A private limited company is a separate legal entity that offers limited liability to its owners (shareholders). It allows individuals to invest in the company without risking their personal assets. The company is managed by directors appointed by the shareholders, who make decisions and run the business. The shareholders benefit from the company's profits based on their ownership.
BENEFITS
LIMITED LIABILITY
Shareholders' personal assets are generally protected and are only liable for the amount they have invested in the company, minimizing personal financial risk.
SEPARATE LEGAL ENTITY
The Company has its own legal identity, which means it can enter into contracts, own assets, and incur debts in its own name.
CREDIBILITY AND TRUST
Being a registered company can enhance credibility and trust among customers, suppliers, and partners, as it demonstrates a commitment to compliance and professionalism.
CAPITAL GENERATION
Private limited companies can raise funds by issuing shares to new investors, enabling them to expand and grow their business.
ENHANCED BORROWING CAPACITY
Financial institutions are generally more willing to lend to private limited companies as they are considered more stable and reliable.
PERPETUAL EXISTENCE
The company has a continuous existence even if the shareholders change or pass away. It provides stability and longevity to the business.
TRANSFERABILITY OF SHARES
Shares can be easily transferred or sold to other individuals or entities, allowing for the infusion of new capital or changes in ownership.
TAX ADVANTAGES
Private limited companies may enjoy certain tax benefits and incentives, depending on the jurisdiction. They often have access to more favorable tax rates and deductions.
FLEXIBLE MANAGEMENT STRUCTURE
Private limited companies offer flexibility in terms of appointing directors, shareholders, and other managerial roles, allowing for efficient decision-making and strategic planning.
STEPS TO REGISTER
To register a private limited company in India, here are the general steps involved:
- SIGNATURE CERTIFICATE (DSC): The first step is to obtain a digital signature certificate for the proposed directors of the company. This is necessary for online filing of forms during the registration process.
- IDENTIFICATION NUMBER (DIN): Each director must apply for a Director Identification Number from the Ministry of Corporate Affairs (MCA) by submitting the required documents and forms.
- CHOOSE A UNIQUE COMPANY NAME: Select a unique name for your company, ensuring it complies with the naming guidelines prescribed by the Companies Act, 2013. Check for name availability on the MCA website.
- PREPARE AND FILE THE INCORPORATION DOCUMENTS: Prepare the necessary documents including the Memorandum of Association (MOA) and Articles of Association (AOA). These documents outline the company's objectives, rules, and regulations. File the incorporation forms, along with the required fees, on the MCA portal.
- OBTAIN CERTIFICATE OF INCORPORATION: Once the MCA verifies the documents and approves the application, a Certificate of Incorporation will be issued. This confirms the formation of the company and includes the Corporate Identity Number (CIN).
- OBTAIN PERMANENT ACCOUNT NUMBER (PAN) AND TAX ACCOUNT NUMBER (TAN): Apply for a PAN and TAN with the Income Tax Department. These are required for taxation purposes.
- MAKE A BANK ACCOUNT: Open a bank account in the company's name and deposit the minimum required capital as mentioned in the incorporation documents.
- REGISTER FOR GOODS AND SERVICES TAX (GST): If your company's annual turnover is expected to exceed the prescribed threshold, register for GST with the appropriate tax authorities.
- REGISTER FOR OTHER REQUIRED STATUTORY REGISTRATIONS: Depending on the nature of your business, you may need to register for other statutory requirements such as Professional Tax, Employees' Provident Fund Organization (EPFO), Employee State Insurance Corporation (ESIC), etc.
- COMPLY WITH POST-INCORPORATION REQUIREMENTS: Fulfill any post-incorporation requirements, such as obtaining licenses, registrations, permits, and complying with annual filing and compliance obligations.
DOCUMENTS REQUIRED FOR PVT LTD
- Identity Proof: PAN Card, Aadhaar Card/Voter ID/Passport/Driving License of all directors.
- Address Proof: Aadhaar Card/Voter ID/Passport/Driving License of all directors, recent utility bills/bank statements.
- Passport-sized Photographs: Recent passport-sized photographs of all directors.
- Proof of Registered Office Address: Ownership proof or rent agreement/NOC, recent utility bills in the name of the property owner.
- Memorandum of Association (MOA) and Articles of Association (AOA): Signed by all directors.
- Declaration and Consent: Various declaration and consent forms related to directorship.
- Director Identification Number (DIN) Form: Form DIR-3 filled and signed by proposed directors.
- Digital Signature Certificate (DSC): Application form and supporting documents.
- Proof of Capital: Bank statement showing capital investment.
- Other Documents: Any additional documents as required by ROC or MCA.
REGISTERATION COMPLIANCES
After the registration of a private limited company in India, there are various compliance requirements that the company needs to fulfill. Here are some key compliance obligations:
- ANNUAL GENERAL MEETING (AGM): Hold an AGM of shareholders within six months from the end of each financial year and discuss important matters such as financial statements, dividend declaration, and appointment/reappointment of directors.
