What is a Private Limited Company?
A private limited company includes a number of shareholders including foreign nationals. A business registered as a private limited company needs to follow the rules incorporated in the ‘Companies Act, 2013’ as well as the ‘Companies Incorporation Rules, 2014.’
Almost all private business holdings in India prefer to register their businesses as a Private Limited Company on basis of the advantages offered to this entity. The members of the company are restricted from a minimum of two to a maximum of 200 with the assets liable to be sold off, if fails to pay off the loan amount taken from banks/financial institutes/ and other creditors. The Directors of the company enjoy a limited liability for paying off the creditors as their personal property / assets cannot be sold off to pay off the loan amount taken for the business.
Requirements for Registration of a Private Limited Company
At least two shareholders along with two directors are required to be associated with the company.
At least 1 director should be a resident of India.
At least Rs 1,00,000 as Share Capital.
While an individual can be a shareholder as well as a director, a legal corporate entity can only be a shareholder of the company.
The law allows foreign funding thus making it the most popular form of business registration.
Foreign nationals, NRIs, and foreign corporate entities are legally allowed to be shareholders and/or directors.
Advantages of registering your business as a private limited company
No paid-up capital required upfront. However a minimum of Rs 1 lakh as share capital is necessary.
The process of forming, registration, operating, and managing the company is exceedingly simple
The company offers a limited liability protection to all its shareholders
Considered to be a legal entity
Transference of ownership is simple and involves signing and filing of the share certificates and the transfer form. However, a few private companies may have a clause that necessitates the consent from all shareholders before transfer of shares.
Financial Institutions are willing to fund private limited companies more readily than partnership or proprietorship companies.
The company can own assets including property in its name. The shareholders do not have any right to claim ownership of the company assets as long as it is solvent and operational.
NRIs and foreign investors can invest heavily into the company making it a stable entity.
It has the potential to expand its business ventures in an unlimited manner
Documents required to Register a Private Limited Company
- PAN Card (2 Copies) ( attested by gazetted officer or bank manager)
- Adhaar Card/ Driving License/Passport (2 Copies) (attested by gazetted officer or bank manager)
Self attested Address Proof - Voter ID/
6 passport size photographs
Self attested Bank Statement/ Electricity Bill/ Mobile Bill/ telephone Bill not older than one month (passbook copy is not accepted)
Rental agreement and electricity bill of office address(Electricity bill not older than 1 month) if rented premises
BBMP tax paid receipt and electricity bill of office address(Electricity bill not older than 1 month) if own premises
Company Registration Process
Choose unique & new business name first
Decide the type of business structure for your company
Apply and obtain your name approval from MCA
Obtain DSC (Digital Signature Certificate) for directors
Register your company in MCA portal (Apply DIN for directors, Draft company’s MOA & AOA, Incorporate company by uploading Forms, Apply PAN & TAN of company)
Get Company Incorporation of Certificate (COI)
You will get the documents after Registration of your Company
DSC for 2 director (Digital Signature Certificate)
DIN for directors (Directors Identification Number)
MOA (Memorandum of association)
AOA ( Articles of association)
Taxation Rules for private limited companies
It is required by law to get the company accounts audited on a yearly basis
Income Tax return for the company should be filed before the due date
Details of the company to be submitted to the ‘Registrar of Companies’ every year by filing balance sheet.