Setting up the business should commence with the business owner taking the first step, which is the incorporation of a private limited company. A private limited company provides numerous benefits compared to other corporate entities. It not only offers great visibility to a business but also provides limited liability to its members.
Overview of Private Limited Company
A group of people, referred to as shareholders, operates a business through the corporate entity of a private limited company (Pvt Ltd). Despite the availability of various corporate entities for business incorporation, many startups opt for a Pvt Ltd due to its potential for higher visibility and popularity among potential clients.
Furthermore, Pvt Ltd is distinct from its members, constituting a separate legal entity. Consequently, the company possesses the ability to enter into contracts, initiate legal actions, and be subject to legal actions independently. Additionally, the company enjoys perpetual existence.
Pvt Ltd maintains an advantageous position over other corporate counterparts among venture capitalists (VCs) and startups for several reasons. It provides funding options such as private equity, Employee Stock Ownership Plans (ESOP), etc. Moreover, private limited companies find fundraising and borrowing from financial institutions comparatively easier.
The Pvt Ltd entity originated under the Companies Act of 2013, administered by the Ministry of Corporate Affairs (MCA). According to the Act, a private company is defined as…
A private company, as defined by the Act, is characterized by several key features:
- It must have a minimum paid-up share capital.
- The shares of the company are nontransferable.
- The company should have a minimum of 2 and a maximum of 200 members, with the exception of a one-person company.
- The public is restricted from subscribing to the shares of the company.
Failure to adhere to the rules outlined by the Act results in the company not being, or ceasing to be, a Pvt Ltd company.
Private Limited Company- Different Types of Company Registrations in India:
While many emerging businesses prefer Pvt Ltd company, various other forms of company registrations are also undertaken. In essence, there are no definitive right or wrong choices when selecting a corporate entity for the business. The decision depends on key factors such as the business type, the number of shareholders, their tax obligations, and so forth.
Further, the primary types of company registrations are as follows:
- Public Limited Company Registration
- Private Limited Company Registration/Pvt Ltd
- Partnership Firm Registration
- Limited Liability Partnership (LLP) Registration
- One Person Company (OPC) Registration
- Proprietorship Firm Registration
While various types of companies exist, public and private limited companies are the most prevalent. There is a wide variety of differences between public and private limited companies, and a few of them are illustrated below.
| S.No. | Public Limited Company | Private Limited Company (Pvt Ltd) |
| 1 | The company’s shares are accessible to the public. | The company is not listed on the stock exchange, and the shares are not accessible to the public. |
| 2 | A minimum of 7 members is required. | A minimum of 2 members is required. |
| 3 | There is no limit on the maximum number of members a company can have. | Except in the case of One Person Company (OPC), there can be a maximum of 200 members. |
| 4 | A minimum of 3 directors is required. | A minimum of 2 directors is required. |
| 5 | The transfer of shares is not easily facilitated. | The shares are freely transferable |
| 6 | A public company can issue a prospectus. | Issuing a prospectus is forbidden for a private company |
| 7 | Holding of a statutory meeting is mandatory. | Statutory meetings are not mandatory. |
List of Documents Required for the Formation of a Private Limited Company
- The standing directors and shareholders of the company need to provide proper identity proof, such as PAN card, Aadhar card, a valid driving license, or an Indian passport.
- Additionally, valid proof of the address of the company’s directors and shareholders, such as the most recent telephone bills, electricity bills, and statements of accounts from the bank, is required.
- If the company’s registered office is in a rented property, a rental agreement and an NOC from the owner are necessary.
- In the case of the company being situated on its own property, a sale deed is required.
- The directors of the company must obtain a Director Identification Number (DIN) and a Digital Signature Certificate (DSC).
- Email and Mobile No of Directors
- Object Clause of Pvt Ltd Company
- Proposed Name of the Pvt Ltd Company
The process to Register a Private Limited Company in India:
Despite not being very tedious, the company registration process requires following a series of steps and mandates the submission of the requisite documents, as elucidated earlier. Therefore, the right option would be to delegate the registration to concerns that carry out company registration services.
As a perpetual corporate body, a company has a number of compliances that must be met. The various steps that have to be adhered to for getting a PLC registered are as follows:
- Step-1
The first step is to acquire the DSC for the directors of the company.
- Step-2
Obtain the DIN from the MCA. The DIN is a unique 8-digit number through which the details of the directors are maintained in the database.
- Step-3
Check the availability of the company name by making an application for the same.
- Step-4
Duly fill and submit the forms SPICe+ Part B and INC-32 while making an online application.
- Step-5
The Memorandum of Association (MoA) and the Articles of Association (AoA) are to be presented.
- Step-6
An application must be made for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number) mandatorily to get the company registered.
The registrar verifies the documents, and if they are satisfactory, awards the certificate of incorporation (COI) along with the PAN and TAN. Furthermore, once the company registration certificate is received, initiate an account in an authorized bank in the name of the company to perform the financial transactions of the Pvt Ltd company.
Requirements for a Private Limited Company
To set up a private limited company in India, you need to fulfill the following requirements:
- Minimum 2 Directors: A private limited company must have at least two directors, with one of them being a resident of India.
- Minimum 2 Shareholders: There should be a minimum of two shareholders, and the maximum number is limited to 200.
- Registered Office: The company must have a registered office address in India, which must be communicated to the Registrar of Companies (RoC).
- Minimum Authorised Capital: There is no minimum capital requirement for a private limited company in India; it can start with any amount of capital as per its business requirements.
- DIN and DSC: The directors must obtain a Director Identification Number (DIN), and the authorized representatives must have a Digital Signature Certificate (DSC).
- Name Availability: The proposed company name must be unique, not infringing on any existing trademarks or copyrights, and it should comply with the naming guidelines issued by the Ministry of Corporate Affairs (MCA).
- Memorandum and Article of Association: The company must prepare its Memorandum of Association (MOA) and Articles of Association (AOA) to define its objectives, rules, and regulations.
- ROC Compliance: Private limited companies need to comply with various legal and regulatory requirements, including annual filings, conducting board meetings, and maintaining proper accounting records.
It’s important to consult with a professional chartered accountant, company secretary, or legal advisor from Complianto to ensure compliance with all necessary requirements and procedures for setting up a Pvt Ltd Company in India.
What Is the Cost of Registration of a Private Limited Company in India?
The government fee for registering pvt ltd companies vary from state to state due to different stamp duty and capital of the pvt ltd company. Usually government fee for registering a private limited company with authorised capital of Rs.1 lakh is approx. Rs.3000. The professional fee for the registration of companies varies based on the processes and complexities involved in getting the company registered. Various forms of company registration cost in India range from ₹2500/- to ₹15000/-. The cost also depends on state taxes. For the registration of a private limited company (PLC), the cost ranges from ₹6000/- to ₹30,000. This depends on factors such as the number of members present in the company, the number of directors, etc., along with the professional fee.
How Long Does it Take to Register a Private Limited Company?
Now that the majority of the operations pertaining to the registration of a company take place online, the process can be completed within 9-10 days, provided all the necessary documents are ready. The time frame also includes the time taken to obtain the DSC, the DIN, and the name approval for the company.
Conclusion
To ease registration process of pvt ltd company, the experts at Complianto can help register the business quickly without any hassles for Pvt Ltd, OPC, etc., as we clearly understand how important the business is for every entrepreneur. Moreover, a business owner can thus rest assured that we will accomplish the registration of the company at the snap of a finger.
