A Guide to Start a Private Limited Company and Registration

A Guide to Start a Private Limited Company

Private Limited Company Registration

A private limited company registration companyis a business entity wherein private ownership is used. These companies can issue shares and have shareholders, but the shares of a private limited company are not issued through an initial public offering (IPO) and can’t be traded publicly, i.e., on public exchanges.

The member’s liability in such a company is restricted to the number of shares held by them. Moreover, the shares of such limited companies are restricted to a maximum of 50 shareholders.

In this article, we will cover varied aspects ofa Private Limited Company which include its characteristics, registration procedures, requirements, pros, and cons.

Characteristics of a Private Limited Company:

1:Members:

A minimum count of 2 and a maximum count of 200 members are permitted as per the Company’s Act, 2013.

2: Limited Liability:

The shareholders have limited liability, i.e., if the company undergoes financial distress the personal assets of members will not be used to pay the debts of the Company as the liability of the person is limited.

3: Index of Members:

Unlike public limited companies who need to keep the index of members, private limited companies need not keep the same.

4: Number of Directors:

The company can commence with a minimum of 2 directors and a maximum of 15 directors is permitted.

5: Paid-up Capital:

A minimum paid-up capital amount of Rs.1 lakh or higher is essential.

6: Prospectus:

Since the public is refrained from subscribing to shares of a private limited company, the need for a prospectus (detailed statement of the affairs of the company) is unessential.

7: Minimum Paid-up Capital:

A minimum paid-up capital of Rs. 1 lakh is required in the case of a private limited company, which can increase with time.

8: Name:

It’s pivotal to use the term “private limited” after the company’s name in this business entity.

Advantages & Disadvantages of a Private Limited Company:

Private Limited Company Registration1

Advantages:

This business entity has varied benefits as compared to other entities. Let’s have a look.

1: Limited Liability:

As stated above, the shareholders of this entity have limited liability, i.e., their liability to compensate for the company’s losses is limited to their shares. Their assets are not at risk.

 

2: Separate Legal Entity:

A private limited company has a separate legal entity which makes the company responsible for the profits and losses. You are not personally responsible for the same and hence the creditors can’t approach you for recovering their finances in case of losses.</p?

3: Raising Capital:

Though this entity has varied compliances, it’s more desirable to entrepreneurs since they can raise funds via equity, thus limiting their liability.

4: Trustworthiness:

These companies are registered with the Registrar of Companies (ROC) as per the Company’s Act 2013. All the company details are visible on the (Ministry of Corporate Affairs) website and hence they are trustworthy.

1: Perpetual Succession:

Since the company exists legally in unwanted circumstances like death, insolvency, or bankruptcy of members, it exists forever. It only perishes once it’s legally dissolved.

2: Ownership:

All the shares of the company are owned by founders and investors who can transfer or sell their shares as per their wishes.

3: Investor-Friendly:

This business entity is preferred by investors who invest in it due to its transparency.

4: Tax Benefits:

A private limited company has varied tax benefits likelower corporate tax rate on their profits. This leads to enhanced savings from profits.

5: Legal Formalities

The legal formalities are quite less in this business entity as compared to public limited companies which have an entire list of legal formalities which need to be followed for their incorporation.

Few More Benefits:

  • Private Limited Company is not compelled to report their financial status to the public.

  • Since the count of shareholders is less, decision-making is smooth and quick as compared to a public limited company, wherein the decision-making is a complex process.

  • The founders of a private limited company are more flexible in business decisions.

  • Stock market pressure is eliminated in the case of a Private Limited Company.

  • There is no minimum compulsion of the share capital at the time of commencing the business.

  • Confidential information remains secured in case of a Private Limited Company.

Disadvantages:

  • Varied compliances like holding board meetings, general meetings, auditing of accounts, filing of annual returns, etc. need to be followed after the incorporation of a Private Limited Company.

  • The owner/director can’t take loan from the company.

  • In case of unclear rules of MCA (Ministry of Corporate Affairs), the number of investors can’t surpass 50.

Documents Required for Filing SPICe (Form Inc-32):

  • The subscribers of the company need to submit an affidavit on a stamp paper to show their willingness to become the company’s shareholders.

  • Address proof in the form of a driving license, ration card, Aadhar card, etc.

  • Residence proof in the form of an electricity bill, gas bill, bank statement, etc.

  • Trademark registration certificate in case the company name is based on a registered trademark.

  • NOC from the owner of the property or a notarized rental agreement.

  • Director Identification Number of the Director

  • In absence of a DIN, the identity proof and the address proof of the subscribers are essential.

How to Register a Private Limited Company?

 

PVT company registration

Registration of a private limited company  is a complex task since it involves various compliances and requirements.

Procedure for Registration:

  • Apply for DSC (Digital Signature Certificate) from any of the government-recognized certified agencies.

  • Apply for DIN (Director Identification Number) which is a unique number assigned to a director for the lifetime unless surrendered or withdrawn.

  • Apply for the availability of a name

  • File the Form SPICe (Form INC-32) for incorporation of the company digitally.

  • File the E-MOA (Memorandum of Association) and AOA (Articles of Association) and get them digitally signed by the subscribers.

  • Apply for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number) of the company by filing forms 49A for PAN and 49B for TAN.

The Registrar of Companies will later issue a certificate of incorporation with the PAN and TAN. Last but not the least, open a current bank account with the company’s name.

Congratulations!! Your Private Limited Company is now registered.

How can we help in Registering your Private Limited Company?

Since the  PVT LTD Company registration is a complex process in Ahmedabad, that’s why Choksitax is Here our team can help you in checking and ensure whether all the documents are in place or not.Our experts can help you by explaining the step-wise registration process, and guiding you in registering your Private Limited Company.Contact us for a hassle-free and smooth registration of your private limited company.