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Private Limited Company Registration
Private Limited Company Registration
Private Limited Company Registration in India
- Preferred Business Structure: When starting a business in India, many opt for a private limited company due to its benefits.
- Limited Liability: Shareholders have limited liability protection, shielding their personal assets.
Ownership Restrictions: Private limited companies have certain ownership restrictions. - LLP Management: Limited Liability Partnerships (LLPs) are overseen by partners who actively manage the business.
- Distinction in Private Limited: In private limited companies, there’s a clear distinction between directors and shareholders.
- Filing Champs Service: Filing Champs offers an affordable solution to efficiently register your company in India.
- Legal Compliance: They ensure strict adherence to Ministry of Corporate Affairs (MCA) standards throughout the registration process.
What is a private limited company?
A private limited company in India is a privately owned business with limited liability, making it a highly favored structure among entrepreneurs. Its popularity arises from various advantages such as limited liability protection, easy setup and management, and its status as a distinct legal entity. Separated legally from its owners, a private limited company needs a minimum of two members and two directors to function. Here are the main features of a private limited corporation in India:
- Limited Liability Protection: Shareholders in a private limited company are only responsible for debts or losses up to the amount of their shares. Their personal assets are protected, even if the company faces financial trouble.
- Separate Legal Identity: A private company is recognized as a distinct legal entity. It can own property, make contracts, and take legal actions using its own name.
- Minimum Shareholders: A private company must have at least two shareholders but cannot exceed 200.
- Minimum Directors: A minimum of two directors is required for a private limited company, with at least one being an Indian citizen.
- Minimum Share Capital: The company must have a minimum paid-up capital of Rs. 1 lakh or a higher amount as specified.
- Company Name: The name of a private limited company must end with “Private Limited.”
- Share Transfer Restrictions: Transfer of shares within a private limited company is restricted and requires approval from the Board of Directors or adherence to the company’s Articles of Association.
- Prohibition on Public Offering: Private limited companies cannot publicly invite subscription to their shares or debentures.
- Compliance Obligations: Private limited companies must meet various legal and regulatory requirements, including maintaining accurate financial records, holding annual general meetings, and submitting annual returns to the ROC (Registrar of Companies).
In summary, the attributes of a private limited company in India make it a favored choice among entrepreneurs, owing to its advantageous features and relatively straightforward structure.
Types of Private Limited Companies:
To run a proprietorship in India, you must obtain important licenses and registrations, including:
- Company Limited by Shares: Shareholder liability is limited to the nominal share amount stated in the Memorandum of Association.
- Company Limited by Guarantee: The Memorandum of Association specifies the maximum guarantee amount. This assurance only comes into play during the winding-up process.
- Unlimited Companies: Members of unlimited companies bear unlimited personal liability for the company’s debts and obligations. Despite this, they are recognized as a separate legal entity, and individual members cannot be sued.
Advantages of a Private Limited Company
A Private Limited Company is one of India’s most common company formats. Let us clarify the advantages and disadvantages.
- Limited Liability: Shareholders are only responsible for the capital they invest, shielding their personal assets from the company’s financial obligations.
- Distinct Legal Identity: A Private Limited Company exists as a separate legal entity from its owners, capable of owning assets, entering contracts, and engaging in legal actions under its own name.
- Continuous Existence: The company’s existence is unaffected by changes in shareholders or directors. It remains operational regardless of changes in its membership.
- Ease of Funding: Raising funds through share issuance to investors, venture capitalists, or angel investors is facilitated, promoting external investment.
- Tax Benefits: Private Limited Companies are eligible for various tax incentives and deductions, enhancing their tax efficiency.
Credibility and Trust: Inclusion of “Pvt. Ltd.” in the company name enhances credibility and trust among customers, suppliers, and partners.
Disadvantages of a Private Limited Company
- Compliance Burden: Private limited companies face regulatory requirements such as financial reporting, filings, and audits.
- Complex Setup: The process and costs for managing a private limited company are higher compared to simpler structures.
- Share Limits: Share transfers are restricted, and there is a maximum limit of 200 shareholders in India for private limited companies.
- Public Disclosure: Financial information is publicly accessible, affecting the company’s privacy.
- Exit Complexity: Selling or leaving a private limited company is more complex compared to other business structures.
- Slower Decisions: Involvement of shareholders and directors may lead to slower decision-making processes within private limited companies.
Necessary Steps for Company Registration in India
Directors and Members:
- Private Limited Company registration in India requires a minimum of two directors and can have up to 200 members.
- Directors need to obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs.
- At least one director must be an Indian resident, having spent 182 days in India within the preceding calendar year.
Company Name:
- When selecting a name for a private limited company, it should indicate the main activity of the business.
Address of the Registered Office:
- After the company registration process, the registered office address must be provided to the registrar.
- This office is where business operations occur, and all essential company documents are maintained.
Procedure for Registering a Company
Registering a company in India is a simple, four-step process:
Step 1: Obtain Digital Signature Certificate (DSC)
- Every director and shareholder must obtain a Digital Signature Certificate (DSC) from the Controller of Certification Agencies.
- Required information includes photos, PAN, Aadhaar card, phone number, and email address.
- Foreign nationals may need notarized and apostilled documents.
Step 2: Get Director Identification Number (DIN)
- Directors need to acquire a Director Identification Number (DIN) before proceeding with company registration.
Step 3: Reserve Company Name (SPICe+ Part A)
- Fill out the SPICe+ Part A form to reserve a unique company name, providing details such as company type, category, and business description.
- Submit two name choices for approval.
