorney to do so. In the case of an illiterate subscriber to the memorandum and articles of association, the thumb impression or mark duly attested by the person writing for him should be given. The person attesting the thumb mark should make an endorsement on the document to the effect that it has been read and explained to the subscriber. The Registrar of Companies will not accept photocopies of the memorandum and articles of association for the purposes of registration of companies.

Imposition of Taxes

Income Tax:

Businesses liable for income tax must obtain a tax identification card and number [known as Permanent Account Number (PAN)] from the Revenue Department:

The following persons should apply for allotment of permanent account number in Form No. 49A

• If income exceeds exemption limit or turnover exceeds Rs. 5,00,000.
• Charitable trust
• Person specified by the Central Government

In addition to this, businesses liable to withhold tax must necessarily obtain a Tax Deduction Account Number (TAN). Both the PAN and the TAN must be indicated on all the returns, documents and correspondence filed with the Revenue Department.

Currently, domestic companies are taxable at the rate of 33.66% (inclusive of surcharge of 10% plus education cess 2% thereon) on its taxable income. Foreign companies are taxed at a marginally higher rate of 41.82% (including surcharge of 2.5% and education cess 2% thereon). However, in case where the income tax liability of the company under the provisions of the domestic tax laws works out to less than 7.5% of the book profits (derived after making the necessary adjustments), a Minimum Alternate Tax of 8.415% (including a surcharge of 10% plus education cess 2% thereon) on the book profits, would be payable. Domestic companies are required to pay a dividend distribution tax of 14.025% (including surcharge of 10% plus education cess 2% thereon) on the dividends distributed during the year.

Companies are required to withhold tax under the domestic law from certain payments including salaries paid to employees, interest, professional fee, payments to contractors, commission, winnings from games / lottery / horse races etc. Moreover, taxes have to be withheld from all payments made to non-residents at the lower of rates specified under the domestic law or under the applicable tax treaty, if any.

Net wealth on “Valuation date” is chargeable to wealth tax in the immediately following assessment year. Only an individual, HUF, and a Company is chargeable to wealth-tax.

By virtue of section 45, no wealth tax is chargeable in respect of net wealth of –

• any company registered under section 25 of the Companies Act, 1956
• any cooperative society
• any social club
• any political party; and
• a Mutual fund specified under section 10(23D) of the Income Tax Act.

Net wealth in excess of Rs. 15,00,000 is chargeable to wealth-tax @ 1%

Valuation date for the purpose of Wealth Tax: March 31 immediately proceeding the assessment year.

The term “Net Wealth” means taxable wealth. Broadly speaking, it represents the excess of assets over debts. Assets include deemed assets but do not include exempt assets.

Sales Tax / VAT:

Sales Tax is a levy on purchase and sale of goods in India. Sales Tax is levied under authority of both Central Legislation (Central Sales Tax) and State Governments Legislations (Local Sales Tax). Central Sales Tax is governed by the Central Sales Tax Act, 1956 which covers inter-state transactions of sale of goods as well as transactions of import of goods into or export of goods out of India. The Local Sales Tax is governed by the respective State Sales Tax Acts under which tax is levied on intra-state transactions of sales.

VAT is a simple transparent tax collected on sales of goods. The states and union territories of India have decided to implement VAT in place of sales tax and a number of other state taxes.

It is a multi-point sales tax and is collected on value addition only, at each stage. The concept is akin to excise duty paid by the manufacturer who, in turn, claims a credit on input taxes paid. Excise duty is on manufacture, while VAT is on sale and both work in the same manner, according to the white paper on VAT released. The document was drawn up after all states, barring UP, were prepared to implement VAT from April.

VAT lies at the heart of a drive to reform India’s tax structure under which states are chronically short of money and only three per cent of the country’s billion-plus people pay income tax.

Service Tax:

Service Tax is currently levied on fifty-nine notified categories of services (See list below). Ordinarily, every person liable to pay service tax is required to register itself with Service Tax Authorities and comply with procedural requirements like paying taxes, filing returns, etc. However, in case of non-residents, who do not have any office in India and who are liable to pay service tax in India, this burden is shifted to the recipient of service with effect from 16 August 2002.

Octroi Duty

Octroi Duty is a municipal levy, which is levied on entry of goods into a municipal/ local area for use, consumption or sale. The rate of Octroi Duty varies from local area to local area.

Stamp Duty

Stamp Duty is imposed on execution of specified instruments. The levy is governed by the Indian Stamp Act, 1899 or the State Stamp Acts. Some States have enacted separate legislations, whereas some have adopted Indian Stamp Act with or without modifications.

ROC Fees Payable