- ANNUAL FINANCIAL STATEMENTS: Prepare and file annual financial statements, including the balance sheet, profit and loss statement, cash flow statement, and notes to accounts, within 30 days of the AGM.
- ANNUAL RETURN: File an annual return with the Registrar of Companies (ROC) within 60 days of the AGM, providing information about the company's shareholders, directors, and key details.
- DIRECTOR'S REPORT: Prepare a director's report, including information about the company's operations, financial performance, and future outlook, to be presented at the AGM.
- STATUTORY REGISTERS AND RECORDS: Maintain various statutory registers, such as the Register of Members, Register of Directors, Register of Charges, etc., at the registered office of the company.
- BOARD MEETINGS: Conduct regular board meetings, at least four times a year, to discuss and make decisions on important matters related to the company's operations, finance, compliance, and strategy. Maintain minutes of these meetings.
- COMPLIANCE WITH INCOME TAX AND GST: Comply with the income tax regulations, including filing annual income tax returns and paying taxes on time. If applicable, comply with Goods and Services Tax (GST) regulations by filing regular GST returns and paying GST liabilities.
- STATUTORY PAYMENTS AND FILINGS: Ensure timely payment of statutory dues such as taxes, employee provident fund, employee state insurance, professional tax, etc. File required periodic returns and reports with relevant authorities.
- STATUTORY AUDITS: Conduct regular statutory audits of the company's financial statements by a qualified Chartered Accountant, as required by law.
- COMPLIANCE WITH COMPANY LAW REGULATIONS: Comply with various provisions of the Companies Act, 2013, and related regulations, including maintaining proper books of accounts, adhering to corporate governance norms, and complying with disclosure requirements.
FAQs
No, the process of setting up a new Private Limited Company is entirely online. You are not need to be physically present because all paperwork must be supplied electronically.
The Registrar of Companies (ROC) across India expects applicants to follow certain naming guidelines. Some are subjective, meaning approval may depend on the request of the official responsible for your request. The more closely you follow the rules below, the better your chances of being approved. However, first, make sure your name is available.
The registration process typically takes around 10-15 days, subject to the timely submission of required documents and the processing time of the Registrar of Companies (ROC).
A private limited company in India must have a minimum of two directors. However, there can be up to a maximum of 15 directors.
A private limited company must have a minimum of two shareholders, and the maximum number of shareholders can be up to 200.
As per the Companies Act, 2013, there is no minimum capital requirement for a private limited company. It can be registered with any amount of capital deemed appropriate by the promoters.
Yes, a foreign national can be a director and shareholder in an Indian private limited company. However, there are certain regulations and compliance requirements that need to be met.
Some advantages of a private limited company include limited liability for shareholders, separate legal entity status, ability to raise funds through share issuance, perpetual existence, and credibility among stakeholders.
Yes, a private limited company can be converted into a public company by following the procedures specified in the Companies Act, 2013. It involves altering the company's Memorandum of Association and Articles of Association, among other requirements.
Annual compliance requirements include holding an Annual General Meeting, filing annual financial statements and annual returns with the Registrar of Companies, maintaining statutory registers and records, and complying with tax and other regulatory obligations.
No, a private limited company cannot directly raise funds from the public through an IPO. However, it can go public by converting into a public limited company and then raise funds through an IPO.
A private limited company can be closed voluntarily by following the legal process of winding up, either as a members' voluntary winding up or a creditors' voluntary winding up, as per the provisions of the Companies Act, 2013.
Yes, the name of a private limited company can be changed after registration by following the prescribed procedure, which involves obtaining approval from the ROC and filing necessary forms.
Yes, a private limited company in India can have a foreign company as a shareholder, subject to compliance with Foreign Direct Investment (FDI) guidelines and other applicable laws.
Yes, a private limited company can have a corporate entity as a director, provided that there is at least one director who is an individual.
Directors of a private limited company have fiduciary duties to act in the company's best interests, comply with laws, exercise due diligence, and avoid conflicts of interest. They are generally not personally liable for the company's debts, except in cases of fraud or negligence.
No, a private limited company cannot be directly converted into a sole proprietorship. However, the company can be closed, and the shareholders can start a new business as a sole proprietorship.
Yes, a private limited company can own property, assets, and enter into contracts in its own name. The company's assets are separate from the personal assets of its shareholders.
Yes, a private limited company can have a nominee director. A nominee director is appointed to represent the interests of a shareholder or a specific organization.
Yes, a private limited company can be converted into a not-for-profit organization, such as a Section 8 Company, by following the prescribed procedure and obtaining necessary approvals.
Yes, the directors of a private limited company can receive remuneration in the form of salary, commission, or other benefits, subject to the provisions of the Companies Act and approval from the shareholders.