Company registration is a vital factor when starting a new company in India. Many new or even experienced entrepreneurs make a blunder in registering a company, which ultimately ruins and hinders the company’s progress in the long term. These silly and common mistakes can ruin your business. To grow your business with the pace of competition, it is essential to know these mistakes in depth to ensure that your company’s registration is smooth and avoid blunders. You should prevent The following common mistakes when registering for a company. 

Wrong Company Name:

In the first stage to register a company is choosing the right name for your company. The proper name is unique and clearly defines your company’s objective and vision. Many startup companies must pay more attention to this primary and necessary step.

 Before registering the company name, one should have read section 4 of the Company Act 2013 correctly. According to section 4 of the Company Act 2013, the company’s name cannot be identical or similar to any existing company or LLP. The company name should be unique and different from all other companies.

 The central government does not consider the company’s name offensive or undesirable. Before registering a company, rule 8 of the Companies Incorporation Rule 2014 should be read thoroughly because it contains a list of such names. 

Wrong Company Type:

Generally, registration consists of three legal statuses: public limited, private limited, and OPC. Public limited companies require a minimum of 7 shareholders and 3 directors, while private limited companies require a minimum of 2 shareholders and 2 directors. OPC, or a one-person company, has only a single owner who performs the responsibility of both director and manager. Before registering a company type, one should have proper information about all the company types so that one can register accordingly. Many startup companies must learn the difference and opt for the wrong company type in company registration.

Read More: How to register a company in India

Agreement of Founders and Cofounders:

Before registration, a shareholders’ agreement must be drafted, signed, and agreed upon mutually. The registration application should include details of all shareholders, share allotment, share capital, lock-in period, terms of investment, and nominee details. Any wrong information can lead to rejection or even conflict between shareholders. That is why it is crucial that the information be accurate and agreed upon by all the investors. 

Not Understanding Local Laws:

Laws are not uniform across all states for registering a company. Before registering a company, one should have proper information about all the local and state laws. However, company registration is a crucial area of the Union Ministry of Corporate Affairs. Still, certain post-incorporation compliances are mandated by different state governments. To avoid any blunder when registering a company, it is necessary to know all the fundamental laws of the Union Ministry and local laws. 

Not taking professional help:

Most startup owners do not know the necessary compliances and rules that they should know before trying to register a company. Because of this negligence, they  pay high penalties for non-compliance. Apart from the high cost of penalties, not following proper rules and guidelines can also lead to business closure. To avoid these severe consequences, you must seek help from a professional. You can also avail of our compliance services at The Startup Lab to avoid these severe consequences. 

End Note 

Company registration in India can only be problematic if you do not know proper compliance and rules. Understanding basic rules and regulations is vital to avoid blunders in the registration process. By keeping key factors in mind such as selecting a good name, company type, PAN and TAN information, an Agreement between founders, and understanding laws you can avoid common mistakes that could take place while registering a company. We understand the significance of the big step of registering your company and how important it is, to get it done right. That is why, we implore you to check out our Company Registration Services. At The StartupLab, we help you in every step of the way into giving your company its legal existence and jumpstarting its progress. 

FAQs

Q. What will happen if I copy the name of another company?

Ans: If your company name is not unique and similar to other companies, the counterpart business could file an objection with the state or file for trademark infringement. That is why choosing a unique and different company name is vital.

Q. Is professional help helpful during  my company’s registration?

Ans: Yes, seeking professional help can be essential during the registration. It can reduce the unnecessary burden on your mind so that you can solely focus on growing your business. 

Q. Do local laws differ for each company’s registration?

Ans: Yes, local laws regarding a company’s registration can differ from one state to another. Before registering a company, you must go through the process according to your region. You can also seek guidance from us for a smoother and better process. 

Q. What will happen if I make a mistake while I register a company?

Ans: If you make mistakes during your company’s registration, you will face consequences like registration delays and even legal notice. That is why it is crucial to proceed with vigilance. 

Q. What are the most common mistakes that can occur in company registration?

Ans: Choosing a bad company name, using the wrong company type, and using an invalid PAN and TAN are common mistakes during the registration process.

Q. How Important is an agreement of shareholders for business registration?

Ans: The agreement of all the shareholders is an essential step before registering a company. If this step is not followed properly, it will lead to conflict and clashes in the future.