Private Limited Company Registration

What is a Private Limited Company

Registering a private limited company is highly regarded among new business owners and innovators for its array of benefits. The process is straightforward, typically completed within 7 to 14 days, and comes at a modest cost. Small businesses in India find the regulatory demands quite manageable. To establish a private limited company in India, at least two shareholders and two directors are needed, with the possibility of them being the same people.

The company can have up to 15 directors and 200 shareholders. Shareholders’ liability is confined to their share of investment, safeguarding personal assets during financial troubles. These companies, recognizable by ‘Pvt Ltd’ or ‘Limited’ in their titles, possess an independent legal status, enabling them to acquire assets, forge agreements, and pursue legal action.

The blend of shareholder security and restricted public trading of shares renders it ideal for small to mid-sized enterprises, offering a balance between capital input and management authority. Corporate Raasta Consulting provides a comprehensive package for private company incorporation and new company formations in India.

Corporate Raasta Consulting provides a comprehensive package for private company incorporation and new company formations in India.

What are the Characteristics of a Private Limited Company?

The characteristics of a Private Limited Company include:

1. Separate Legal Entity

A Private Limited Company registration ensures that the company has its own legal identity. It can own property, enter into contracts and agreements, and file or defend legal cases independently.

2. Limited Liability Protection

Shareholders have limited liability, meaning they are only responsible for company debts up to the extent of their shareholding. Beyond this, liabilities are managed by the company as a legal entity.

3. Number of Shareholders

A Private Limited Company’s shareholders range from 2 to 200. This number must always remain within this range.

4. Number of Directors

A Private Limited Company must have at least two directors, with at least one director being an Indian resident.

5. Company Name

The name of the Private Limited Company must end with the term ‘Private Limited’.

6. Share Capital Requirements

 The share capital of the Private Limited Company must be at least Rs 1 Lakh.

7. Transfer of Shares Restrictions

Transferring shares within a Private Limited Company is restricted. Shares can only be transferred according to the company’s Articles of Association or with board approval.

8. Compliance

Registration as a Private Limited Company requires adherence to various regulatory and legal compliances, such as maintaining accurate financial records, filing annual returns with the registrar of companies, and conducting annual general meetings.

9. Public Share Listing

Private Limited Companies are prohibited from listing their shares, securities, or debentures for public issuance. Only Public Limited Companies can do so.

10. Perpetual Succession

A Private Limited Company enjoys perpetual succession, meaning it continues to exist despite the death of members or financial difficulties like bankruptcy. It remains a lawful entity.

Types of Private Limited Companies in India

There are three types of Private Limited Companies in India:

1. Company Limited by Shares

A Memorandum of Association is created, and the liability of shareholders is limited to their shareholding in the company. Shareholders are liable for company losses or gains only up to their shareholding.

2. Company Limited by Guarantee

Liability is limited to the amount guaranteed by members as stated in the company’s Memorandum of Association. This guarantee is invoked only if the company is winding up.

3. Unlimited Liability Companies

In these companies, shareholders have unlimited liability for debts and obligations. However, shareholders cannot be sued based on their liabilities since the company itself, as a separate legal entity, must be sued in case of default.

Important Papers Required for Private Limited Company Registration

An Indian Private Limited Company is a business structure designed for private ownership with limited liability. This arrangement shields the personal assets of the company’s proprietors from its debts and responsibilities. Ownership is usually divided among a select group of shareholders, and the company’s shares are not listed for public trading. Such companies are favoured by small to medium enterprises for their ability to limit liability while offering enhanced management and confidentiality.

Private limited companies must submit yearly financial reports and adhere to other regulatory filings, ensuring transparency and responsibility to their stakeholders. For entrepreneurs and small business proprietors seeking to safeguard personal assets while retaining business control, a private limited company is often the go-to option.

