Common Myths About Company Registration in India
Company registration in India is surrounded by misconceptions that prevent many would-be entrepreneurs from taking the first step. Some of these myths come from outdated laws, others from hearsay, and many from simple lack of awareness. This guide takes the 10 most common myths about company registration and replaces them with facts that every founder should know.
Myth 1: Company Registration is Too Expensive
The Myth
Many aspiring founders believe that registering a company costs lakhs of rupees and is affordable only for established businesspeople.
The Reality
Registration costs have decreased significantly over the past decade. With the SPICe+ integrated process, you get the Certificate of Incorporation, PAN, TAN, DIN, and name approval in a single filing.
| Component | Cost Range |
|---|---|
| MCA government fees | Rs. 2,000 to Rs. 5,000 |
| Stamp duty (varies by state) | Rs. 1,000 to Rs. 10,000 |
| DSC (Digital Signature) | Rs. 1,000 to Rs. 2,000 |
| Professional fees | Rs. 3,000 to Rs. 10,000 |
| Total | Rs. 7,000 to Rs. 27,000 |
Myth 2: You Need a Commercial Office Space
The Myth
You cannot register a company without renting a dedicated commercial office space.
The Reality
You can register your company at your residential address, a virtual office, or a co-working space. The MCA only requires proof that you have a valid address where official correspondence can be received. Many successful startups were registered at home addresses.
Required documents for any address type:
- Recent utility bill (not older than 2 months)
- NOC from the property owner (or rent/lease agreement)
- Address proof of the owner
Myth 3: Minimum Capital of Rs. 1 Lakh is Mandatory
The Myth
The Companies Act requires a minimum paid-up capital of Rs. 1 lakh for Private Limited Companies.
The Reality
This requirement was removed in 2015. There is no minimum capital requirement for any type of company in India. You can incorporate with any amount of authorized capital. However, practical considerations suggest starting with at least Rs. 1,00,000 for credibility and operational needs.
Myth 4: Only Business Experts Can Start a Company
The Myth
You need a business degree, CA qualification, or prior business experience to start and run a company.
The Reality
The only requirements to be a director are: being at least 18 years old, having a valid PAN card, having a valid Indian address proof, and not being disqualified under Section 164 (no existing director disqualification). There is no requirement for any specific education, profession, or business experience.
Myth 5: Company Registration Takes Months
The Myth
The registration process is bureaucratic and takes several months to complete.
The Reality
The SPICe+ process has streamlined registration to a single integrated application. With all documents ready, incorporation typically takes 7 to 15 business days. The process is entirely online, and there is no need to visit any government office.
| Step | Timeline |
|---|---|
| DSC issuance | 1 to 2 business days |
| Name approval (RUN) | 2 to 4 business days |
| SPICe+ filing and processing | 4 to 7 business days |
| Total | 7 to 15 business days |
Myth 6: Compliance is Minimal After Registration
The Myth
Once you register, you just run your business and file an annual tax return.
The Reality
Registration triggers multiple ongoing compliance obligations:
- File AOC-4 (financial statements) annually with ROC
- File MGT-7A (annual return) annually with ROC
- Hold at least 4 board meetings per year
- Hold an AGM within 6 months of the financial year end
- Get a statutory audit every year (regardless of turnover)
- File DIR-3 KYC for all directors annually
- File income tax returns annually
- File GST returns monthly or quarterly (if registered)
- Deposit TDS monthly and file quarterly returns
Myth 7: Government Can Seize Your Registered Company
The Myth
The government can nationalize or take over your privately held company at any time.
The Reality
Your company is private property protected by law. The government cannot seize or nationalize a private company. The only government action against a company is administrative: strike-off for non-compliance (recoverable through NCLT), investigation under Section 210/212 for fraud, and winding up ordered by NCLT for specific legal grounds.
Myth 8: Registration in Your Home State is Mandatory
The Myth
You must register the company in the state where you live or where you will operate.
The Reality
You can register in any state in India. The MCA portal is online and processes applications regardless of director location. Many startups choose their registration state based on: lower stamp duty rates, proximity to their registered office address (virtual or physical), state-specific incentives for startups, and preferred ROC jurisdiction.
Myth 9: Wait for Profitability Before Registering
The Myth
It is better to run the business informally until it makes money, then register.
The Reality
Delaying registration means you operate without limited liability protection, which means personal assets are at risk for business debts. Other disadvantages of waiting:
- Cannot open a business bank account or accept payments professionally
- Cannot sign contracts in the company's name
- Cannot raise equity investment or issue shares
- Cannot register for GST and claim input tax credits
- Cannot apply for Startup India or MSME benefits
- Transferring an existing business to a later-formed company has tax implications
Myth 10: Adding Investors Means Losing Control
The Myth
If you take investment, investors will take over your company.
The Reality
Founder control depends on structuring, not just shareholding. Tools to maintain control include:
- Majority shareholding: Retain 51%+ equity for ordinary resolution control
- Board composition: Ensure founder-nominated directors are the majority on the board
- Reserved matters: Define specific decisions that require founder consent in the SHA
- Differential voting rights: Some investors accept shares with lower voting rights
- Anti-dilution protection: Protect your percentage through pre-emptive rights on future rounds
Conclusion
These myths collectively create an unnecessary fear of company registration. The reality is that registration is affordable, fast, legally straightforward, and available to virtually anyone with a valid PAN and Aadhaar. The benefits of formal registration (limited liability, credibility, tax benefits, funding access) far outweigh the modest costs and compliance obligations. Do not let myths hold you back from formalizing your business.
IncorpX makes company registration simple, affordable, and transparent, helping founders move past myths and into action with proper guidance every step of the way.
