Private Limited Company Registration in India

An Overview

Private companies are the most popular choice for business formation among startups and businesses striving for higher growth. Business entities controlled by a small group of people are called Private Limited Companies. A private limited company offers startups stability and development opportunities. Startups prefer a company as a business structure because it allows outside funding to be raised easily, limits the liabilities of its shareholders, and enables them to offer employee stock options to attract top talent. To start a private limited company, a minimum of 2 members is required and a maximum number of 200 members as per the provisions of the Companies Act, 2013. Thanks to the MCA online process, company registration in India has also become more accessible and efficient today.

Legalities Concerned:

The legal existence of a private limited company is separate from its members. Companies must hold board meetings and file annual returns with the Ministry of Corporate Affairs (MCA). They tend to be viewed with more credibility than an LLP or General Partnership. Further, the status of a company is not altered by changes in members and management. A private company may issue debentures to any number of persons, the only condition being that an invitation to the public to subscribe to debentures is prohibited.

Duration Required:

Typically, company registration takes 10-15 business days to complete. Providing the highest customer satisfaction and timely delivery of services are Legalfin Advisors’ objectives. Our network of company secretaries and chartered accountants are of best-qualified professionals. Throughout the process, assistance and communication are offered regularly by Legalfin Advisors’ experts.

 

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    Types, Advantages & Disadvantages.

    1. Types of Private Limited Companies:
      • Company Limited by Shares: Shareholders’ liability limited to the nominal share amount.
      • Company Limited by Guarantee: Member liability limited to specified guarantee amount.
      • Unlimited Companies: Members have unlimited personal liability, but remain a separate legal entity.
    2. Advantages:
      • Limited Liability: Shareholders’ responsibility limited to capital contribution.
      • Distinct Legal Identity: Independent legal identity, capable of owning assets and entering contracts.
      • Continuous Existence: Company persists regardless of changes in ownership or management.
      • Ease of Funding: Easier capital raising through share issuance.
      • Tax Benefits: Eligible for various tax benefits.
      • Credibility and Trust: “Pvt. Ltd.” instills confidence in stakeholders.
    3. Disadvantages:
      • Compliance Burden: Regulatory demands, financial reporting, and audits.
      • Complex Setup: Higher process and cost compared to simpler structures.
      • Share Limits: Restricted share transfers; max 200 shareholders in India.
      • Public Disclosure: Financial info publicly viewable impacts privacy.
      • Exit Complexity: Selling or leaving is more complicated.
      • Slower Decisions: Involvement of shareholders and directors may slow decision-making
     

    Directors and Members: Minimum two directors and 200 members required. Directors must have DIN issued by MCA. At least one director must be an Indian resident.

     
     

    Step 1: Acquire Digital Signature Certificate (DSC).
    Step 2: Obtain Director Identification Number (DIN).
    Step 3: Name Reservation for the Company (SPICe+ Part A).
    Step 4: Submission of Company Details (SPICe+ Part B).
    Step 5: Preparation and Submission of Incorporation Forms (SPICe+ MOA and AOA).

     
     
     

    Issued upon successful document verification. Contains Company Identification Number (CIN), PAN, and TAN.

     
     
     

    For Indian Nationals:

    PAN card copy, photo, Aadhaar Card, proof of identity/address.

    For Foreign Nationals:

    Notarized documents, photo, passport, and address proof.

    Registered Office Documents:

    Proof of business address, rent agreement copy (if applicable), owner’s NOC.

     

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    Vital Features of a Private Limited Company

    Limited Liability

    Members are only liable for the number of shares they hold. In the event of any loss to the Company, shareholders may be responsible only for their claims. No shareholder’s assets are at risk. 

     

    For Raising Funds

    It is vital for fast-growing businesses that seek venture capital funding (VC) to register as a private limited company because only private limited companies can offer these investors shares and seats on the board of directors.

    Paid-up Capital

    Minimum capital for a Private Limited Company must be Rs. 1 lakh or such a greater amount as the government prescribes from time to time. There is, however, no such requirement under the recent amendment.

     

    Perpetual Succession

    In the eyes of the law, the Company continues to exist even if one of its members passes away, becomes bankrupt, or is insolvent. In other words, the Company’s life continues forever.


    1limited

    Limited Liability

    Members are only liable for the number of shares they hold. In the event of any loss to the Company, shareholders may be responsible only for their claims. No shareholder’s assets are at risk.

     
    2fund

    For Raising Funds

    It is vital for fast-growing businesses that seek venture capital funding (VC) to register as a private limited company because only private limited companies can offer these investors shares and seats on the board of directors.

     
    3capital

    Paid-up Capital

    Minimum capital for a Private Limited Company must be Rs. 1 lakh or such a greater amount as the government prescribes from time to time. There is, however, no such requirement under the recent amendment.

     
    4perpetual

    Perpetual Succession

    In the eyes of the law, the Company continues to exist even if one of its members passes away, becomes bankrupt, or is insolvent. In other words, the Company’s life continues forever.

     

    FAQs

    The number of members must be between 2-200.
    Two directors are necessary, of whom at least one must be Indian.
    And two shareholders. In this case, a shareholder may also serve as a director. The registered office address for a business must be in India.

    After acquiring a Director Identification Number (DIN), any natural person above 18 years can become a director in a company. A foreign national can also become a director since there are no specific requirements for citizenship or residency.

    At the time of registration, the authorized capital of at least INR 1 lakh must be provided. A minimum paid-up capital requirement has been eliminated as part of the government's initiative to simplify business registration in India. A shareholder, however, must subscribe to at least one share for the registration to bring in the proper amount required for its operation.

    Private limited company registration in India provides small businesses with credibility and an image of their business to financial institutions, vendors, and potential clients. As a result, the Company can get loans at low compliance from banks or potential clients.

     

    Yes. The Ministry of Corporate Affairs (MCA) allows residential addresses for companies' registered addresses.

     

    Memorandum of Association (MOA) is the foundation on which the Company is built. It describes the objects, powers, and constitution of the Company. Articles of Association (AOA) details all the rules and regulations governing the management of the Company.

     

    As soon as the company registration in India is done, it should follow the following requirements as a priority:

    1. The Company's current account must be opened within 30 days following receipt of its PAN card.
    2. Statutory Auditor Appointment
    3. Depositing the paid-up capital as indicated during registration
    4. Issuance and allotment of shares

    The Company must hold at least 4 board meetings (one every quarter) during each financial year, as well as an Annual General Meeting (AGM). Moreover, the accounts and financial statements must be audited by an independent auditor. As part of Annual Compliance, it shall file forms AOC - 4 and MGT - 7 within the given timeframe.

     

    A company's authorised capital is the maximum amount of capital it can raise by issuing shares now or in the future. In contrast, Paid-up Capital refers to the amount paid by shareholders on the issuance of shares to raise capital for a company. In India, one can register a company with a paid-up capital which can be less or equal to the authorized capital, but not exceeding it.
     
     

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