Importance of Proper Company Registration

In recent years, India holds the flag for the evolving startup ecosystem as young brains are more attracted towards entrepreneurship. The Ministry of Corporate Affairs report says that around 15,000 new startups come into existence in India each month. The most shocking part is that among them only about 20% of the businesses manage to sustain themselves and a significantly lower, approximately 0.01% achieve notable success after a period.

The low rate of success may be the result of limited operational scope, lack of profit, and restricted growth opportunities. Some other factors that may result in a business failure are those common company registration mistakes made during the initial phases of business registration in India.

Common Mistakes to Avoid During Company Registration in India

Selection of Inappropriate Structure

Selecting the right business structure as per the requirements of a startup is crucial. The startups may choose from a Private Limited Company, Public Limited Company or One-Person Company. It is the initial and one of the most crucial structures of a business as it would have a sustaining impact. Simply put, selection of a business structure can depend on various factors such as business size, cash flow, and future development and growth potential of the startup.

Private limited company provides flexibility as it requires a minimum of two shareholders and directors so it's suitable for small businesses. If it comes to public limited companies, they are appropriate for bigger businesses as they require a larger number of directors, stockholders for incorporation. Whereas, OPCs are the best way for solopreneurs who wish to handle all company duties alone.

Insufficient or Incorrect Supporting Documents

Arranging requisite documents as per business structure requirement is mandatory to get the incorporated completed successfully. It's essential to attach/upload the documents with filing registration applications. Filing erroneous or insufficient documents may cause delay or rejection of your business registration. It is one of the most common company registration mistakes that must be avoided to reduce delay or rejection rate of businesses registration.

Improper Identification of Liability

Different business frameworks provide different amounts of liability protection. Therefore, it's crucial to consider this key aspect while choosing a business registration. Wrong or inappropriate selection of business form may affect your personal assets as you are personally obliged for company's losses as specified through your business registration. For instance, a sole proprietorship business structure in which the owner is fully liable for its losses, in this condition, his personal assets are at risk.

Improper Addressing of Liability

Different business frameworks provide different amounts of liability protection. Therefore, it's crucial to consider this key aspect while choosing a business registration. Wrong or inappropriate selection of business form may affect your personal assets as you are personally obliged for company's losses as specified through your business registration. For instance, a sole proprietorship business structure in which the owner is fully liable for its losses, in the event of losses, his personal assets are at risk.

In contrast, a company provides limited liability protection to the owners. Due to which, the owners are not personally accountable for the company's debts and losses; their assets are protected if the company has loan, debt or meeting any loss. This is the reason, selection of a business structure providing limited liability and also meets other criteria is essential.

Neglecting Tax Liabilities

One of the common mistakes that entrepreneurs often make is not prioritising the tax related compliances. Addressing the taxes related obligations as per business type even before registration of your business is always a wise decision. Entrepreneurs must register with all essential local, state and governmental taxes regulations. Businesses as per their structure need to comply with a broad range of taxes and other government regulations.

Providing Improper/incomplete company information

While registering a business in India, providing complete details of a business is necessary. This provided details should be the Company Name, Nature of its Operations, Current Location, Distinctive Brand identity, Target Clients/Location, along with the company's key objectives. Such information provided in a prescribed format acts as the basis for key documents such as Memorandum of Association (MOA) and Articles or Association (AOA) and required policies. Providing improper or incorrect information may lead to delay or rejection of application, thereby providing a break or pause on your entrepreneurial dream.

Not seeking professional assistance

The majority of entrepreneurs are not aware of the rules and regulations that need to be fulfilled when starting a business. Navigating these rules can be done easily by seeking professional assistance. However, many such entrepreneurs feel that it's so expensive paying for professional assistance; it is one of the biggest mistakes that entrepreneurs often make. Hiring a professional expert/company for incorporation of your business can turn out to be an investment as you can focus on the business peacefully while letting an incorporation professional ease your incorporation and other essential registrations.

The aforementioned points must be kept in mind and be avoided while incorporating a business unit. Do consider these points before incorporation of your startup and giving it legal validity.

Conclusion
Giving your business a legal entity is a crucial step in this dynamic startup ecosystem in India. Before a business registration, delving into the DONTs is as crucial as DOs, ensuring a hassle-free company incorporation in India by lowering chances of application rejection. Staying updated and aware of these common mistakes often made by entrepreneurs can help you keeping them at bay and getting your business registration done in a quicker manner.

About Company
Setindiabiz is a techno-legal company in India dedicated to providing compliance and regulatory services for startups and other businesses. With its team of professionals specializing in company registration in India, it offers business registration services in India quickly and hassle-free. Since it has vast experience in this segment, it is well-versed in company registration mistakes to avoid while registering a company. Avoiding company registration mistakes helps you register your company efficiently within a short time span. If you are looking for a professional or company to help you register your business without mistakes, contact Setindiabiz today!