Procedure for Private Limited Company Registration Online in India

Online registration of a private limited company in India is a process that establishes a business with limited shareholder liability and non-transferable shares. It operates as a separate legal entity, capable of engaging in contracts, owning property, and incurring debt independently. A distinctive feature of a private limited company is the private nature of its share transactions, which are not open to the public, offering privacy and discretion to its proprietors. They can selectively admit new shareholders into the business. Small and medium-sized enterprises often prefer this setup for the legal protection it affords its owners, along with possible tax advantages and operational flexibility. Typically, such companies must include ‘Ltd.’ or ‘Pvt Ltd.’ in their names to denote their status. The incorporation process involves several steps:

Step 1: Obtain a Digital Signature Certificate (DSC)

Each director and shareholder must obtain a Digital Signature Certificate (DSC) from the Controller of Certification Agencies (CCA). Directors need to provide essential details like their phone number, email address, PAN card, Aadhaar card, and passport photos. Foreign nationals must present additional official documentation.

Step 2: Acquire a Director Identification Number (DIN)

Directors must obtain a Director Identification Number (DIN), which is required for filling out the registration form for a Private Limited Company.

Step 3: Reserve Company Name (SPICe+ Form Part A)

Applicants must fill out the SPICe+ Form to reserve a unique company name. This involves selecting the type of company, category, sub-category, class, primary industrial activities, and providing a business description. Two names should be proposed for approval.

Step 4: Submit Company Details (SPICe+ Form Part B)

Applicants must provide details such as the registered office address, capital requirements, director details, PAN, TAN, stamp duty, and other necessary documents as per the Companies Act of 2013.

Step 5: Submit AOA and MOA

Draft the Memorandum of Association (MOA) and Articles of Association (AOA) with digital signatures from subscribers and professionals. Submit these documents for approval to the Ministry of Corporate Affairs.

Additionally, applicants must complete the AGILE-PRO-S form for EPFO, ESIC, GST registration, bank account, and a shop and establishment license depending on the state.

(Once the process is completed correctly, the Ministry of Corporate Affairs issues the Incorporation Certificate along with the TAN, PAN, and CIN)

How does Corporate Raasta Consulting Help in Private limited company registration?

CRC’s assistance in registering a private limited company is pivotal. In India, the initial capital needed to register can be as low as Rs. 20, yet it’s common to start with Rs. 1 lakh in both paid-up and authorized share capital. There’s no upper cap on the funds a private limited company can amass, offering the leeway to tailor the capital based on the business’s unique financial targets and operational requisites. Opt for the capital framework that fits your venture’s needs and proceed with assurance. The steps to set up a new company include:

• Selecting a service package
• Uploading required documents to our site or app
• Verification of documents by our experts and signing the necessary forms
• Downloading the Certificate of Incorporation
• Maintaining compliance through an annual package
• Obtaining related business licenses
• Consulting on MCA regulations
• Assistance with opening a bank account
• Establishing a bank account with premier Indian banks for your new business.

Cost involved in Private Limited Company Registration

The expenses for registering a Pvt Ltd Company can fluctuate based on factors like the company’s locale, the registration service’s offerings, and extra-legal or compliance mandates. Generally, the cost spans from several hundred to thousands of dollars, covering the registration process, government fees, and professional charges, along with services like digital signature certification or PAN card procurement. It’s crucial to evaluate various registration services to secure the best deal for your needs. While the initial cost may seem steep, the advantages of Pvt Ltd registration—like liability limitation, funding ease, and enhanced credibility—are significant for your business’s sustained growth.

Benefits of Company Registration in India

• Legal Entity: Registration grants your business its own legal identity, safeguarding the owners’ personal assets from company liabilities.
• Funding Access: Registered entities can readily obtain funds from banks, investors, and financial institutions.
• Brand Recognition: A registered company can establish a distinct brand, attracting customers and fostering trust.
• Limited Liability: Company owners are only liable up to their invested capital.
• Tax Advantages: The Indian government offers tax benefits and incentives to registered companies, reducing operational costs.
• Perpetual Existence: A registered company endures even with changes in ownership or shareholders.
• Business Opportunities: Registration opens doors to contracts, partnerships, and collaborations.
• Credibility and Trust: Registration enhances your business’s credibility and trust among stakeholders.
• Intellectual Property Protection: Safeguard patents, trademarks, and copyrights, securing a market edge.
• Regulatory Compliance: Registered companies must adhere to laws and regulations, ensuring ethical practices and transparency.

GST registration is a straightforward online process, allowing you to file from home with updates provided as needed.

