Private Limited Company Registration

/ Companies Act 2013 / By

For starting a business in India Private Limited Company is the most popular and an effective medium for higher growth aspirants. It is incorporated under Companies Act, 2013 and has various benefits as it ensures limited liability and separate legal entity which means safeguarding of the personal property. This type of entity is mainly preferred by the start ups and the growing entities.
So, if you are willing to start a Company your first priority is to get it registered  Once the same is registered it increases its authenticity as well as offers various benefits which can be offering liability protection to protect the Company’s assets, attraction of more and more funds etc.Setting up a business in India often involves choosing a private limited company as a preferred option. This structure offers shareholders limited liability protection while placing specific ownership constraints. In contrast, in the case of an LLP, partners oversee the management. Private limited company registration allows for a clear distinction between directors and shareholders.

private limited company registration

What is a private limited company?

In India, a private limited company is a privately held entity with limited liability, and it ranks among the nation’s most favored business structures. This popularity is primarily attributed to its numerous advantages, including limited liability protection, ease of formation and maintenance, and its status as a distinct legal entity. A private limited company enjoys legal separation from its owners and necessitates a minimum of two members and two directors for its operation. Here are the key characteristics of a private limited company in India:

  • Limited Liability Protection: Shareholders of a private limited company are liable only to the extent of their shareholding. Their assets remain safeguarded, even in cases of financial setbacks incurred by the company.
  • Separate Legal Entity: A private company possesses its own distinct legal identity. It can own property, engage in contracts, and initiate or defend legal actions under its unique name.
  • Minimum Number of Shareholders: A private company must have a minimum of two shareholders and cannot exceed 200 shareholders.
  • Minimum Number of Directors: A private limited company necessitates a minimum of two directors. At least one of these directors must be an Indian citizen.
  • Minimum Share Capital: The company must maintain a minimum paid-up capital of Rs. 1 lakh or a higher amount as specified.
  • Name of the Firm: The private limited company’s name must conclude with the words “Private Limited.”
  • Restrictions on Share Transfer: The right to transfer shares within a private limited company is restricted. Shares can only be transferred with the approval of the Board of Directors or following the company’s Articles of Association.
  • Prohibition on Public Invitation: Private limited companies are prohibited from inviting the public to subscribe to their shares or debentures.
  • Compliance Requirements: Private limited companies are obligated to adhere to various legal and regulatory obligations, including maintaining proper financial records, conducting annual general meetings, and filing annual returns with the ROC.

Types of Private Limited Companies:

  • Company Limited by Shares: Shareholders’ liability is limited to the nominal share amount mentioned in the Memorandum of Association.
  • Company Limited by Guarantee: Member liability is limited to the amount of guarantee specified in the Memorandum of Association. This guarantee is invoked only during winding up.
  • Unlimited Companies: Members of unlimited companies have unlimited personal liability for the company’s debts and liabilities. However, they are still considered a separate legal entity, and individual members cannot be sued.

Advantages of a Private Limited Company

  • Limited Liability: Shareholders’ responsibility is restricted to the extent of their capital contribution, safeguarding personal assets from the company’s financial obligations and liabilities.
  • Distinct Legal Identity: A Private Limited Company possesses an independent legal identity distinct from its proprietors. It has the capacity to own assets, engage in contractual agreements, and initiate or defend legal actions under its own name.
  • Continuous Existence: The company’s existence persists irrespective of shifts in shareholders or directors. Its existence is not contingent upon the lifespan of its associates.
  • Ease of Funding: Raising capital by issuing shares to investors, venture capitalists, or angel investors is easier. This structure attracts external investment.
  • Tax Benefits: Private Limited Companies may qualify for various tax benefits and exemptions, making them tax-efficient entities.
  • Credibility and Trust: Having “Pvt. Ltd.” in your company name often instills more confidence and trust in customers, suppliers, and partners.

