Company Registration for NRIs and Foreign Nationals in India

Private Limited Company is considered to be the most ideal form of business for NRIs, foreign nationals and for foreign entities who want to set up business in India.

According to FEMA guidelines, Foreign Direct Investment (FDI) is not allowed in other types of businesses like Proprietorship, Partnership Firm and One Person Company. Though investment in LLP’s is allowed, but it requires prior approval of the RBI.

Subject to FDI norms, the shares of an Indian Company can be held by a NRI, Foreign National or Foreign Company. Therefore, Incorporation of a Private Limited Company is recommended for foreign nationals as it is the fastest and easiest way to enter into the Indian Market.

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Registration for NRIs and Foreign Nationals in India

In this article, we focus on the requirements, conditions and procedure for setting up a Private Limited Company in India with NRI’s and Foreign Nationals:

Minimum Directors:

For the purpose of incorporating a Private Limited Company in India, there should be atleast two directors, out of which one director should be mandatorily a “Resident of India” (ie, a person who has stayed in India for more than 182 days in the previous year).

The requirement of one Resident Indian Director has to be fulfilled throughout the existence of the Private Limited Company. Therefore, the directors can be a combination of resident and non-resident individuals

Minimum Shareholders:

A Private Limited Company can be set up with minimum two shareholders. The shareholders can be a combination of foreign nationals, non-residents individuals or other entities. There is no condition regarding the residential status for shareholders. The directors can also be the shareholders of the company.

Process of Incorporation:

– Obtain DSC (Digital Signature Certificate)

– Obtain DIN (Directors Indentfication Number)

– MoA & AoA, SPICe INC-32 Filing

– PAN/TAN Applications

The directors should apply for DSCs for signing e-forms and DIN (to be appointed as directors) before proceeding with the process of incorporation.

Documents required for obtaining DSC and DIN:

The primary documents required for obtaining the DIN and DSC are the applicants photograph, Proof of Identity and Proof of Address. The details are listed below:

For Foreign Nationals residing in their home country – Proof of Identity (passport mandatory) – Copy of Driving License, Bank Statement or any utility bill (not older than two months) – Passport size photograph All the above documents should be notarized by a Public Notary in the country of residence and be consuralized or apostilled by the competent authority in the country of residence. (depending on the country where the citizen belongs to).

For Foreign Nationals residing in another foreign country:

– Proof of Identity (passport mandatory)

– Copy of Driving License, Bank Statement or any utility bill in the country of residence (not older than two months)

– Copy of Visa

– Passport size photograph.

All the above documents should be notarized by a Public Notary in the country of residence and be consuralized by the Embassy of the Foreign National’s home country in the country of residence.

For Foreign residents residing in India:

– Resident Permit

– Copy of Passport

– Copy of Visa

– Copy of Bank Statement or any utility bill (not older than two months)

– Passport size photograph.

All the above documents should be attested by consulate of the Foreign Embassy in India.

For Non-resident Indians:

– Proof of Identity

– PAN Card

– Copy of Aadhaar Card, Driving License, Voter ID Card, if any

– Current Address proof such as Copy of Driving License, Bank Statement or any utility bill in the country of residence (not older than two months)

– Passport size photograph.

Current Address proof should be notarized by Public Notary in the country of residence and consularized by the Indian Embassy in the foreign country.

Other Required details and documents for incorporation-

– Proposed Company Name

– Any other business in which the proposed directors are interested

– Address Proof of Proposed Place of Business such as Sale Deed or Rental Agreement

– Utility Bill (Electricity, Telephone, Gas Bill etc) in the name of the premises (not older than 2 months)

– NOC for use of premises as Registered Office.

There are various other documents prepared for the purpose of Incorporation which have to be signed by the proposed directors and subscribers of the Company.

In case such documents are signed outside India by the foreign directors and subscribers, then all such documents shall be required to be notarized by a Public Notary and consularized or apostilled by the competent authority of the foreign country.

Note- Apostillation is acceptable in 105 member-countries of the Hague Convention. In other countries, consularization is to be done by the competent authority.

How to start a US company from India

The United States is still one of the biggest markets as well as an investor’s heaven, for any business. A product becomes more appealing to the people when it has a US branding on it. Great companies can be built anywhere, selling apps and products to customers living anywhere. Incorporating enhances your credibility as a company. Building base in the US is a mammoth task. This article will give you the basics of starting a US company from India.

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Start a US company from India
Step 1: Which type of business entity: Corporation or LLC?

