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Before you register a company, compare the years after it
Forming an entity is a short task, but the yearly duties last as long as it exists. Choose on the basis of liability, funding and compliance you can keep up.
How the options usually compare
A simplified starting point. Each row has exceptions, and tax outcomes depend on your numbers, so discuss your numbers with Deepak Mittal before deciding.
| Entity | People needed | Personal liability | Ongoing burden | Often chosen for |
|---|---|---|---|---|
| Sole proprietorship | One owner | Unlimited | Lowest | Starting alone, with low risk |
| Partnership firm | Two or more | Generally unlimited | Low to moderate | Small shared businesses |
| LLP | At least two designated partners, one resident in India (120 days in the year) | Generally limited | Moderate, with annual MCA filings | Professional and shared firms wanting limited liability |
| One Person Company | One member, who names a nominee, and one director | Generally limited | Higher | A solo founder wanting a company form |
| Private limited company | At least two directors and two members, with one director in India for 182 days in the year | Generally limited | Highest: audit, annual filings, meetings and records | Raising investment, or building a larger business |
People requirements from the Companies Act, 2013 (sections 3 and 149) and the LLP Act, 2008 (section 7), read on consolidated copies because the official MCA (opens in a new tab) site could not be fetched.
Questions that usually decide it
- Will you raise outside investment?
- Investors often expect a company. An LLP or proprietorship may not suit them.
- How much risk could fall on you personally?
- Limited liability has limits, for example if you personally stand surety for a loan.
- Who will handle yearly compliance?
- Budget for it from the start. Missed filings can bring penalties and consequences for directors.
- Do your clients expect a particular form?
- Some larger customers prefer a registered entity.
Separate the charges
Ask for a written split of any quote:
- Government filing fees and stamp duty
- Digital signature costs
- The professional's own fee
- What comes after: GST, bank account, first-year compliance
Very low "all-inclusive" prices may leave out one or more of these. Fees depend on capital and state, so check MCA's fee calculation for your case.
What the process involves
Companies are generally formed through the SPICe+ web form on the MCA portal, and directors need digital signatures. In outline:
- Decide the entity and the people involved.
- Get digital signatures, and choose possible names.
- Prepare the incorporation documents and proof of the registered office.
- File, and answer any questions from the Registrar.
- After incorporation, handle items such as the bank account, tax registrations and the first compliance steps.
Timelines depend on the portal and the quality of documents. No one can promise a name or an approval.
Who does what
Section 7(1)(b) of the Companies Act requires a declaration at incorporation that the law has been complied with. It is made by an advocate, Chartered Accountant, cost accountant or company secretary in practice who is engaged in forming the company, and by a director, manager or secretary named in the articles. Other forms may need a practising professional's certification, so ask which applies and in what capacity. An accountant without those qualifications can help with bookkeeping and tax after you form the entity, but cannot give these declarations.
What stays with you
- The truth of what is filed. Directors and partners sign for it.
- Your name on the digital signature. Keep control of its use.
- Ongoing duties, whoever you appoint to help with them.
Common mistakes
- Choosing a company only because it sounds more established
- Using a friend as a dummy director or partner, who then carries real duties
- Forgetting that an inactive company can still have filing duties
- Using an address without proper permission or documents
After registration, see ROC and MCA compliance and GST registration.
Sources checked, November 2026
- Companies Act, 2013 on a consolidated copy: section 3 (opens in a new tab), section 7 (opens in a new tab) and section 149 (opens in a new tab); LLP Act, 2008, section 7 (opens in a new tab) (read 10 November 2026; the MCA site blocked automated reading)
- Taxaj on SPICe+ (opens in a new tab) (secondary, for the filing process)
Need help forming a business?
Tell us who is involved, what the business does, and whether you plan to raise investment.
