10 myths about company incorporation in India

10 myths about company incorporation in India

Myths about company incorporation in India

Before the industrial and IT revolution, registering a company was a daunting task as it required arranging massive paperwork and dealing with endless compliance. However, today, things have become much simpler and agile, thanks to the implementation of digitized processes and relaxed compliances. Company registration is a matter of meeting statutory guidelines. That is why it is vital to stay informed and keep myths about company incorporation at bay. Having said that, let’s dive into 10 myths about company incorporation in India and debunk them with facts.

Myth number 1: Company registration is costly

It is one of the most widespread myths about company incorporation in India is that most businesses perceive it as an overly expensive affair. Truth be told, the authorities have slashed the cost of company registration significantly, ensuring affordable registration for diverse business types.

Authorities have taken this move in the purview of the government’s initiative namely Ease of Doing Business. To bring India on par with developed nations, GOI continues to find ways to make the registration process as simple and swift as possible.

Myth number 2: Company registration is a time-consuming process

With so many legalities to address, it is easy to get the impression that registering a firm could take a lot of time. However, the fact is that after the advent of an online system and amended compliances, the company registration process has become surprisingly fast.

This is evident from the slew of e-forms deployed by different apex authorities. These include Spice+, e-form Filip, etc. Both these online applications have gotten rid of menial chores and hefty documentation, ensuring seamless processing from the ground up. This benefit ultimately leads to a swift grant of license.

Myth number 3: Company registration attracts hefty paperwork

In general, it is assumed that securing operational approvals or company registration is a matter of arranging endless paperwork.This statement does not hold any significance in the present era as authorities in India are increasingly adopting paperless approach.

Almost every government department in India, from the labor office, SPCB, to the Ministry of Corporate Affairs, which seemingly adheres to stringent compliances, requires moderate paperwork from applicants for granting the certificate.

Myth number 4: The company attracts endless post-compliance

Once you register the company under any legislation, you become entitled to meet underlying statutory requirments . However, that does not imply that doing so would hinder your ability to maintain daily chores effectively. Unless you have a sizable organisation to manage or your entity belongs to a notified category, you aren’t going to deal with hectic compliances.

Myth number 5: Company registration is only available offline

There is a prevalent misconception within the business community regarding the availability of online company registration, rendering it one of the most ubiquitous myths about company incorporation in India.

While many authorities are leaning towards a paperless approach, some institutions still rely on bureaucratic methods for accepting and processing applications, despite having dedicated online portals. However, the majority of application submission and processing procedures are conducted online today.

Myth number 6: Registering a company means adhering to tons of compliances

According to the economic survey 2022-23, the Department of Economics has obliterated around 39,000 incorporation compliances, aiming to simplify the overly complicated registration process.

This welcome step has reinforced a sense of liberty among entrepreneurs who are often exposed to unnecessary regulations to legalize their entity. In the status quo, you can register your entity within 2-3 days provided you haven’t committed any mistake while drafting and arranging necessary paperwork.

Myth number 7: Only a natural person can act as a shareholder

The presence of shareholders is indeed vital to register a company in India, but they aren’t required to be a natural person. According to the Company Act and other relevant legislations, an entity stands eligible as a person and hence it can act as a subscriber to the Memorandum for incorporating a company. Moreover, a company can own a certain percentage of stake or capital in other registered companies as a shareholder.

Myth number 8: Company Registration attracts massive taxes

India is a tax-friendly nation and has nominal tax slabs for diverse businesses. The present tax regime levies a corporate tax ranging from 25-40 percent based on the income threshold. While this rate may not be the lowest among Asian countries, it is still significant, especially when considering the privileges accessible to businesses in India.

Businesses can leverage various legitimate tactics such as investing in social causes or funding NGOs to get a rebate on taxes applied to their income. Similarly, they can enroll in various schemes like Startup India to avail of tax holidays for a certain timeline.

If you can use these tactics wisely, you will end up addressing minimal taxes.

Myth number 9: Company registration doesn’t provide any privileges

Being registered under a given legislation opens the door to a host of opportunities that reinforce growth and prosperity. The registered entities can have access to schemes like Startup India and PRISM, which aim to facilitate benefits like tax holidays, initial corpus, and technological resources to ensure business growth.

Small businesses, on the other hand, can enrol in MSME to get access to government-based tenders based on their production and technological capabilities.

Myth number 10: Company registration can complicate the winding up formalities

At the onset, it seems that winding up involves tons of legal formalities, but this is not true. This widespread misconception is now counted among one of the most ubiquitous myths about company incorporation in India.

The Company Act and other legislation facilitate a simplified procedure for winding up that requires furnishing an easy-to-file application and some mandatory annexures, including a special resolution. Upon submitting this paperwork, you can expect the authority to legally shut down your organisation within a month.

Conclusion

Hopefully, this article has debunked all the myths about company incorporation in India. We believe that from now on you will proceed with clarity, be it a matter of company registration or addressing other incorporation related affairs. If you still have some doubts left, let us know.

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