It is a natural first step for any business to register its company, as it offers a number of advantages. The vast majority of businesses in India are sole proprietorships or partnerships, despite the fact that registered businesses benefit considerably more than unregistered businesses.
In an era where start-ups are sprouting up everywhere, it is imperative that company registration is highlighted more than ever. Various myths and misconceptions about the company registration process prevent Indian entrepreneurs from embracing the corporate structure. These ten assumptions about company formation will be debunked in this article.
As part of our attempt to present a clear picture of what is legally permissible, we have selected some of the biggest pvt company registration myths in India. Keeping your business legal is essential to avoiding costly mistakes.
(1) Myth – A commercial location is necessary for company incorporation
Residential locations are legal places to register your company. A private limited company can be legally formed on any residential premises. Many entrepreneurs are unaware of this fact. Corporate law does not prohibit new businesses from being registered in residential locations in accordance with the Companies Act, 2013. At every location where a company conducts business, an affix with the company’s name and registered address is mandatory.
(2) Myth – Original documents need to be submitted by applicants
The applicants are required to attest scans of their documents. During the company registration process, scammers often pressure entrepreneurs to submit all their original documents. Entrepreneurs who are unaware of the real process are being defrauded and cheated. Documents relating to the incorporation of a company do not have to be originals.
(3) Myth – GST registration is mandatory
Many people think GST registration is mandatory, but that is not the case. In order to apply for GST registration, individuals must provide taxable services. Small scale service providers who have annual turnover below the government-imposed threshold are not required to register for GST.
(4) Myth – Minimum level of annual turnover is required for company incorporation
In order to register a company, there is no minimum sales or turnover requirement. Business owners who have little to no sales and barely earn any revenue can also register.
(5) Myth – Allocation of shares to directors is mandatory for company incorporation
A company’s directors are not required to own shares. There is no requirement that shareholders be directors of the company they have invested in. Additionally, directors do not need to own shares in their companies.
(6) Myth – The rate of taxation applicable to private companies is a disadvantage
Private companies may be subject to higher taxes than individuals or partnership firms. In contrast, corporations are taxed after deducting expenses from revenues. Sole proprietorships and partnerships are not eligible for this advantage. Moreover, registered companies are now able to claim greater tax deductions.
(7) Myth – Investment in a company can only be made by human beings
Ownership or ownership of a company is not limited to humans. Law dictates that even incorporated companies may invest in shares of other corporations because companies are artificial persons.
(8) Myth – The share capital of a company must be deposited in a bank at the time of incorporation
A private limited company offers a great deal of flexibility. When a company is incorporated, its share capital does not have to be deposited in a bank. Your business is also able to change all the details related to its capital, business, address, and much more the moment it is incorporated.
(9) Myth – Maintenance of company is expensive
A company’s maintenance is not very expensive, as is a myth. In terms of accounting, compliance, and tax filings, there is only a minimal expense involved.
(10) Myth – Registration of a company needs to be renewed every year
The registration of your company does not have to be renewed annually. Your company only needs to be registered once. Unless it goes through the legal process of winding up, your company will remain registered with the MCA forever.
To conclude, do your own research through authentic sources and avoid being misled by myths and misconceptions.