Step 4: Provide Company Details (SPICe+ Part B)
- Submit comprehensive information on capital, registered office address, director details, and PAN/TAN applications.
- Ensure compliance with the Companies Act of 2013 by obtaining digital signatures from professionals.
Step 5: Prepare and Submit Incorporation Forms (SPICe+ MOA and AOA)
- Draft the Memorandum of Association (MOA) and Articles of Association (AOA) containing vital corporate details.
- Obtain digital signatures before submitting these documents to the MCA for approval.
- Complete the AGILE-PRO-S form to register for GST, EPFO, ESIC, a bank account, and a store and establishment licence, as per state requirements.
Certificate of Incorporation
- After verifying the documents, the Ministry of Corporate Affairs (MCA) will issue the Certificate of Incorporation.
- This document contains the Company Identification Number (CIN), PAN, and TAN.
Document Checklist
- Requirements for Indian Nationals:
- Self-attested copy of PAN card
- Passport-sized photo
- Aadhaar card
- Proof of identity
- Proof of address
- Requirements for Foreign Nationals:
- Notarized documentation
- Passport-sized photo
- Passport
- Proof of address
- Registered Office Documents:
- Proof of business address
- Copy of the rent agreement (if applicable)
- Owner’s no objection certificate
Importance of Post-Registration Compliance
- After incorporation, it’s crucial to comply with post-registration business obligations to ensure smooth company operations.
- These compliances help define the responsibilities and duties of directors and shareholders.
Register Your Company with Filing Champs
- Expert Company Registration Services:
- Filing Champs specializes in company registration in India, offering comprehensive assistance throughout the registration process.
- Skilled staff provide tailored guidance based on your specific needs and company objectives.
- Name Selection Assistance:
- Filing Champs specialists help you choose a unique and suitable name that complies with ROC rules.
- They check for name availability and assist in reserving the best name for your company.
- Documentation Handling:
- Professionals at Filing Champs handle the compilation of necessary documents for company registration efficiently.
- They ensure the accuracy and compliance of all paperwork.
- Guidance on Credentials Acquisition:
- For establishing a private limited company, directors need to acquire a digital signature certificate and director identification number (DIN).
- Filing Champs guides you through this process to ensure you have the required credentials for smooth registration.
- Professional and Efficient Service:
- Choosing Filing Champs for your company registration ensures a professional and effective handling of the process.
- They aim to simplify procedures, allowing you to focus on business goals while fulfilling legal obligations.
Proprietorship vs Partnership vs Limited Liability Partnership (LLP) vs Company
| Features | Proprietorship | Partnership | LLP | Company |
|---|---|---|---|---|
| Definition | Business managed by one person | Agreement between multiple parties | Combination of partnership and company | Registered entity with limited liability |
| Ownership | Sole Ownership | Min 2 Partners, Max 50 Partners | Designated Partners | Min 2 Directors, Min 2 Shareholders, Max 15 Directors, Max 200 Shareholders. For One Person Company: 1 Director, 1 Nominee Director |
| Registration Time | 7-9 working days | – | – | – |
| Promoter Liability | Unlimited Liability | Limited Liability | Limited Liability | Limited Liability |
| Documentation | MSME, GST Registration | Partnership Deed | LLP Deed, Incorporation Certificate | MOA, AOA, Incorporation Certificate |
| Governance | – | Under Partnership Act | Under LLP Act, 2008 | Under Companies Act, 2013 |
| Transferability | Non Transferable | Transferable if registered under ROF | Transferable | Transferable |
| Compliance Requirements | Income tax filing if turnover is more than Rs.2.5 lakhs, ITR 5, Form 11, Form 8 | ITR 5 | ITR 5, ITR 6, MCA filing, Auditor’s appointment | ITR 6, MCA filing, Auditor’s appointment |
Private Limited Company Registration FAQ's
Register with the Ministry of Corporate Affairs (MCA) under the Companies Act 2013. Steps include obtaining Director Identification Number (DIN), Digital Signature Certificate (DSC), name approval, incorporation application, and receiving a Certificate of Incorporation.
Cost varies based on factors like number of directors, members, authorized share capital, and professional fees, ranging from Rs. 6,000 to Rs. 30,000.
Options include Sole Proprietorship, One-person Company, Partnerships Firm, Limited Liability Partnership (LLP), Private Limited Company, Public Limited Company, and Section 8 Company.
Yes, subject to RBI's Foreign Direct Investment norms, with at least one Indian national required on the Board of Directors.
Use Filing Champs company name availability search tool, noting it provides choices based on existing registrations.
Required for certain businesses, especially those with e-commerce or interstate activities, or exceeding Rs. 40 lakhs turnover.
Includes appointing an auditor within 30 days, filing income tax and annual returns, and completing 'Commencement of Business' forms and DIN eKYC.
Within 30 days of incorporating a Private Limited Company, the Board of Directors appoints a practicing Chartered Accountant.
ITR filing uses Form ITR 6, while annual returns are filed in Form AOC 4 and MGT 7.
Minimum 2 members, extendable to 200.
Ownership transfer occurs through share transfers.
Taxed at 30% plus applicable surcharge and cess.
The MCA and Companies Act, 2013 regulate their functioning.
Includes limited liability, access to funding, borrowing capacity, scalability, ease of exit, and diverse opportunities.
Authorized capital is the maximum value of equity shares a company can issue, while paid-up capital is the actual amount issued to shareholders.
Shareholders are only liable for the company's debts to a limited extent, unlike in proprietorships or partnerships.
Once incorporated, open a current account in the company's name with required documents like certificate of incorporation, Memorandum and Articles of Association, board resolution, PAN allotment letter, and utility bill.
