MLM company is direct selling platform to market unique products or services worldwide without setting up shops or showrooms. If you want to register your MLM company;
according to my best knowledge there is no special or separate law for starting an MLM company in India. The acts of Indian constitution completely prohibit the Pyramid scheme model and Prize Chit and Money Circulation. Both these are banned under MRTP Banning Act 1969 and PCMC Banning Act 1978.
There are several Legal company structures in India:
- Private Limited Company
- Public Limited Company
- Limited Liability Partnership
- One person company
- Nidhi company
- Partnership firm
- Sole Proprietorship
- Producer company
- Sec 8 company
- Trust firm
- Society firm
1. Private Limited Company:
It has many benefits and is the most popular business entity in India. To incorporate a Private limited company, minimum two members are needed. This business structure offers flexibility, greater stability, and benefits of partnership. The minimum capital requirement is 100,000 this can exceed to any amount. Documents needed are ID proof, PAN card, Address proof, and rent agreement and NOC of the owner in case space is residential.
2. Public Limited Company:
It is a bigger business set up and is for a company who want to get listed. To establish a public limited company a minimum of three or maximum of fifteen directors is needed. A foreign citizen or NRI can also be a director of a public limited company after obtaining a DPIN. There is no minimum capital also the company has the benefit if raising capital from investors. PAN card, ID proof, Address proof are some of the mandatory documents for the company registration. There is no need of commercial space, however, NOC from the owner is needed.
3. Limited Liability Partnership:
The incorporation of LLP needs a minimum of two members but there is no limit on the capital investment in the registration process. NRIs and foreigners need to obtain a DPIN to become a partner in an LLP. The name filed on the registration form should be unique and per the guidelines set by ROC.
4. One person company(OPC):
Only one shareholder and nominee is needed to start to an OPC. The minimum capital should be 100,000 and it can exceed to any amount. Foreigners or NRIs can't establish an OPC in India. The documents needed are same as for a private limited, public limited, and LLP company which includes ID proof, Address proof, PAN card, and NOC of the owner in case of a rented property.
5. Nidhi company:
To incorporate a Nidhi company 3-5 directors are needed, these are regulated by MCA and are registered under companies act 1956. The members are primary source of funds which deposit money which is used to give loans to members in need. It acts as a mutual benefit organization and the activities fall under the RBI however they are exempted from core provisions and regulations.
6. Partnership firm:
It is easy to set up as compared to other company structures, the registration starts with selection of a name for the company by the partners that is unique the next step is to create a written partnership deed which includes name and nature of the business, address, capital contribution, duration of partnership and profit sharing ratio. Partnership firms are governed by Indian partnership Act, 1932. The firm also needs registration with the Income Tax Department.
7. Sole Proprietorship:
A business owned by a single person it is popular among small traders. It is easy to set-up with service and sales tax registration. A proprietorship is free to choose any name, trademark registration is necessary to stop others from using the same business name.
8. Producer company:
It is a group of ten or more people involved in the products or services related to primary produce. The minimum of five directors with a paid up capital of 500,000 can incorporate a producer company under the companies Act, 2013.
9. Sec 8 company / Not for profit company:
A non-profit organization formed with the objective of promotion of art, education, commerce, social welfare, or charity. All the income is used for promotion of its objectives no dividend is ever paid to the members. First, the company has to register as a private limited with at least two directors, obtain DSC and DIN for directors. Next is the name approval as per MCA guidelines followed by drafting and filing of MOA and AOA documents to ROC. It has to apply for license approval from the central government.
10. Trust Firm:
Trusts are formed for regional sentiments, public benefit, preservation of a property, or claiming exemption from income tax. To register a trust under the Indian Trusts Act, 1882 the process starts with deciding a name, address, and objects of the trust. A minimum of one settler and two trustees are a must. A trust deed is prepared on stamp paper documents included are passport size photograph and identity proof of the settler, two trustees, and two witnesses. The trust deed is submitted to the local registrar.
11. Society Firm:
Society income is exempted from income tax and a minimum of seven members which act as President, Vice-president, treasurer, etc are required to form a society, these members from the governing body. To form a society a name, registered office, objectives, and details of members of the governing body are required under the Societies Registration Act, 1860.
To setup an MLM company, the first step is to register a Private or Public Limited company and applying for membership of IDSA (Indian Direct Selling Association). For incorporation of a public or private limited company, Indian companies Act 1956 is applicable under which an application is filed with the Registrar of Companies(ROC). It is a private body governing direct selling companies to stop MLM scams and unethical business practices. For company registration, consultancy services provide support for obtaining DSC(Digital Signature Certificate), DIN(Director Identification Number), PAN, and TAN documents. These services are also available for the drafting of MOA, AOA, and name approval of the company. The complete process takes 10-20 days after providing all information and documents.
Note: For MLM company registration, we recommend the services of CCV India, a leading Corporate restructuring and Secretarial services consultancy in Delhi.