What is a private limited company?
Private limited company registration is one of the best business structures in India for new business, it is cost-efficient and offers the best advantages for startups.
Private limited company incorporation offers a robust business structure to start a business privately owned by a small group of persons.
In India, a private limited company is considered one of the prestigious business structures that can be owned by a person, the business structure itself brings many strategic advantages to business.
The private limited company offers tax savings benefits in the income tax act compared to a partnership firm, therefore private limited company pays less income tax to file income tax returns.
How to register a private limited company?
- Private limited company can be registered with a minimum of 2 shareholders and directors and a maximum of 15 directors.
- To register a private limited company one should get the services of a company registration consultant, a chartered accountant, or a company secretary who will provide consultation, draft documents required for company registration, and submit documents with the registrar of companies.
- A minimum of one director is required to be an Indian citizen to register a private limited company, therefore private limited company cannot be registered with all directors and shareholders as foreign citizens only.
- Only a person who has attained an age of majority can be the director of the private limited company.
- Documents required for private limited company registration should be submitted in the portal of the Ministry of Corporate Affairs, the entire process of private limited company registration can be completed in online mode.
What are the documents required for private limited company registration?
Documents and details required for the director
- PAN card copy.
- Identity proof – Passport, driving license, voter ID.
- Address proof – Latest mobile bill, latest EB bill, and Latest bank statement, the document should not be older than 2 months, we always recommend submitting the latest documents.
- Permanent E mail id, and mobile no.
- Passport-size photo.
- Place of birth
- Educational Qualification
- Occupation
- Duration of stay at the address in the address proof
- DIN number if already available
Documents and details required for company address proof
- Rental agreement or lease agreement in the name of a private limited company.
- NOC from the landlord allowing the use of the premises for business purposes.
- Latest Electricity bill for the business address.
- Shareholding pattern.
- Authorized capital and paid-up capital.
What are the steps involved in private limited company registration?
Name approval is the first process in private limited company registration, the name of the private limited company is required to be approved for the smooth process of registration. Name approval application has to be made in the RUN application with 2 unique names. The name applied should not resemble existing company names or any trademark, apart from a unique name it should comply with the naming guidelines of Companies Act 2013 and naming rules.
Digital signatures are required to be applied for all the directors in case all the directors do not have valid DINs, generally, digital signatures will be processed after the approval of the company name.
Documents required for directors and the company such as director declaration, rental agreement, NOC, etc. are prepared for signing by the directors.
Once the documents required for company registration are prepared and signed by all the directors, MOA, AOA together with AGILE pro, and other forms are required to be submitted with the required govt fees to register a private limited company.
Once all the required docs are submitted together with any queries raised in the event of a resubmission request, the private limited company registration will be approved together with an allotment of PAN number and TAN number.
Advantages of private limited company registration
Separate legal entity
A private limited company is a separate legal entity having its own identity, which means that the law recognizes a private limited company as a separate person from its members and directors. A private limited company can own a property and enter into any legal transactions that can be done by an individual.
No minimum paid-up capital
There is no minimum paid-up capital required to start a private limited company, it means the private limited company can be registered without actual capital brought in immediately. The only condition of authorized capital of Rs. 1 lakh needs to be complied with. Authorized capital means the maximum permitted capital that the shareholders can bring into the private limited company.
Uninterrupted existence
The life or existence of the private limited company is not affected by the death or insolvency of its director and shareholders, the company will continue as long as the defaults are complied within the time allowed as per the Companies Act 2013. Perpetual existence is one of the major advantages of a private limited company, changes in its members do not affect its exitance.
Limited Liability
Limited liability means the shareholders are responsible only to the extent of unpaid amount towards their share in the private limited company. The shareholders cannot be made responsible for the debts of the company in excess of the amount they are liable to the company. The members and the company are separate persons as per the Companies Act 2013, therefore the creditors, government, or any other persons cannot claim any amount directly to the members of the company. In the case of proprietorship business and partnership firm registration, the liability of the firm is the liability of the proprietor and partner respectively.
Smooth share transfer process
Transfer of share to another person is easy in the case of a private limited company, this allows the private limited company to add investment easily from closed user groups. The share transfer process is as simple as signing the share transfer application form by the transferor or by the existing shareholder.
Ability to raise capital
Capital sourcing will be easy when compared to proprietorship firms or partnership firms, this allows venture capitalists and angel investors to invest in private limited company startup projects.
Credibility
The private limited company enjoys enhanced credit facility compared to other forms of business, multiple compliance, stringent rules for financial transactions in private limited company, and allows financial institutions, bankers, suppliers, and customers to have the highest rating for private limited company.
Branding
A private limited company itself gives a good branding image to the business, in the case of a proprietorship or partnership firm there can be any number of firms with the same name, however in the case of a private limited company, there cannot be two company with the same name or resembling name. It helps to gain a competitive marketing advantage over the other forms of business, people consider private limited companies as trustworthy which adds an additional layer of trust to the business.