Private Limited Company Registration Online
What is a Private limited company?
A Private Limited Company is a business entity held by a small group of people. It is registered for pre-defined objects and owned by a group of members called shareholders. Startups and businesses with higher growth aspirations popularly choose Private companies as suitable business structures.
The business entity gets recognized as a Company through its registration under the Companies Act of 2013 in India. The governing body is the Ministry of Corporate Affairs, widely known as MCA. The definition of a Private Company under the Act is provided here to understand its basics. Section 2 (68) of the Act defines a Private Company as under:
However, there’s one limitation during a Private Limited company, shareholders cannot trade share capital publicly.
Why Private Limited Company is preferred by startups?
Private Limited Company is preferred structure by startups because of stability and growth opportunities offered by this structure. Further, it assures separate legal existence from its members. So, it can involve contracts and legal proceedings in its own name. Moreover, a company’s status is unaffected by any change in members and management.
A separate managerial board i.e. Board of Directors is beneficial for members interested in investment purposes. Where Board works on remuneration, the members receive profit-sharing in form of Dividends.
It also offers various funding options in form of private equity, ESOP, and more. This makes it more suitable for external funding options. And thus, it is more preferred by VCs, Angel Investors, and other outside funding agencies compared to any other business structure. It also is rather preferred by banks and lending agencies because of the credibility that it holds as a corporate structure.
A private company is eligible to take benefit of registration under the Startup India Scheme of the Government of India. This scheme avails multiple benefits including tax exemptions for the recognized startups.
Because of these reasons, it is the priority for both family-based businesses and start-ups. Where service-based businesses tend to choose LLP, Pvt Ltd is suitable for product-based and growth-oriented businesses.
Types of Private Limited Company
There are various types of Private companies, classified based on liability and capital. Here, we are discussing such in brief.
Based on Capital: A Private Company can be registered with or without share capital. The type of company based on capital is provided in the capital clause of the MoA of the company.
Based on Liability: The members’ liability can be limited or unlimited. Usually, companies are registered with Limited Liability Partnership Companies in India. In the case of Public companies with shareholding, members’ liability is limited to unpaid capital on subscribed shares. In the case of companies without shareholding, the agreed amount of liability in form of capital is provided in the MoA of the company.
One Person Company: One Person Company, popularly known as OPC is a type of Private Limited Company. It is a company registered with only one shareholder. This structure benefits such promoter, who does not want to share the ownership rights.
Private Limited Company Registration Requirements
- A minimum of two adult persons are required to act as Directors of the company
- Minimum of 2 Directors and can have a maximum of 15 directors.
- One of the directors of a private limited company has to be an Indian Citizen and Indian Resident.
- The other director(s) can be a Foreign National.
- Two persons are required to act as a shareholder of a company.
Documents Required For Private Limited Company Registration
1. Documents from Directors and Shareholders (File form)
- Identity Proof
1) Permanent Account Number (PAN) Card
2) Aadhaar Card / Passport / Driving License / Voter Identity Card
- Address Proof
1) Telephone Bill / Mobile Bill
2) Electricity Bill / Water Bill
3) Bank Statement /Bank Passbook with the latest transaction (Any one of the Documents not older than 2 months)
- Passport size Photographs – 3 each
All the Copies of documents must be Self Attested by the applicant.
Telephone Bill, Mobile Bill, Electricity Bill, Bank Account Statement must be in the name of the applicant and should not be older than 2 months.
If the documents are not in English, they should be translated into English.
2. Documents to be Signed by DIRECTORS
1) Consent to Act as Director: Form DIR-2
2) Details for DIN
3) Declaration of DIN (If DIN is allotted already)
3. Documents to be Signed by SHAREHOLDERS
1) Application for Digital Signature Certificate (DSC)
2) Declaration by Subscribers & Director: INC-9
4. Documents from Company / LLP / Trademark Owner, if any
1) Board Resolution / Formal authority for use of Name / Trademark
2) authority for execution of Documents from Company / LLP
Note:- These shall be signed by the concerned on their Letterhead
5. Registered Office – Address
1) No-Objection letter from the Owner of Address to use the address of the registered office of the Company.
2) Address Proof – In the name of the Owner
Electricity Bill, Telephone Bill, Gas Bill, or Water Bill
Income Tax Paid Receipt, corporate tax, or Copy of Registered Sale Deed- To be signed by the Shared Office Service provider.
Private Limited Company Registration Process
1: Apply for DSC (Digital Signature Certificate)
2: Apply for the DIN (Director Identification Number)
3: Apply for the name availability
4: File the EMoa and EAOA to register the private limited company
5: Apply for the PAN and TAN of the company
6: Certificate of incorporation will be issued by RoC with PAN and TAN
7: Open a current bank account on the company name
With this, you will be all set to start your own private limited company. It is advised to consult with the right people with scanned copies and make the best choice for smooth growth.
Advantages Of A Private Limited Company
No Minimum Capital
No minimum capital is required to form a Private Limited Company. A Private Limited Company can be registered with a mere sum of Rs. 10,000 as total Authorized Share capital.
Separate Legal Entity
A private limited company is considered to be a separate legal entity. It has its own identity and is very much recognized as a separate company under the law. Also, the company can own property due to this feature under its name. The company can sue and also it can be sued under its own name due to this very same feature.
Private Limited Company has this feature of limited financial liability of all the shareholders. The liabilities are limited to their shares only. This feature protects the personal assets and income of shareholders at times of any financial crisis faced by the company. Also, it gives the company more liberty of taking risks.
Shareholders are allowed up to two hundred, the reputation of a private limited company making it easier to raise capital funds than other types of companies. Hence, we can say that when a Private Limited Company is incorporated the scope for expansion is high. It is also quite easy to take loans from banks and other financial undertakings.
Free & Easy transfer of shares
Shares of a company limited by shares are transferable by a shareholder to any other person. The transfer is easy as compared to the transfer of an interest in a business run as an estate concern or a partnership. Filing and signing a share transfer form and handing over the buyer of the shares along with a share certificate can easily transfer shares.
In a Private Limited Company, 100% FDI is allowed which means any foreign entity or foreign person can directly invest in a Private Limited Company.
The particulars of the company are available on a public database. This improves the credibility of the company as it makes it easy to authenticate the details
Disadvantages of a Private Limited Company
One of the main disadvantages of a Private Company is that it restricts the transferability of shares by its articles.
In a Private Limited Company the number of shareholders, in any case, cannot exceed 50.
Another disadvantage of a Private Limited Company is that it cannot issue prospectus to the public.
In the stock exchange shares cannot be quoted.