The decision to start up a company is a critical decision. One must fully understand and aware of the number of formalities that goes into the formation of the company. The process of company formation involves taking into consideration various legal requirements that need to be complying with. Formation of the company requires the investment of time and efforts, and one must fully be ready to provide that so.
It is a long process, and it involves a number of steps. But before indulging into the steps of how to form a company, one must decide the type of company they are going for. There are two types of company, i.e. Public limited company and Private Limited Company. One of the fundamental difference between these two is that Public limited company is open to Public i.e. its shares are publicly traded whereas Private limited company funds comes from their private sources, i.e. it is not open for general Public. One must first be clear for the type of company they are going for.
There are certain steps that are involved in the formation of the company that is common to both types of companies mentioned above. These steps are:
- Promotion Stage: Promotion is the first and the foremost step involved in the formation of the company. Promotion involves the formulation of the ideas on the basis of which the business is formed. It is through the promotion; the business begins to exist. Under this the preliminary agreements are formed, placement of capital starts, prospectus circulation etc. takes place.
- Incorporation Stage: Until and unless, a company is duly registered under the Companies Act, the company does not exist. It is with the registration that the company can start its operation after it has received the certificate of incorporation, which shows that company is ready to begin. This certificate is received only when certain conditions are met, such as:
- Name of the company has been decided.
- Documents such as MOA have been filed.
- List of directors, consent of director has been filled.
- At the statutory declaration has been submitted.
After completing all these, the certificate of incorporation is granted.
- Capital Subscription: As the capital of the private company is not open to Public, they can start the operation after the second stage. However, it is mandatory for Public company to undergo further legal formalities as mentioned under the company act so that the Public can subscribed to the shares of the company. This is an important step as one needs funds to operate, and this will be made available to the public company. But it is important to go all the requirements that need to fulfill under this stage.
- Commencement of the business: This is the last step in the formation of the company. Under this, the business actually starts to operate for the very purpose it was formed. If the company fulfils all the above steps, then a certificate of commencement is issued by the registrar. It is a legal statement stating the company can now legally start its operation.
Hence, starting a company a number of legal steps. It is recommended that one must avail services such as company startup services in Pune which provides expertise services in this regard.