Disadvantages of a Private Limited Company

  • Compliance Burden: Face regulatory demands, including financial reporting, filings, and audits.
  • Complex Setup: Process and cost for managing are higher than more superficial structures.
  • Share Limits: Restricted share transfers; max 200 shareholders in India.
  • Public Disclosure: Financial info is publicly viewable, impacting privacy.
  • Exit Complexity: Selling or leaving is more complicated than with other structures.
  • Slower Decisions: The involvement of shareholders and directors may slow choices.

Requirements for Registering a Company in India:

Directors and Members:-A minimum of two directors and 200 members are required for Private Limited Company Registration in India, as per the Companies Act of 2013.Directors must have a Director Identification Number (DIN) issued by the Ministry of Corporate Affairs (MCA).

At least one director must be an Indian resident, having spent 182 days in India in the previous calendar year.

Company Name:- When selecting a name for a private limited company, two factors must be considered:The name should reflect the principal activity of the business.

Address of the Registered Office:- After the company registration process, the company must provide the permanent address of its registered office to the company registrar. Business operations occur in this office, and all relevant company documentation is maintained.

Documents Required for Incorporation

  • PAN Card of the Member and Directors of the proposed Company
    Passport in case of Foreign Nationals
  • Latest passport size photograph of Member and Directors
  • Identity Proof of the Member and Directors of the proposed Company;
    (Aadhar /Voter ID/Driving License/Passport)
  • Address Proof of the Members and Directors (Utility Bill/Telephone Bill/Mobile Bill/Bank Statement not older than two months)
  • Business Address Proof
    Rented/leased:     Rent Agreement, NOC from the Owner, Latest Govt. Electricity Bill or Water Bill)
  • Business Address Proof
    Owned Property     : (Copy of Registry and Latest Govt. Electricity Bill or Water Bill)

Company Registration Process

Step 1: Acquire a Digital Signature Certificate (DSC)

Every director and shareholder must secure a Digital Signature Certificate (DSC) issued by the Controller of Certification Agencies (CCA). This involves providing essential details such as passport-sized photos, PAN, Aadhaar Card, phone number, and email address. Foreign nationals should also furnish notarized and apostilled documents if applicable.

Step 2: Director Identification Number (DIN)

Obtain a Director Identification Number (DIN) if you intend to be a director in the company. DIN is essential for directors and needs to be provided in the registration form.

Step 3: Name Reservation for the Company (SPICe+ Part A)

Begin by completing the SPICe+ Part A form to secure a unique company name. This entails selecting the company type, class, category, and sub-category, specifying the primary division of industrial activity and offering a comprehensive business description. You’ll need to propose two names for approval.

Step 4: Submission of Company Details (SPICe+ Part B)

Provide comprehensive information concerning capital, registered office address, subscriber and directors’ details, stamp duty, PAN and TAN application, and necessary attachments. Ensure compliance with the Companies Act 2013 and obtain digital signatures from assisting professionals.

Step 5: Preparation and Submission of Incorporation Forms (SPICe+ MOA and AOA)

Draft the Memorandum of Association (MOA) and Articles of Association (AOA) containing crucial company details. Obtain digital signatures from subscribers and professionals before submitting these documents to the MCA for approval.

Additionally, file the AGILE-PRO-S form to register for GST, EPFO, ESIC, a bank account, and a shop and establishment license (which may be state-dependent).

Certificate of Incorporation- Upon successful document verification, the MCA will issue the Certificate of Incorporation (COI) with the Company Identification Number (CIN), PAN, and TAN.

FAQs

What is a Private Limited Company?

A Private Limited Company is a type of business structure where the liability of the shareholders is limited to the amount they have invested in the company. It is a separate legal entity from its owners.

How Many Members are Required to Start a Private Limited Company?

A minimum of two members is required to start a private limited company, and the maximum number of members can go up to 200.

What Documents are Required for Private Limited Company Registration?

Commonly required documents include identity and address proofs of directors, Memorandum of Association (MOA), Articles of Association (AOA), and proof of registered office address.

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