A Private Limited Company is a popular business structure in India, offering a blend of limited liability, separate legal entity status, and perpetual succession. This guide provides a detailed overview of private limited company registration, covering prerequisites, the registration process, compliance requirements, advantages, disadvantages, and frequently asked questions.
A Private Limited Company is a privately held corporate entity with limited liability. It is one of the most favoured business structures in India due to its numerous advantages, including limited liability protection for shareholders, ease of formation and maintenance, and its status as a distinct legal entity. It requires a minimum of two members and two directors.
• Limited Liability Protection: Shareholders are liable only up to the amount they have invested in the company’s shares. Their personal assets are protected from business debts.
• Separate Legal Entity: The company is a separate legal person, distinct from its shareholders and directors. It can own property, enter into contracts, sue or be sued in its own name.
• Minimum Number of Shareholders: A private company must have at least two and can have a maximum of 200 shareholders.
• Minimum Number of Directors: A private limited company requires a minimum of two directors. At least one of these directors must be an Indian citizen and resident.
• Minimum Share Capital: While the Companies Act, 2013, removed the minimum paid-up capital requirement, it is common practice to have at least Rs. 1 lakh as authorized capital.
• Name of the Firm: The company’s name must end with “Private Limited.”
• Restrictions on Share Transfer: The right to transfer shares is restricted. Transfers usually require approval from the Board of Directors or adherence to the company’s Articles of Association.
• Prohibition on Public Invitation: Private limited companies cannot invite the public to subscribe to their shares or debentures.
• Company Limited by Shares: Shareholders’ liability is limited to the nominal value of the shares they hold.
• Company Limited by Guarantee: Members’ liability is limited to the amount they guarantee to contribute in the event of the company’s winding up.
• Unlimited Companies: Members have unlimited personal liability for the company’s debts. This type is rare in India.
• Limited Liability: Protects shareholders’ personal assets.
• Distinct Legal Identity: Enhances credibility and allows the company to own property and enter contracts in its own name.
• Continuous Existence (Perpetual Succession): The company continues to exist even if shareholders or directors change.
• Ease of Funding: Easier to raise capital from investors.
• Tax Benefits: May be eligible for certain tax benefits and exemptions.
• Credibility and Trust: The “Pvt. Ltd.” designation often increases trust with customers and suppliers.
• Compliance Burden: More regulatory compliance requirements compared to simpler structures.
• Complex Setup: The registration process can be more complex.
• Share Limits: Restrictions on share transfers and a maximum number of shareholders.
• Public Disclosure: Financial information is publicly accessible.
• Exit Complexity: Exiting the company can be more complex than other structures.
• Slower Decisions: Decision-making may involve more stakeholders and can be slower.
• Directors and Members: Minimum two directors and two members (can be the same individuals). Directors need a Director Identification Number (DIN). At least one director must be an Indian resident.
• Company Name: The name should be unique and reflect the business activity.
• Registered Office Address: A permanent address for the company’s registered office in India.
• Step 1: Acquire a Digital Signature Certificate (DSC): All directors and shareholders need a DSC.
• Step 2: Obtain Director Identification Number (DIN): Apply for DIN for all proposed directors.
• Step 3: Name Reservation (SPICe+ Part A): Reserve a company name through the MCA portal.
• Step 4: Submission of Company Details (SPICe+ Part B): Provide details about capital, registered office, directors, subscribers, etc.
• Step 5: Preparation and Submission of Incorporation Forms (SPICe+ MOA and AOA): Draft the Memorandum of Association (MoA) and Articles of Association (AoA) and submit them along with SPICe+ Part B.
• Step 6: AGILE-PRO-S Form: File this form for GST, EPFO, ESIC, bank account, and shop and establishment license registration.
• Step 7: Certificate of Incorporation: The MCA issues the Certificate of Incorporation with the CIN, PAN, and TAN.
• Indian Nationals: PAN card copy, passport-sized photo, Aadhaar card, identity proof, address proof.
• Foreign Nationals: Notarized and apostilled documents, passport-sized photo, passport, address proof.
• Registered Office Documents: Proof of address, rent agreement (if applicable), NOC from landlord.
Adhering to post-registration compliances is crucial. This includes filing annual returns, conducting board meetings, maintaining financial records, and complying with tax regulations.
Return Filings offers comprehensive private limited company registration services. They assist with name selection, document preparation, DSC and DIN acquisition, and ensure compliance with MCA regulations. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.
• PAN Card: Mandatory for Indian directors and shareholders.
• Passport (Foreign Nationals Only): Mandatory for foreign directors and shareholders.
• Aadhaar Card: Mandatory for Indian directors.
• Passport Size Photo: Of directors and individual shareholders.
• Identity Proof: PAN card for Indian nationals, passport for foreign nationals.
• Address Proof: Aadhaar card, voter ID, passport, driving license.
• Residential Proof: Recent utility bills or bank statements.
• Registered Office Proof: Rent agreement and NOC from the landlord (if rented), or ownership documents.
• Recent Utility Bill (Business Place): Utility bill for the registered office address.
• Name Significance Letter: Explanation of the chosen company name.
