From Concept to Reality: The Step-by-Step Guide to Forming a Legal Entity in India
Forming a legal entity in India can be a complex process, but it is necessary for businesses to operate legally in the country. Here are the steps to form a legal entity in India:
Choose a Business Structure: The first step in forming a legal entity in India is to choose a business structure. The most common business structures in India are sole proprietorship, partnership, private limited company, and public limited company. Each structure has its own advantages and disadvantages, and the choice depends on the nature and size of the business.
Obtain a Digital Signature Certificate (DSC): A Digital Signature Certificate (DSC) is required for all directors of the company to file electronic documents with the Ministry of Corporate Affairs (MCA). The DSC is issued by certifying authorities such as e-Mudhra or TCS.
Obtain a Director Identification Number (DIN): The Director Identification Number (DIN) is a unique identification number for all directors of the company. The DIN can be obtained by filing an e-Form DIR-3 with the MCA.
Reserve a Company Name: The next step is to reserve a company name. The name must be unique and not already registered with the MCA. The company name can be reserved by filing an e-Form INC-1 with the MCA.
Draft the Memorandum and Articles of Association: The Memorandum of Association (MOA) and Articles of Association (AOA) define the purpose and scope of the company's activities, as well as the rights and responsibilities of the shareholders and directors. The MOA and AOA can be drafted by a lawyer or a company secretary.
Incorporate the Company: The final step is to incorporate the company by filing the necessary documents with the Registrar of Companies (ROC) in the state where the company will be headquartered. The documents include the MOA, AOA, and the e-Form INC-7 for registration. Once the ROC approves the application, the company will be registered, and a certificate of incorporation will be issued.
In summary, forming a legal entity in India involves choosing a business structure, obtaining a DSC and DIN, reserving a company name, drafting the MOA and AOA, and incorporating the company by filing the necessary documents with the ROC. It is important for businesses to follow the legal process to ensure that they operate legally in India.
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You can also refer to our article here to understand more about the legal policies: https://www.startupsherpa.in/post/the-startup-series-legal-policies
By Siddharth Dalmia
The StartUp Sherpa
+91-9971799250
dalmiasiddharth1994@gmail.com
