Why is it necessary to incorporate company?

You should incorporate a company for :-

• Tax savings
• Liability protection
• Business credibility
• Ease in raising capital
• Perpetual duration
• Transfer of ownership
• Privacy

What are the benefits/advantages of company incorporation?

Let’s look at 10 benefits of company incorporation :-

1. Corporate veil

Incorporation successfully establishes the corporate veil, a protective area of limited liability that safeguards the interests of the company’s shareholders and directors. As a result, incorporated companies can absorb a lot of risks that aid in growth without exposing owners, directors, and shareholders to a lot of financial liabilities beyond their initial investments in the company.

2. Corporate personality

The incorporation of the company aids in the establishment of a legal entity of the company that is independent of and distinct from the stockholders, owners of the company, and partnership firms.

3. Limited liability

The Company Act Section 34(2) states that if a company is shut down, the members are solely liable for the debts. But, the members are legally required to contribute with some nominal share held by the members and have few additional liabilities once the company is established.

4. Perpetual succession

In spite of any owner’s death, bankruptcy, insanity, or transfer of shares to another entity, etc., the company continues to operate. Perpetual succession gives the company immunity.

5. Transferable shares

The shares and other interests of the members are movable property that can be transferred, as stated in Companies Act, Section 82. This gives investors liquidity and generates investment of funds in shares.

6. Separate property

Company’s property is treated as separate property separate from its members. The company, like a real person, controls, manages, and disposes of the property. The shareholders might face criminal charges for misappropriating the company’s funds if they use the company’s property for personal use, according to the law.

7. Capacity to sue

An incorporated company has the right to sue and be sued ( exceptions exist)

8. Flexibility and autonomy

A company that has been incorporated has the autonomy and freedom to establish its own rules and regulations and decide how to carry them out. However, these are constrained by Equity rules, General principles of law and Morality.

9. Elevates company credibility

Companies that have been incorporated are more stable than those that have not. Simply said, adding ‘Inc.’ or ‘ltd’ to the end of the company name adds credibility, stability, and permanence.

10. Additional benefits

One of the main benefits of incorporation is tax benefits. Taxes are levied on a corporation’s profit. To achieve their financial objectives, an incorporated company may additionally deduct salary, health benefits, etc.

Conclusion

Hope this blog was useful for you. Please do not hesitate to get in touch with us at Finaccle, if you require further help. Apart from online company registration in India (such as private limited company registration in Surat), we also render services related to Finance, Accounting, Tax and Legal aspects! Share this blog and follow us on the following platforms to know more!

Overview

Once you complete private limited company registration, you need to comply with all regulations to ensure smooth daily operations. The Ministry of Corporate Affairs (MCA) introduced One-day Company Incorporation with SPICe , greatly simplifying the process of online company registration. Books of accounts must be audited and kept, irrespective of size, fame, or type of business. An annual procedure which is a part of a company’s compliance needs is the Auditing Process.

The following is a list of compliance requirements in addition to the auditing process, to comply with the laws set by MCA.

Compliance requirements

Forms

• ADT-1 Form – For Appointment of Auditor

Within 1 month of the private limited company registration and incorporation, the company must appoint an auditor. The auditor will have a 5-year term.

• MGT-7 Form –  For Annual Return Filing

Within 60 days after conducting the Annual General Meeting, a private limited company must file its Annual Returns for the Financial Year using form MGT-7.

• AOC-4 Form – For the Filing of Financial Statements

Private limited company must file its Balance Sheet, Profit and Loss Account Statement, and Director’s Report included in the form within 30 days of conducting its Annual General Meeting.

Other

• Audit of Statutory Accounts

Companies must prepare for the compulsory annual audit of their financial accounts by a practicing Chartered Accountant.

• Organizing the Annual General Meeting

The company must hold the Annual General Meetings (AGM) at least once each calendar year.

• Director’s Report

All relevant data must be shown in a Director’s Report in accordance with Section 134.

Auditing

Due to the microanalysis and scrutiny of financial information, the Annual Statutory Audit is a complicated procedure that could be highly stressful.  After private limited company registration, if the company plans its audit correctly, it may become a routine aspect of its operations and help it become more efficient both financially and operationally. Hope that this blog will help you in understanding about the annual procedure in a way that complies with all auditing requirements.

What is Statutory Audit?

Statutory essentially refers to anything that falls within the regulations established by the government. An audit is an inspection. An examination conducted in the private limited company (or any other type of company) to evaluate a company’s financial position is Statutory Audit.

Some aspects for a smooth process that complies with all auditing requirements are as follows:-

Assist the Auditor

Auditors need to be fully aware of all of the company’s transactions. By giving them the appropriate information, you may aid in their understanding of your company. This consists of :-

• Corporate Structure: Company’s history and Market share
• Information about Operations: Services, Products, Marketing, Processing, etc.,
• Processing: Accounts, Shares and Stocks, Liquidity, Financial Statements

Plan the Audit

The Audit is a process that involves a lot of paperwork and is intensive. A schedule with a to-do list, list of tasks, documents that need to be arranged, and names of people in charge of creating certain documentation must be kept by a private limited company. It would be great for auditors to get in touch with everyone on the list.

Main areas around which Audit works

• Statutory Records
• Stocks
• Receivables and Payables

Profit and Loss Account

Some items which are shown under it are as follows :-

• Sales and other sources of income
• Manufacturing and Administrative costs
• Purchases and other expenses

Balance Sheet

It includes items such as :-

• Share Capital
• Secured and unsecured loans
• Fixed assets
• Current Assets
• Current Liabilities

Essential and crucial documentation

Some examples are :-

• Purchase bill
• Sales register
• Salary and wages
• Fixed assets purchased
• Trade license
• Payment of advance tax
• TDS certificates
• Bank reconciliation statement

Records of the private limited company(here), can be thoroughly checked by auditors. Depth of auditing in a company depends on the quality of the internal control assessment performed by it, according to the auditors decision.

Feedback

In an ideal audit environment, after each phase of evaluation, the company does informal discussions on various internal control aspects and a review of the audit process so far conducted.

Audit Report

Once the audit team has effectively handled problems relating to the company’s financial records and transactions, the audit report is prepared. The report is then given to the Board or Auditing Committee.

After private limited company registration, the process is completed and the operations of the company starts, it may be difficult to complete the audit procedure and adhere to requirements. You may need a professional touch frequently to ensure efficient day-to-day operations.

At Finaccle, we assist your business in meeting ROC compliances from the basic step of company registration in India (or abroad) and company incorporation to meeting Audit requirements too!

Contact us today for all services related to the Finance-Taxation-Accounting-Legal domain!

Select a Platform to Share This Blog!