Things to keep in mind while registering a Private Limited Company

When setting up a Private Limited Company, it’s crucial to consider several factors:

• Name Selection: Choose a distinctive name that doesn’t clash with existing entities and follows the registrar’s guidelines.
• Minimum Requirements: You need at least two directors and shareholders, who can be the same individuals.
• Registered Office: The company must have an official address in its country of incorporation.
• Constitutional Documents: Submit the Memorandum and Articles of Association, detailing the company’s purpose and governance.
• Share Capital: Define a minimum authorized share capital and shareholding structure.
• Company Secretary: Appoint a secretary to manage statutory records.
• Compliance: Post-registration, adhere to regulatory requirements, file annual returns, and conduct general meetings.
• Taxes: Be aware of tax obligations and ensure proper tax registration.
• Legal and Regulatory Awareness: Stay informed about industry-specific laws and regulations.
• Professional Advice: Seek expert advice to navigate legal and regulatory processes.

Choosing a business structure while applying for company registration in India

Choosing a business structure in India involves:

• Understanding Business Structures: Familiarize yourself with various forms like Sole Proprietorship, LLP, Partnership, Private Limited, and Public Limited Companies.
• Business Goals and Needs: Reflect on your business’s long-term objectives, desired control level, liability, and the number of stakeholders.
• Professional Consultation: Obtain guidance from legal or financial advisors on implications and compliance for each structure.
• Regulatory Requirements: Investigate the specific registration and compliance needs for each structure.
• Cost and Administration: Consider the financial and administrative demands of maintaining the chosen structure.
• Tax Implications: Evaluate the tax benefits and responsibilities associated with each business framework.

Compliances to be followed by the Pvt. Ltd. Company

For a private limited company, compliance is a multifaceted obligation encompassing various legal and regulatory domains. After careful consideration of these aspects, you’ll be well-equipped to choose the most suitable business structure for your company’s registration in India. Consulting with a company registration service or legal advisor is recommended to fully grasp all legal and regulatory prerequisites before initiating the registration process.

Statutory Compliances

A private limited company in India must fulfill all statutory compliance demands as outlined in the Companies Act, 2013, and adhere to rules set forth by the Ministry of Corporate Affairs (MCA).

Taxation Compliances

The company is obligated to meet all tax-related duties, including the filing of income tax returns, tax payments, and compliance with Goods and Services Tax (GST) regulations.

Annual Compliances

The company is required to hold its Annual General Meeting (AGM), compile and file annual financial statements, and maintain other statutory records as mandated by law.

Regulatory Compliances

The company must comply with guidelines and rules from regulatory bodies such as the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Registrar of Companies (ROC).

Employment and Labour Law Compliances

The company must observe relevant employment and labour laws, which cover areas like minimum wages, provident fund, employee insurance, and other labour welfare provisions.

Intellectual Property Compliances

The company must respect all laws and regulations concerning intellectual property rights, including trademarks, copyrights, and patents.

Environmental and Health Safety Compliances

The company must comply with environmental regulations and maintain a safe and healthy workplace for its employees.

Data Protection and Privacy Compliances

The company must adhere to data protection and privacy laws, safeguarding customer and employee information.

Corporate Governance Compliances

The company must follow good corporate governance principles as per the guidelines from the Securities and Exchange Board of India and other regulatory authorities.

Other Industry-Specific Compliances

The company must also comply with any laws, regulations, and standards that are specific to the industry in which it operates.

Why is it Important to Select the Right Business Structure?

Selecting the right business structure is important because:

– It ensures the company complies with rules, regulations, and laws, protecting it from legal issues like fines, penalties, and even closure.

– Choosing a Limited Liability Partnership or a Private Limited Company protects personal assets from being involved in the company, shielding them from personal liability in the form of debts.

– It helps in reducing the tax liabilities of the company, depending on the nature of the business.

– The right structure is crucial for attracting potential investors from the market.

– It is essential for managing the company’s operations effectively, based on the nature of the business and other factors.

– The chosen business structure should align with both the short-term and long-term goals of the company.

State-wise Report on Company Registrations in India

Why Corporate Raasta Consulting

Corporate Raasta Consulting offers end-to-end solutions for private limited company registration and compliance management. Our team of experts provides timely and efficient services to ensure that your company remains compliant with all legal and regulatory requirements.