Ultimate Guide to Overcome Challenges in Company Registration

27 December 2024

Company registration is indeed a crucial decision that formally initiates the process of commencing a business. It attains legal recognition. But registering it can be full of hurdles, which may take a long time to address issues. These challenges range from compliance requirements to documentation, legalities to meet, etc. Simply put, registering a commercial entity can be an acid test.

Let's introduce some of the most common hurdles that can hamper documenting a business,

Common Problems in Company Registration

1. Understanding the Legal Framework
The first and foremost challenge is to understand the actual legal requirements. These requirements are associated with how to register a company, like a partnership firm, sole proprietorship, etc. Each country or state has its own laws that govern business registration. Simply put, the registration can be of a private limited, public limited, LLP, or sole proprietorship, but the struggle is to discover the legal framework of an ideal business structure for you. This structure further influences taxation, compliance, and operational flexibility, which must be comprehensive.
 

2. Choosing the Right Business Structure
Entrepreneurs must balance their goals, funding plans, and operational needs while selecting the structure.
Identifying which type of entity is ideal for you. Selecting it can be a daunting task because each choice has its own pros and cons. For example,

• A private limited company may have limited liability, but it must be more compliant per laws.
• Limited Liability Partnerships are also simpler to set up, but raising capital for it is not a bed of roses.
• Likewise, a proprietorship is easy to register and manage but lacks corporate benefits.

3. Name Approval
Another puzzle is to name it uniquely and make it compliant with regulatory laws. In many cases, proposed names are observed as duplicates or non-compliant with naming conventions. These cases lead to rejection, which further delays and hence, requires additional brainstorming to find a compliant name.

4. Document Preparation
Formal registration is possible by following proper documentation for company registration. Typically, this process can be initiated by enclosing these documents:
 

• Proof of identity and address of directors and shareholders.
• Memorandum of Association (MoA) and Articles of Association (AoA).
• Proof of the registered office address.
• Invalid or incomplete details in documents can spark refusal of the application, which further necessitates resubmission of your application.

5. Compliance Requirements
The next challenge is to stay compliant with the company laws and their requirements, which are the following:

• Tax Identification Numbers (e.g., PAN and TAN): These documents may take weeks to be issued.
• GST Registration: The government has introduced stringent policies to make the GST registration process the toughest of all processes. And frequent changes in it make it extremely difficult to register.
• DIN (Director Identification Number): It is concerned with directors who must obtain a DIN before registration, which adds to the workload.

6. High Costs
Startups, large or small, have to bear the financial burden of registering companies. Its expenses encompass the charges for name approvals, government filings, and legal consultation. Many professionals or entrepreneurs consult with professional chartered accountants or lawyers, which also requires fees.

7. Online Registration Challenges
However, the MCA in India has already initiated digital platforms to register a company online. But, first-time users may find it difficult to navigate these portals. They may face poor navigation or user interface, a slow server, a lack of clear guidelines, etc., which bounces them out from the middle of the online registration process.

8. Delay in Approvals
Many-a-times, you may have all documents in place, and the processing goes smoothly and fast. Authorities may delay its processing. Verifications and approvals often become lengthier than the forecasted period. It leaves the applicant frustrated, who may postpone business operations.

9. Jurisdictional Differences
Registering a company across states or countries can be a hard nut to crack. Because every jurisdiction-specific rule is not comprehensive, it may significantly complicate the process of approvals.

10. Foreign Business Registration
Indian expats living abroad may have to face double trouble. These reasons can be any of these:

• Incomprehensive local laws and tax implications.
• Challenging to secure government approvals for foreign direct investments (FDIs).
• Complying with FEMA (Foreign Exchange Management Act) regulations in India or equivalent laws in other countries.

11. Lack of Professional Guidance
Some startups rely on self to maximize savings. But inadequate knowledge and expertise often end up in errors and unnecessary delays in registration. This problem can be tackled effortlessly with the support of a professional consultant who has hands-on experience.

12. Post-Registration Compliance
Simply registering is not enough. It requires companies to meet compliance requirements, which range from annual filings to maintaining statutory records and tax assessment. These tasks can be overwhelming and tiresome. But non-compliance can be even more painful because you have to pay penalties and trials.

13. Sector-Specific Approvals

Some industries, like healthcare, education, and finance, have to take additional approvals, certificates, and licenses. These requirements vary, which adds further length to the procedure of a company registration.

14. Language Barriers
International entrepreneurs who want to register their businesses in non-native regions may face language problems. It requires the entire process of company registration to continue in local languages. But it won't be easy because they need translation and interpretation services.

15. Resistance to Formalization
Small businesses or proprietors are not open to formalizing their business operations. They may be afraid of compliance and tax liabilities, which further makes the process lengthier.

Conclusion
Registering a company is a crucial decision, but challenges can make it more difficult. Entrepreneurs must have to invest significant time and money in understanding and then continuing the process. This is where company registration consultants outshine. They resolve most of the incorporated challenges.