Cost of Company Registration in India: Complete Breakdown Structure-Wise

Before launching a business in India, most entrepreneurs and business owners generally ask the following questions:

“How much does it cost to start a company in India?”

Well, to be frank, there is no direct answer to this – considering the many factors that go into determining the actual cost.

While this can be confusing to many entrepreneurs and business owners who are keen to launch their business, the advantage is having the access to the right information allowing you to work within your budget and avoid uncalled-for expenses without future surprises.

This article carefully breaks down the cost of registering a company in India.

From government fees to professional charges to hidden costs and other related fees. This way, you will know exactly what to expect during the registration process and the ideal business setup to pursue.

Types of Company Structures

Company registration cost in India may vary depending on the structure of business one settles on, thus giving you several options to choose from.

This is because of the different laws, benefits and cost implications associated with each structure; hence, companies should be able to determine in advance what fits their objectives before heading into the registration process.

1. Sole Proprietorship

While a sole proprietorship is the simplest business structure you can register, it also has a limited legal structure. There is no separate legal entity, and the single owner is liable for all the debt and obligations of the business personally. This makes it appropriate for freelancers due to the limited compliance requirements.

2. A Partnership Firm

A partnership firm is one of the most commonly chosen structures for small and family-run businesses in India. As the name suggests, it is formed when two or more individuals agree to run a business together and share profits based on mutually agreed terms. Compared to companies, such partnership firms are relatively easier and less expensive to start, though the partners remain personally liable for the obligations of the business.

3. Limited Liability Partnership

Established under the Limited Liability Act 2008, a Limited Liability Partnership is popular among professionals due to lower compliance and cost implications in the business. It is a more flexible legal entity that guarantees partners limited liability protection while enabling them to participate in the oversight of daily business operations.

4. One Person Company

Like its name itself suggests, a One Person Company is meant for solo founders and leverages the benefits of a Sole Proprietorship and those of a Private Limited Company. It is established as a separate legal entity yet allows entrepreneurs to run it with limited liability.

5. Private Limited Company

Private limited companies are the most preferred type of structure for startups and scaling businesses governed by the Companies Act, 2013. This option involves limited liability, as the company operates as a separate legal entity. Furthermore, it is practical for businesses looking to raise capital quickly.

6. Public Limited Company

A public limited company is suitable for larger companies who are aiming to expand or to raise money from the public in the future. Such a structure is under greater regulatory and compliance obligation, as it allows companies to raise funds from the public by selling shares. While the registration and compliance expenses are comparingly higher, however it offers more credibility and wider expansion options.

In all the above business structures, the cost to register a new company varies due to factors such as compliance needs, filings, documentation and benefits, which are unique to each format as provided for by the Companies Act, 2013.

This is why it is important to align the choice of structure with the long-term business goals before registration.

Cost of Company Registration In India

Let’s take a look at some of the factors that influence the overall cost of company registration in India.

1. Government Fees

According to the Ministry of Corporate Affairs fee structure, the following is a comprehensive breakdown of government fees when it comes to company registration cost:

a) SPICe+ Form Filing

SPICe+ refers to Simplified Proforma for Incorporating Company Electronically Plus and the form fee varies based on the authorized capital.

A capital of up to INR 15,00,000/- attracts a fee of INR 10,200/- including Stamp Duty on MOA & AOA for Karnataka ROC, while anything above this cost INR 500/- plus 300/- for any extra 10,00,000 of the authorized capital.

Further Stamp Duty on Article of Association shall be Rs.5000 for every Rs.10 lakhs or part thereof.

b) Name Approval (RUN / SPICe+)

The registered company name has to be reserved with the Registrar of Companies and should be unique in a way that there is no other already existing company with the same name.

To do this, the owner has to run the company’s unique name through Spice + Part A (Reserve Unique Name form) and the services costs about INR 1,000/- per submission.

c) Digital Signature Certificate (DSC)

A DSC is necessary for online documentation of your company’s registration. The company registration fee may vary depending on the certifying agency and the class of the certificate, usually ranging between INR 2,000/- and 3,000/- per director.

