Need of registration of company: Benefits of registration of company; importance of registration of company.
REGISTRATION OF COMPANY
Registration of company refers to registering the company with the registrar of companies under the Companies Act in force. It means giving birth to the company in the eyes of the law. Registration of company gives legal status to the company and gives powers to continue the business.
NEED OF REGISTRATION OF COMPANY
In case the company is registered, it gets legal status. The registration of company is needed for following reasons:
Limited Liability: The directors and shareholders of the company have no personal liability towards of any unfortunate event happens like, business loss, failure in the business. Hence Registered Company protects the personal assets of the directors, shareholders in the unfortunate event which is not in control with anybody.
Legal Entity status or Recognition: The registered company like, Private Limited or Limited Company, LLP, Nidhi company, exists separate from its directors or Members, Registered company status enables you to taken more seriously than other unorganized business like firms. Operations of Registered company gives more confidence to the suppliers, Bankers who will prefer to dealing with Registered companies. Easy to attract to talented workforce and achieve strategic goals through employees by designating wide range of positions like Executive directors, operation directors etc.
Existence of the company remains forever: One of the popular saying that, Directors or promoters may come and go, but the existence of the Company remains forever. it has separate Legal existence from the eyes of law. Once company registered it remains alive, until it’s closed down as per Companies Act, 2013. The death of the promoters, directors does not affect the continuity of the company.
Big Project cost and Risk factors: For businesses which needs high capital outflow, usage of hi-tech systems, wherein financial stake is high, Banks and financial institutes prefer the Registered company and insist to have legally registered company.
Easy Transferability: Directors, management of the company can easily transfer there stake from one to another, This will saves time, money of the business owners, and saves big amount of stamp duty. Dual Relationship: In the company form of business, separate share-holders agreement can be executed between company and with its Directors, promoters etc. It’s also possible, the promoter become an employee of the company and draw salary. The person at the same time become, Shareholder, director, employee, creditor of the company example:
- As a director, he can draw salary from company.
- As a shareholder, he can draw dividend from company.
- As a landlord/lesser, receive a rent from company.
- As a creditor, he can lend and receive interest from Company.
- As a supplier, he supply the goods or services from his family business to company.
Borrowing capacity: As a company, it has better avenues for borrowing of funds to business. It can issue Debenture certificates, private placement, issue of preference share capital etc. accept deposits from public, even it borrows money from banks, as they prefer to lend to Companies rather than Firms and proprietorships.
Taxation benefits: Payment of tax is only on the net-profit, the taxable net-profit arrived after offsetting all types of expenses, salary to directors, reimbursement etc, which reduces the net taxable income drastically and result is minimal or lower tax on the company Net profit.
Raising money from Public: Limited companies can raise large amount of capital from public by issue of shares and deposits. Private companies raise capital from issue of debentures, private placement etc.