Formation & Incorporation of Entities
In India, several types of artificial or juridical persons can be formed to carry on business, own property, enter contracts, and be liable independently of their human promoters. These entities are creations of statute and enjoy distinct legal personality, limited liability, and perpetual succession, which makes them central to modern commerce and professional practice.
Meaning of an “artificial person”
An artificial person is a legal construct recognised by law as capable of holding rights and duties, even though it does not have a physical existence. It is formed either by registration under a statute (e.g., Companies Act, LLP Act) or by some other legal recognition (e.g., certain trusts, AOPs, societies). Such an entity can sue and be sued, own assets, incur liabilities, and operate through human agents or representatives.
Major artificial-person entities which can be formed in India for business and professional purposes, and the principal entities are:
- Company (Private Limited, Public Limited, One Person Company, Section 8 Companies) under the Companies Act, 2013.
- Limited Liability Partnership (LLP) under the LLP Act, 2008 expanded as a hybrid between company and partnership.
- Partnership firm (registered or unregistered) under the Indian Partnership Act, 1932, though it is not always treated as a fully separate artificial person for all purposes.
- Trusts and societies, usually formed for non-profit or charitable purposes, also function as juridical persons under specific statutes.
Each of these structures offers different degrees of limited liability, regulatory compliance, tax treatment, and governance formality, so the choice depends on the client’s objectives whether it is profit-oriented, fund-raising-oriented, or charitable. Selection of business entity for carrying on business in India is a business decision considering the capital requirements, the persons who invests, interest of the investors and promoters, taxation policies of the government and size and nature of business.
In India, the minimum requirements to form a company and an LLP differ slightly, but both need a basic legal structure, minimum personnel, and a registered office. Below is a concise, practical-level summary you can use for client counselling.
Minimum requirements to form a company (Private Limited / OPC)
To form a Private Limited Company, a minimum of two shareholders (who may be individuals or body corporates) and a minimum of two individual directors are required, at least one of whom must be a resident of India. In the case of a Public Company, seven shareholders and a minimum of three individual directors are required. In the case of an OPC, only one shareholder and one director are required, and both may be the same individual.
Procedure involved in the Incorporation:
Below is a detailed, procedure for formation and incorporation of the three major corporate entities in India—Private/Public Limited Company, One Person Company (OPC), and LLP—under the Companies Act, 2013 and LLP Act, 2008.
To form a company minimum 2 Individuals need to subscribe to the Memorandum and Articles of Association of the Company, and both of them need the Digital signatures. All the subscribers to the Memorandum and Articles of Association (In case of Private Company: 2 Individuals, Public Company: 7 Individuals and OPC: Only 1 Individual) and all the directors of the company requires digital signature.
Every subscriber/director must have valid PAN, Aadhaar (for residents), and address proof. Attested copies of the same shall be submitted to the ministry along with the incorporation application.
Company should have a registered office at the time of registration and the promoters should submit the proof of registered office in India with rent-agreement/ownership proof and utility bill (electricity, piped-gas, etc.) and a letter of consent from the owner of the premises.
Immediate postincorporation compliances (within 30–60 days)
These are typically completed soon after obtaining the Certificate of Incorporation (Form INC11).
First board meeting
Convene the first Board Meeting within 30 days of incorporation (minimum quorum). Pass resolutions for:
- Adoption of financial year.
- Appointment of First Auditor.
- Opening of bank account.
- Approval of initial policies (e.g., borrowing, intercorporate deposits).
Appointment of first auditor
Appoint a First Auditor (a Chartered Accountant in practice) within 30 days from incorporation by Board resolution, and file Form ADT1 with ROC within prescribed time.
Verification of registered office (Form INC22)
If the registered office address was not fully confirmed at incorporation, file Form INC22 (verification of registered office) within 30 days or as applicable, with address proof and NOC.
Opening of bank account
Open a current bank account in the company’s name, based on ROCissued Certificate of Incorporation, PAN, board resolution, and KYC documents.
Collection of subscribed capital and issue of share certificates
Collect subscribed capital from shareholders within 60 days. Issue duly stamped share certificates within 60 days from date of allotment and pay stamp duty as per state law.
Filing of Form INC20A (Commencement of Business)
Before starting business, file Form INC20A with ROC within 180 days from incorporation, certifying that:
- Subscribed share capital has been received, and
- Declaration of commencement of business is filed.
ROC then notes commencement of business in its records.
Minimum requirements to form an LLP
An LLP in India has several distinguishing legal and operational characteristics that make it a hybrid between a traditional partnership and a company. In practice, LLPs are often preferred for service-oriented, professional, and small-medium businesses where partners want limited liability, internal flexibility, and relatively lighter compliance than a private limited company.
At least two designated partners, both being natural persons, with at least one resident in India who is primarily responsible for statutory compliance.
The internal structure and profit-sharing are governed by the LLP Agreement, which can be customised as per partners’ needs, unlike rigid statutory articles in a company. Every Partner/Designated Partner director must have valid PAN, Aadhaar (for Individuals), and address proof. Attested copies of the same shall be submitted to the ministry along with the incorporation application.
LLP should have a registered office at the time of registration and the promoters should submit the proof of registered office in India with rent-agreement/ownership proof and utility bill (electricity, piped-gas, etc.) and a letter of consent from the owner of the premises.
After the incorporation of the LLP and receipt of the Certificate of Incorporation, the partners of the LLP shall draw up an LLP Agreement and execute it among themselves for the purpose of regulating the affairs of the LLP and defining the partners’ rights, obligations, and liabilities in relation to the LLP. Once executed, the same should be submitted to the ROC immediately. The LLP Agreement must be filed with the Registrar within 30 days from the date of incorporation of the LLP.