2. Mandatory Supporting Costs

a) Director Identification Number (DIN)

When the company name is secured and approved, all its directors must also be registered formally. The Director Identification Number is obtained upon filing form DIR-3 and often costs around INR 500/- per director, although it may vary.

Alternatively, DIN can be applied while incorporating a new company in case the proposed Directors/promoters do not have valid DIN, without filing any separate E-form DIR-3 (Application for allotment of DIN) for DIN application to Central Government.

So, DIN can be obtained along with company incorporation.

b) Stamp Duty (State-wise variation)

The stamp duty is a state-specific charge that many businesses tend to miss during the registration process. Fee variations depend on the state of business incorporation and authorized capital but generally falls between INR 500/- to 10,000/-.

3. Professional Fees

For an easy registration process, companies often seek the services of a certified chartered accountant or company secretary to provide ongoing support. The services involved may range from doing a name search and reserving it, applying for the DSC, applying for DIN and filing legal documents.

Professional fees have a major variation depending on the complexity of registration process and the category of the company chosen, although most service provides will charge between INR 5,000/- and 15,000/-.

4. Company Registration Hidden Costs

Besides the primary company registration fees, here are additional fees that may apply:

• Fees related to filing a notary (500-1000)
• Other registration costs like GST, Shop & Establishment, Trademark registration etc.,
• Registered office rental
• Rejection and rework costs (3000-5000)

5. Post-Registration Compliance Costs

After successful completion of the company registration process, there are still mandatory administrative and legal costs that a business will incur to operate within the law. Some of the major post-registration compliance costs include:

• Bank opening
• Hiring auditors
• Filing Form INC-20A
• Issuance of share certificate
• Income tax returns
• Registered office signboard

Total Cost Summary (Comparison Table)

To give you a clearer idea, here is a comparison table of the approximate registration costs for different business structures in India.

Note: The figures of cost quoted in the table are subject to changes in the future and not final.

DIY vs Hiring a CA Firm: What Should You Choose?

While some businesses may choose to handle the company registration process for cost-saving and control considerations, there is a potential risk of errors and eventual rejection. Hiring a professional service saves you time while ensuring the process is handled more seamlessly and error-free documentation to cancel rejections.

How to Reduce Company Registration Cost Bangalore

The company registration cost India can easily get out of hand if the process is handled carelessly. Luckily, there are steps you can take to minimize this without compromising your business’s integrity, and here are a few suggestions to consider:

• Choose the ideal business format
• Take advantage of online registration platforms
• Cut down extra services fees
• Evaluate government incentives and waivers
• Hire a trusted professional if necessary

Final Thoughts

Every entrepreneur and business owners should note that registering a company in India comes with a range of costs, from professional costs and government fees to miscellaneous expenses. Understanding the registration and the costs involved goes a long way to letting you operate within the set budget and avoiding complications with your business down the line.

At Mukunda Shiva & Associates, our team of certified accountants can facilitate a smooth registration, while reducing your cost of registering a company in India.

FAQs

How Long Does it Take to Register a Company in India?

The company registration process is generally short. If you have all the documents in order, it should typically take between 7 and 15 working days to have the company fully registered. However, delays may come about as a result of documentation errors and name approval.

Can I Register My Company Online, in India?

Yes, it is possible to register your company entirely online. Through the Ministry of Corporate Affairs portal, applicants can file their different incorporation forms, including SPICe+, as well as other required documents. Ensure the Digital Signature Certificate is signed by directors before filing.

What Factors Affect Company Registration Cost?

The actual cost of registering a new company in India is typically determined by the following:

• Number of directors
• Authorized capital
• State of registration (stamp duty)
• Professional firm chosen
• Urgency of services

What is the Cheapest Company Structure to Register in India?

A Limited Liability Partnership offers the most cost-friendly options for entrepreneurs in India. It involves pretty government fees, typically starting as low as INR 500/- for lower capital companies. The stamp duty across most states is also minimal, and so are the compliance costs.

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