For foreign companies, there are two main business types: the C-corporation and the Limited Liability Company (LLC). The main difference between the two is that a C-Corporation pays taxes on the profits as a business and an LLC reports profits on an individual level. Majority of foreign businesses apply for a C-corporation. There are various online services that can help you register your corporation.

Step 2: Which state to incorporate in?

The formation documents (the Certificate of Incorporation, etc.) must be filed with the appropriate state agency, by paying a fee. In case you don’t wish to open an office there, states such as Delaware, Nevada, and Wyoming are known to be “incorporation friendly” choices, as they have low annual fees and taxes, as well as an easy legal framework. In case you wish to operate from multiple states, you have to register through a process called foreign qualification.

Step 3: Get a registered agent or a lawyer to do the legal work.

A registered agent is a person authorized to receive legal documents on behalf of the business during business hours. He must be located in the state where your corporation is registered. He helps you with most of your documents, including notices, lawsuits, and tax-related papers. An agent or a lawyer can be hired to work with you through the entire process.

Step 4: US postal address

This is mandatory in order to receive business documents or to mention in other documents. In case you don’t plan to set up an office in the US, you can use a mail forwarding address offered by many companies. As part of the package, they collect letters and documents, scan them, and email them to you. They also ship them to your postal address outside the US, at an additional cost.

Step 5: Get a tax ID and an EIN number

These are unique numbers issued by the Internal Revenue Service (IRS), for the purpose of payment of taxes. Individual taxpayer Identification Number (ITIN) is issued to those individuals, who cannot get a Social Security Number (SSN). It takes one to three months to arrive. In case there is more than one founder in your incorporation, each founder needs to apply for a separate ITIN through Form W-7.

Once this arrives, you can apply for your Employer Identification Number (EIN) through the SS4 Form, which takes three to four business days to arrive. EIN is unique to each business and is essential for opening a bank account.

Step 6: Open a US bank account

Most foreign business owners find it very challenging to open a bank account in the US, as different banks have different requirements for a corporate account. Big banks like Citibank, HSBC, and Bank of America don’t open accounts based on online interaction. It is easier to choose a bank such as Chase Bank or Silicon Valley Bank, which offers remote processing and operation. You may need a recommendation along with your EIN and a copy of your passport.

Step 7: Merchant Account

This is the final step to put your business out there in the market. A payment gateway is essential to do business online and is one of the primary reasons why most companies are incorporated in the US. The most popular choices are PayPal, Authorize.net and Stripe. There are also integrated platforms where most payment gateways are authorized for access. It is a big challenge to build and maintain any business in the US as a foreign national.

The steps outlined above make it a little easier to start out. Individually, careful assessment is required in terms of business plan, the legal framework in both countries, the financial investment, and product marketing, in order to make it big. Above all, it requires investment of time and money. However, as a foreign business, the benefits of registering in the US make it worth all the effort.

This article was also published in Tech in Asia

Is your startup compliant?

Is your startup compliant?

Whether you are a giant corporation or a startup, to be successful, it is important to analyse if you are compliant and are following certain laid-down protocols. It’s imperative to keep a close eye on the laws in the city or state you operate in, failing which you are likely to overlook compliance responsibilities and face damaging penalties and lawsuits that could severely impede the progress of your business entity.

Many organizations show a great deal of promise. However, because they bypassed important compliance procedures they have had founders step down, executives replaced, and employees lost. A business entity that is compliant is automatically trustworthy to its clients and investors. All businesses, particularly startups, should follow certain compliance protocols.

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Is your Startup Compliant?

This article will give you a lowdown on all compliances.

1) Choosing the right business entity: The first major challenge faced by any entrepreneur is choosing the right business vehicle for their venture. This choice will in the near and long term affect the startup’s viability, visibility, sustainability, suitability, and profitability. Your long-term goals, vision, and objectives will decide whether the startup will be established as a private limited company, public limited company, partnership firm, or a limited liability partnership. Each of these categories has a different set of compliance procedures and laws. To avoid any backfiring in the form of legal hassles or otherwise, it is better to be aware of all these formalities right at the inception stage.

2) Statutory Compliances: The credibility of any business highly depends on its compliance with all the applicable laws. For a Company and LLP, the mandatory compliances with the Registrar of Companies (RoC) are the most essential of all. Some of the important provisions include appointment of Auditor, conducting board and shareholder’s meetings, filing statutory annual returns, and maintenance of statutory registers. These criteria should be met and will be verified by the investors.

