Corporate Law Services

If we understand this correctly given the context of a small vs large business, here – a small business can essentially be referred to as a company with a smaller revenue/turnover (in the domain of SMEs/MSMEs) and a large business can be a company with a higher revenue/turnover (in the domain of large corporates/MNCs).

Now while some might think that the compliance matters for both types of businesses are different, but they’re actually not and there’s no significant difference between the kind of compliances which are undertaken once a business is incorporated under a specific company format (be it LLP, Pvt. Ltd. Company, Public Ltd. Company, and so on). If your company is later registered as an MSME / startup specifically, even then there are only certain criteria which need to be adhered to but they essentially don’t have any impact on changing the statutory and regulatory compliances, thereby making no difference to the kind of company secretarial services a business avails during its working.

In order to read through the detailed list of compliances which are undertaken by a company (statutory as well as regulatory) under Company Law (secretarial, annual secretarial, different compliances for liaison office/branch office/project office), as well as compliances related to direct tax, indirect tax and transfer pricing, you can view our document on Doing In Business India by clicking here.

MSME (an abbreviation for Micro, Small and Medium Enterprises) refer to whose investment and turnover limit in plant/machinery for manufacturing or equipment in services is defined by a certain threshold limit – classifying them as either micro enterprises, small enterprises, or medium enterprises.

Recently, the Government revised the criteria for MSME classification – where it essentially removed the distinction between investments in manufacturing and services sector companies and released co criteria to ensure equality prevails. The criteria for obtaining an MSME certificate comes with certain benefits (which is a different topic altogether), but the registration process for the MSME certificate (which can be obtained under the MSME act) is elucidated as follows:

For registering as an MSME, it is imperative to have an Aadhar Number, but you can make a choice with regards to registering with a PAN or without a PAN.

For starters, you need to visit the website “udyamregistration dot gov dot in” (as MSME registration is now known as Udyam Registration for all intents and purposes) and go to the section “For Entrepreneurs Who Are Not Yet Registered As MSME” and enter your Aadhaar Number. Following this, you’ll have an option to proceed either with PAN or without. If you proceed with PAN, your details are automatically verified by government databases and you can fill in your ITR details.

After your PAN details are verified and you click on “Validate PAN”, the Udyam Registration Box will appear where you enter the necessary company/industry details.

If you proceed without PAN and fill the Udyam Registration, make sure to update your PAN and GSTIN details within the designated timeline later.

Once the details are verified and sent, you shall see a “Thank You” message along with your registration number. The MSME certificate has no expiry date as long as the company complies with all the necessary legal and financial norms.

A Nidhi Company is a company which is essentially based on the concept of engaging in non-banking financial lending and borrowing services between its members only. Its main source of funding comes from the contribution of its members. It does not need RBI approval as compared to NBFCs for setting up, therefore making it a relatively easier option to go for. Nidhi companies are regulated by the Ministry Of Corporate Affairs (MCA) and have to comply with Nidhi Rules, 2014 and Public Limited Company norms, since it is always incorporated as a public limited company.

As for the second part of the question – Simply put, you need 7 members and 3 directors to start a Nidhi Company.

However, it is compulsory for a Nidhi company to have 200 members within a year of its existence.

Striking off an LLP simply refers to declaring an LLP (limited liability partnership) as non-operational and removing its name from the register of companies, which is maintained by the Registrar of Companies (ROC). In order to do the same, there are a few documents which need execution and some criteria which needs to be adhered to. The process is relatively similar to striking off a private limited company in India, but it has some distinctions of its own.

It is compulsory for an LLP to file its returns via e-form LLP-8 and LLP-11 “up to the end of the financial year in which the limited liability partnership ceased to carry on its business or commercial operations before filing of form for strike off”.

