The nature of business is such that
many times many disputes arise. Extensive business laws can sometimes lead to
very strict penalties in such cases, even when non-compliance is
For entrepreneurs, it is imperative to have a solid safeguard against such
legal issues. Forming and registering a company is one of the best ways to
Besides, company formation has
numerous other benefits. Let’s look at some of them:
Limited Liability: The concept of a “corporate veil” is a safeguard for business
owners that a registered company provides. A company by law is a “separate
entity” distinct from its owners. In case of any legal issues, an owner is
only liable for any damages only to the extent of his undischarged
liability. This is very robust protection against painful “unlimited
personal liability”. This is one major advantage of company formation over
running a business as proprietorship or partnership.
Access to Capital: A registered company enjoys a reputation of reliability and trust
in the investing market. Hence, it has much better chances of procuring
funding than an unregistered business. Company laws in India mandate a
company to be registered for it to seek equity investment. Moreover, if
such equity is raised from the public, the company needs to be listed on a
registered stock exchange. All this entails more disclosures and close
regulation of the company, thereby increasing the investors’ faith in the
Exit Option for Investors: A registered company allows the transfer of shares to new
buyers. This provides much-needed liquidity and exit mechanism for
existing investors. Especially with public limited companies, this enables
investors to allocate their funds efficiently to generate best-possible
- Expertise: With a
registered company, the owners can appoint separate professional managers
as now owners are distinct from management. This leads to better business
performance and output.
Despite these many advantages, many
businesses shy away from getting incorporated. Let’s clear out some of the
misconceptions behind this:
Tedious Compliance and Paperwork:
This used to be true in the past. But now, the incorporation process has been
made agile and easy. Moreover, numerous experts can get this done for you
is Costly: Again, professionals now register your company
at very affordable costs with online processes and increasing competition.
Moreover, Income Tax Act allows you to
amortize your pre-incorporation expenses in subsequent operation years.
- Companies Are
Taxed at Higher Rates: This is a common misconception.
Partnerships and Companies are all charged at the same 30% slab rate.
Partnership are charged at 30% tax and Companies at 25% in General
Category and at 18% - for manufacturing units.
Turnover Needed: Again, this is simply not true. Your
business does not need to generate a minimum turnover to get registered.
Company Act, 2013 has provisions for many different types of companies to
allow any business size to enjoy the benefits of incorporation.
Legal compliance is critical when you
run a business. Any illegal action by your business, even if committed in
innocence unintentionally, can lead to exorbitant legal costs and loss of
reputation. A registered company also boosts customer confidence by convincing
him of your bonafide business intent.
more enquiry get in touch with us.