  • Appointment of Auditors The First Auditors of a Company should be appointed within one month of its incorporation and shall shall hold office till the conclusion of the first annual general meeting. Thereafter, an auditor shall be appointed who can hold office for a period of consecutive five years.
  • Conducting board meetings: At least one meeting should be conducted in every three calendar months. Four such meetings should be held every calendar year. The Chairman of the said meeting signs the minutes of the meeting.
  • Filing Financial Statements and Annual Returns: Private Limited Companies are required to file its Annual Accounts and Returns disclosing details of its shareholders, directors etc. to the Registrar of Companies. Such fillings are required to be made once in a year, usually before 30th September.
  • Maintaining Statutory Registers and Records: A Private Limited Company has to maintain various statutory registers and records as required by the Company law such as Register of shares, Register of Members, Register of Directors etc. Besides, Incorporation documents of the company, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting etc are also required to be preserved by the Company.

3) Audit Compliances: The purpose of a statutory audit is to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records and financial transactions. Compliances related to audit include appointment of the Statutory Auditors of the Company and finalizing annual accounts with the Auditors of the Company.

4) Payroll compliances: When you start an organization, it is obvious that you will have employees working for you. There will be employees, independent consultants and contractors as well. Such professional relationships are governed by various labour legislations. For instance, A business with an employee strength of over 20 needs to comply with ESI and PF regulations.

5) Taxation: A business has to pay taxes to the Central/State government or local bodies. Thus, every new entrepreneur should have the know-how of the aspects of taxation. Tax laws vary with sector and any recent changes should be within an entrepreneur’s radar. Tax compliance measures vary with the kind of business and the nature of services. A company selling goods would need to comply with the state VAT laws. Similarly, businesses working as service providers need to obtain service tax registration, make service tax payments, and file service tax returns on time. The business should also comply with relevant income tax rules and regulations.   The Comparison chart will give you a clear distinction between the compliance requirements of all the three forms of business.

Factors of Comparison Private Limited Company One Person Company Limited Liability Partnership Partnership/ Proprietorship
Statutory Compliances Mandatory Mandatory Compulsory Not Applicable
Maintenance of Books of Accounts Mandatory Mandatory Mandatory Required for Income Tax
Annual General Meetings (AGM) Mandatory Not Applicable Not Applicable Not Applicable
Annual Tax Filings Mandatory Mandatory Mandatory Mandatory
Statutory Audit Mandatory Mandatory If turnover > 40 lakhs or contribution > 25 lakhs Not Applicable
Tax Audit If turnover > 1 Crore If turnover > 1 Crore If turnover > 1 Crore If turnover > 1 Crore
Taxation Profits Taxed at 30% Profits Taxed at 30% Profits Taxed at 30% Partnership – 30% Proprietorship – Individual Slab Rates

VenturEasy strongly believes that Compliance should be viewed as more than just a process. It should become a part of your startup culture! This article was first published in YourStory

Documents Required for Private Limited Company Registration

Once a name has been given to a company as an entity, the next step is the registration of the company. The list of documents required for private limited company registration is always a cause for confusion. This article takes a look at the necessary steps and documents required for registering a private limited company.

1) Proof of Identity – Directors

Indian Nationals

a) The proposed Directors of the company must submit a copy of their PAN Card. It is mandatory for Directors who are Indian Nationals to submit PAN during the incorporation process. The Ministry of Corporate Affairs will use the name as written on the PAN Card for everything related to the company.

b) Another document to be submitted is the Address proof. This proof should carry the same name as on the PAN Card and the most recent address of the Directors. The documents accepted as address proof include Passport, Election Card or Voter Identity Card, Ration Card, Driving License, Electricity Bill, Telephone Bill, and Aadhaar Card.

Foreign Nationals

a) This is an obvious requirement since the person is a foreign national. The Passport must also be Notarized or Apostilled in the country it was issued in. If in a different language, the passport must be translated by an official translator to English and notarized or apostilled.

b) The submitted address proof should also be notarized or apostilled. It must carry the Director’s name as mentioned in the Passport and the most current address of the Director.

This document must not be older than a year. The following documents are acceptable: Driving License, Residence Card, Bank Statement, Government issued form of identity containing address. If it is in a foreign language, it must be translated and later notarized or apostilled.

2) Proof of Identity – Shareholders

Individual Shareholders: All shareholders must submit their identity and address proofs.

Institutional Shareholders: If one of the shareholders is a Corporate Entity (Company, LLP, etc.,), then they should attach a Certificate of Incorporation of the Body Corporate along with the resolution passed by the Body Corporate to subscribe to the shares of the company under incorporation.

