Private Limited Company

A Private Limited Company (Ltd) is a business structure where ownership is restricted to private shareholders, liability is limited, and shares aren’t publicly traded.

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What is a Private Limited Company?

In India, a private limited company is a privately held entity with limited liability, and it ranks among the nation’s most favored business structures. This popularity is primarily attributed to its numerous advantages, including limited liability protection, ease of formation and maintenance, and its status as a distinct legal entity. A private limited company enjoys legal separation from its owners and necessitates a minimum of two members and two directors for its operation. Here are the key characteristics of a private limited company in India:

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Types of Private Limited Companies:

Company Limited by Shares:

Shareholders' liability is limited to the nominal share amount mentioned in the Memorandum of Association.

Company Limited by Guarantee:

Member liability is limited to the amount of guarantee specified in the Memorandum of Association. This guarantee is invoked only during winding up.

Unlimited Companies:

Members of unlimited companies have unlimited personal liability for the company's debts and liabilities. However, they are still considered a separate legal entity, and individual members cannot be sued.

Advantages of a Private Limited Company

A Private Limited Company is one of India’s most popular business structures. It offers several advantages and some disadvantages, let us explain.

Limited Liability:

hareholders’ responsibility is restricted to the extent of their capital contribution, safeguarding personal assets from the company’s financial obligations and liabilities.

Distinct Legal Identity:

A Private Limited Company possesses an independent legal identity distinct from its proprietors. It has the capacity to own assets, engage in contractual agreements, and initiate or defend legal actions under its own name.

Continuous Existence:

The company’s existence persists irrespective of shifts in shareholders or directors. Its existence is not contingent upon the lifespan of its associates.

Ease of Funding:

Raising capital by issuing shares to investors, venture capitalists, or angel investors is easier. This structure attracts external investment.

Tax Benefits:

Private Limited Companies may qualify for various tax benefits and exemptions, making them tax-efficient entities.

Credibility and Trust:

Having “Pvt. Ltd.” in your company name often instills more confidence and trust in customers, suppliers, and partners.

Documents Required for Private Limited Company Registration

  • Aadhar and PAN Card of the Directors;
  • Latest passport-sized photos of all the proposed Directors;
  • Identity proof of the Directors;
  • Address proof of the Directors.
  • Rent Agreement
  • Proof of registered office of the Company. The following documents must be submitted as address proof of the Company:
  • Rental Agreement or Tenancy Agreement between the landlord and Company;
  • Letter/NOC from the Landlord of their permission to use the premise or office as the company’s registered office;
  • Sale Deed of the Company premise in the Company’s Name; MoA & AoA of the Company.

Private Limited Company Registration Process

Registering a company in India involves a straightforward four-step process:

Step 1: Acquire a Digital Signature Certificate (DSC)

Every director and shareholder must secure a Digital Signature Certificate (DSC) issued by the Controller of Certification Agencies (CCA). This involves providing essential details such as passport-sized photos, PAN, Aadhaar Card, phone number, and email address. Foreign nationals should also furnish notarized and apostilled documents if applicable.

Step 2: Director Identification Number (DIN)

Obtain a Director Identification Number (DIN) if you intend to be a director in the company. DIN is essential for directors and needs to be provided in the registration form.

Step 3: Name Reservation for the Company (SPICe+ Part A)

Begin by completing the SPICe+ Part A form to secure a unique company name. This entails selecting the company type, class, category, and sub-category, specifying the primary division of industrial activity and offering a comprehensive business description. You’ll need to propose two names for approval.

Step 4: Submission of Company Details (SPICe+ Part B)

Provide comprehensive information concerning capital, registered office address, subscriber and directors’ details, stamp duty, PAN and TAN application, and necessary attachments. Ensure compliance with the Companies Act 2013 and obtain digital signatures from assisting professionals.

Step 5: Preparation and Submission of Incorporation Forms (SPICe+ MOA and AOA)

Draft the Memorandum of Association (MOA) and Articles of Association (AOA) containing crucial company details. Obtain digital signatures from subscribers and professionals before submitting these documents to the MCA for approval.

 

Additionally, file the AGILE-PRO-S form to register for GST, EPFO, ESIC, a bank account, and a shop and establishment license (which may be state-dependent).

Certificate of Incorporation

Upon successful document verification, the MCA will issue the Certificate of Incorporation (COI) with the Company Identification Number (CIN), PAN, and TAN.

FAQs on Private Limited Company Registration

A Pvt. Ltd Company is a privately held business entity where shares are not publicly traded.

  1. Generally, at least two directors and shareholders are required, along with a registered office address in India.

  1. Limited liability protection, separate legal entity status, and easier access to funding are key benefits.

It involves obtaining Digital Signature Certificates (DSCs), Director Identification Numbers (DINs), name approval, drafting of MOA and AOA, and filing incorporation forms.

 

Regular filing of annual returns, financial statements, holding board meetings, and maintaining statutory records.

The timeline varies but typically takes 15-30 days, depending on document preparation and government processing times.