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Private Limited Company Registration in India: A Detailed Guide - Overview
Most entrepreneurs prefer establishing their start-up as a private limited company, as the term refers to a company held by a select few people. It is governed by the Companies Act, 2013 and the Companies Incorporation Rules, 2014. The liability of the members of a Private Limited Company (PLC) is limited to the number of shares held by them. Going by the statistics, the Ministry of Corporate Affairs, the apex regulatory body for companies, stated that a total of 13,44,857 private limited companies were registered and active as of 31st March 2022.
Management of the process requires in-depth knowledge of legal requirements and not to mention, practical experience of the same. We take care of all legal formalities and fulfill the compliances, as defined by the Ministry of Corporate Affairs. Post-approval of the company registration process, you receive a Certificate of Incorporation (CoI), along with PAN and TAN. Now, you can open a current bank account and begin your business operations.
- As per Section 2(68) of the Companies Act, 2013, a private company means a company having a minimum paid-up share capital as may be prescribed, and which by its articles, --
- Restricts the right to transfer its shares:
- Except in case of One Person Company, limits the number of its members to two hundred:
- Provided that where two or more persons hold one or more shares in a company jointly, they shall, for this clause, be treated as a single member:
Benefits to register Private Limited Company
The most vital reason for registering as Private Limited Company is the limited liability. The members of the firm are only liable for a small amount of debt incurred by it. This is entirely different from proprietorship and partnership where the personal assets of directors and partners are not protected if the business becomes bankrupt.
Separate Legal Identity: Private Limited Company is an entirely separate legal entity. It has its own independent legal existence separate from its directors and shareholders.
Limited Liability: A private limited company has limited liability. It means the owner's liability is limited to the amount that they have invested in the company. This protects the shareholders' assets from the liabilities of the company.
Power to sue and be sued: The company, because of its separate legal existence, has the power to sue and be sued in its own name by any person.
Transferability of shares: he shares in a private limited company can be transferred easily by the shareholders.
Tax benefit: Private limited companies have a lower tax rate as compared to the other forms of businesses like a partnership or Limited Liability Partnerships.
Facilitates funding: Company is the most preferred structure for fundraising from prospective investors and financial institutions.
Checklist for Registering a Company in India
Eligibility
A minimum of two members who are aged 18 or more.
One of the Directors must be Indian Resident
A minimum share capital of Rs 100,000.
Documents Required
- PAN (mandatory) for Indian Nationals.
- Voter ID/Aadhar Card/Passport/Driving Licence
- Latest Bank Statement/Telephone or Mobile Bill
- Passport size Photograph of Directors and Shareholders
- Copy of the rental agreement or sale deed.
| Form of Business | PRIVATE LIMITED COMPANY | ONE PERSON COMPANY | LLP | PARTNERSHIP FIRM | PROPRIETORSHIP FIRM |
|---|---|---|---|---|---|
| Recommended For | Startups & Growing Companies | Sole Promoters | Professional Services Companies | Small Businesses Firms | Small Traders, Agents & Manufactures |
| Prevailing laws | Companies Act | Companies Act | LLP Act | Partnership Act | NA |
| Charter Documents | MOA & AOA | MOA & AOA | LLP Agreement | Partnership Deed | NA |
| Limit of Members | 2-200 | 1 | 2-Unlimited | 2-20 | NA |
| Separate legal identity | Yes | Yes | Yes | NO | NO |
| Limited Liability | Yes | Yes | Yes | NO | NO |
| Tax Advantage | High | High | Low | Low | Low |
| Annual Statutory Compliances | High | High | Low | Low | Low |
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FAQs
Simplified Performa for Incorporating Company Electronically, also known as SPICe, was introduced in the year 2016 for the purpose of incorporation of the companies. Under the Ease of Doing Business (EODB) initiative, the MCA released the new form SPICe+ to further ease the company incorporation process. The new SPICe+ form encompasses more features than the earlier SPICe form. Name approval is integrated as part of the SPICe+ form. The AGILE form has been converted to AGILE Pro to provide GSTIN / ESIC / EPFO / Bank account as well along with company incorporation. Apart from that, even after affixing DSC in the form, information can be modified in the SPICe+ form.
After the introduction of the SPICe+ form, the name approval has been integrated with SPICe+. Part-A of SPICe+ is for name approval. Therefore, from 15th February 2020, the RUN form can only be used for a change of name.
Company Limited by Shares: The liability of the shareholders is limited only to the amount that is unpaid on the shares held by them. Company Limited by Guarantee: A company having no share capital where the liability of the shareholders is limited up to the amount undertaken to be contributed by them in the event of liquidation of the company.
Yes. private limited companies are eligible for attracting foreign direct investments in compliance with the relevant laws and regulations.
DIN, also known as Director Identification Number, is an identification number of a person intending or has become a director in a company. DPIN, also known as Designated Partner Identification Number, is an identification number for a designated partner in LLP. It is similar to DIN in the case of companies. DIN and DPIN are issued by the Ministry of Corporate Affairs.
Yes. Even a foreign national can become a director in a private limited company.
As per the Companies Act, 2013, only an individual natural person can become a director in a company. Therefore, neither a company, firm, or association can become a director in any company. This is to ensure the fixation of duties and responsibilities that would be difficult in the case of companies and firms becoming directors.
The private limited company registration cost depends upon various factors like authorized capital, number of directors, etc. Initiate your Pvt. Ltd. Company Registration with eAuditor Office as your partner in corporate compliance! Reach out to us for any professional assistance.