Then, the LLP must ensure if it has filed e-form LLP-3 which is the initial LLP Agreement. If not, LLP-3 must be mandatorily filed with the ROC before the strike off procedure, provided the LLP commenced business operations since its incorporation

Following this, the application to strike off the LLP is filed by filling e-form 24 with the ROC. Along with this, certain documents must be attached which include a statement of accounts made by a Chartered Accountant (CA) up to 30 days prior to the filing of e-form 24 (disclosing nil assets and nil liabilities), a copy of acknowledgment of the latest income tax return, an affidavit by the designated partners (which adheres certain criteria such as declaring closure of business operations, closure of existing bank account, declaring no liabilities, etc.), a detailed application citing reasons for closure/strike off of the said LLP, and lastly – a signed copy of authority by the partners for filing the application for striking off the LLP from the register of companies. Following the analysis/scrutiny of these documents, the ROC shall then – on satisfaction of the mentioned criteria shall strike off the LLP.

For registering or incorporating an LLP in India, there are certain forms which must be filed with the Registrar of Companies (ROC). It starts with form RUN-LLP (where Run essentially stands for “Reserve Unique Name” for the LLP). And then, form FiLLiP must be filed for the incorporation of the LLP.

Form RUN-LLP is processed by the Central Registration Centre. Here, the ROC will approve the name of the LLP provided it carries no resemblance to the name of an existing LLP and if it is not deemed as undesirable in the opinion of the Central Government.

Along with these forms, it is essential to obtain a DSC (Digital Signature Certificate), and a DIN (Director Identification Number, in case DIN is not available the same can applied along with incorporation application. Then form FiLLiP is filed with the ROC along with supporting documents, i.e., consents, subscription sheet, utility bill, etc.

There are certain factors to consider as well – such as if the partner in an LLP is a company, then an appropriate individual/representative authorized by a resolution/power of attorney shall file the Subscription Page of the initial LLP Agreement. And in case the documents are made in the context of persons residing outside India, then they must be apostilled and notarized accordingly. Once the required fees is paid with the respective forms and all the documents are filed with the ROC, the documents are then subject to scrutiny and analysis by the ROC. If all is in order, a Certificate of Incorporation (COI) is issued to the LLP. Following this, an initial LLP agreement must be filed via Form 3 within 30 days of the incorporation of the LLP.

One aspect which must also be taken care of is obtaining a PAN (permanent account Number) and TAN (Tax Deduction and Collection Account Number) by the LLP by filing the required forms, as well as opening a bank account by filing the required documents for the selected bank.

Primarily, it is required by an LLP to file e-form LLP-8 and LLP-11, where the former essentially denotes a statement of accounts and solvency and the latter denotes the annual return of the LLP. Form LLP-11 must be filed on or before 30th May of every year and form LLP-8 must be filed on before 30th October every year. Both the forms are filed with the Registrar of Companies.

Other than these, there are annual income tax compliances which shall be undertaken by the LLP. This includes filing the income tax return under form ITR-5. The due dates vary accordingly, in case if the LLP requires an audit (the due date for the return being 30th September every year) or in case it doesn’t require an audit (30th July every year).

The primary difference between a private limited company and an LLP is the regulatory act which governs the two, where Pvt. Ltd. Companies are governed by the Companies Act, 2013 and LLPs are governed by the LLP Act, 2008.

A point of similarity is that both of these entities offer limited liability, where the private assets of the partners (in case of LLP) and shareholders (in case of Pvt. Ltd. Company) aren’t at risk provided either the company or the LLP goes into any form of debt. The key difference here is that there can be a distinction between shareholders and management (directors, etc.) in a Pvt. Ltd. Company, whereas it is the partners of the LLP who are management personnel as well.

It is relatively cheaper to start and maintain an LLP, while it has limitations where it cannot raise funds from the public and as for a Pvt. Ltd. Company, it is advantageous since it is incorporated as a separate legal entity and it can have its own assets – however, it has more compliances as compared to an LLP and can’t trade its shares publicly. Another aspect of differentiation between the two is that an LLP offers no limit on the number of members, while a Pvt. Ltd. Company limits the maximum number of members to 200. As for number of directors, both types of entities require a minimum of two directors (or two designated partners in case of an LLP) – where there is a limit of 15 directors in a Pvt. Ltd. Company and no limit on the number of partners in an LLP.