3) Proof of Registered Office Address

There needs to be a valid proof of the company’s registered office. These proof documents must be submitted during the company registration process or within 30 days of incorporation of the company.

a) The registered document of the title of the premises of the registered office in the name of the company; OR

b) The notarized copy of lease / rent agreement in the name of the company along with a copy of rent paid receipt not older than one month

c) The authorization from the Landlord (Name mentioned in the Electricity Bill or Gas Bill or Water Bill or Property Tax Receipt or Sale Deed) to use the premises by the company as its registered office. This is usually referred to as NOC from Landlord;

d) Proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, which is not older than two months.

4) No Objection Certificate

There should also be a No Objection Certificate by the landlord for having the registered office in his/her premises and this person must submit his/her identity proof and address proof.

Additionally, some documents like the INC-9, MOA, and AOA are drafted by VenturEasy. These are made specifically for the incorporation and must be signed by Company promoters and duly notarised.

VenturEasy can assist you in preparation of documents required for private limited company registration along with incorporating your company.

Acceptable Names for a Private Limited Company

One of the most important steps in setting up a company is choosing an appropriate name for it. The naming should be in accordance with the Companies Act, 2013 or Limited Liability Partnership Act, 2008. There are certain naming guidelines for choosing an acceptable name for a Company or LLP.

There are three parts to a name for a company. These are the Name part, the Object part, and the Constitution part. For example, if the name is XYZ Solution Private Limited, then “XYZ” forms the Name, “Solution” is the Object and “Private Limited” will be the Constitution part. Let us look at each of the parts individually.

Name

The Companies Act or the LLP Act suggests that a unique and acceptable name be given to the set up. The name should not resemble to that of an existing entity or LLP or trademark in the same industry. For example, if there is a company called XYZ Beverages Private Limited then there cannot be another company in the same field with the same name or even as XYZ Beverages LLP. However, the same name for a company in a different industry may be allowed. Hence, the founders must ensure the sanctity of the names.

Object

The object part of the name is that which tells us what the company is all about or their nature of business. It defines the company’s activity. Although two companies may share the same name, if there objects are different, the name will be allowed to be registered. However, it is important for the object part to be absolutely clear. Names without an object part or a vague object can be rejected. Some well-known object parts used are as follows. Technology, Textiles, Motors, Power, Steel, Hospital, Hotel, Restaurant, Holding, Construction, Real Estate, Trading, Information, Manufacturing, Financial, Pharmaceuticals, Medicals, Travels, Aviation, Shipping, Energy, Solar Power, Electricals, Containers, Designs, Foods, Garments, Mobiles, Plastics, and Interiors.

Constitution

This part of the company name defines the type of entity it is. Private Limited Companies are represented by Private Limited Company or Pvt. Ltd Company; One Person Companies are represented by OPC or One Person Company; Limited Companies are represented by LTD Company or Limited Company; and Limited Liability Partnerships are represented by LLP or Limited Liability Partnership.

Naming Guidelines

The Companies Act also lays down certain guidelines when it comes to naming a company. Here is a lowdown on some such points to be kept in mind while choosing a unique and appropriate name.

  1. It does not make sense to use the Plural Version of any of the words in an already existing company name. You cannot name a company as XYZ Steels Private Limited if a company by the name XYZ Steel Private Limited already exists, for example.
  2. You cannot change the type, case of letters, or the spacing between letters and punctuation marks of an existing name and make it unique. For example, changing XYZ Steels Private Limited to Xyz Steels Private Limited is not acceptable.
  3. Do not try joining words or separating words. For Example, do not change XYZ Steels Private Limited to X Y Z Steels Private Limited and so on.
  4. Changing the tense or number of a word from the name is also not acceptable if the company works in the same industry. Example, XYZ Steels Private Limited cannot be changed to XYZ’s Steels Private Limited.
  5. The use of different phonetic spellings or spelling variations does not make a name unique.
  6. You cannot misspell certain words intentionally to make the name unique since the checking is done with the correct words only.
  7. Do not add internet-related designations such as .com, .net, .edu, .gov, .org, .in to make the name unique.
  8. Addition of common names or titles or the name of a place cannot be added to make the name sound unique. However, names with places may also be allowed if no objection from the existing company by way of Board resolution is submitted.
  9. Different combination of the same words is not allowed. Example, Contractors and Dealers cannot be made Dealers and Contractors. The words of an existing should not also be translated to another language.
Undesirable Names

There are certain criteria which qualify the names as undesirable.

  • The proposed name should not violate section 3 of the Emblems Act 1950.
  • The proposed name should not violate the name of a registered trade mark or a trade mark which is subject of an application for registration, unless the consent of the owner or applicant for registration is obtained.
  • There should not be any word or words offensive to any section of the people.