What is a Private Limited Company

What is a Private Limited Company

A private limited company is a corporate entity that enables a group of people to carry out a business. The group of people thus running the business are called the shareholders. Although there are different types of corporate entities to incorporate a business, a private limited company is chosen by quite a number of start-ups as it gives scope for higher visibility and popularity amongst the potential clients. Further, a private limited company is a separate legal entity and is different from its members. Therefore, the company is eligible to enter into contracts, can sue, and be sued by third parties, by itself. Moreover, the company has perpetual existence.

Another reason why a private limited company has an edge over the other corporate counterparts amongst the VCs and start-ups is that it presents funding options like private equity, ESOP etc. Further, fundraising and borrowing from financial institutions are relatively easier for private limited companies.

Establishing a Private Limited Company in India: Criteria Under the Companies Act, 2013

The private limited company was evolved under the Companies Act, 2013 under the Ministry of Corporate Affairs (MCA). The Act defines a private company as

i)One that has a minimum paid-up share capital

ii)one that renders the shares nontransferable

iii)a company that should have a minimum of 2 and a maximum of 200 members, the exception being a one-person company

iv) A company where the public cannot subscribe to the shares of the company.

If a company does not follow the rules as pointed out by the Act, it is not or ceases to be a private limited company.

What Are the Different Types of Company Registrations in India:

Although a private limited company is best-liked by many budding businesses, there are also other forms of company registrations that are being done. In short, there are no right or wrong choices, when it comes to choosing a corporate entity for the business. Likewise, it merely depends upon the key factors such as the type of the business, number of shareholders, their tax obligations, etc. Further, the primary types of company registrations are as follows:

  •   Public Limited Company Registration
  •   Private Limited Company Registration
  •   Partnership Firm Registration
  •   Limited Liability Partnership (LLP) Registration
  •   One Person Company (OPC) Registration
  •   Proprietorship Firm Registration

Although there are various types of companies, the most prevalent ones are public and private limited companies. There does exist a wide variety of differences between public and private limited companies.

No. Public Limited Company Private Limited Company
1 The public has access to own the shares of the company The company isn’t listed on the stock exchange and the public does not have access to the shares.
2 There should be a minimum of 7 members There should be a minimum of 2 members
3 There is no limit on the maximum number of members a company can have There can be a maximum of 200 members except in the case of One Person Company (OPC).
4 There should be a minimum of 3 directors There should be a minimum of 2 directors.
5 The shares are not easily transferable The shares are freely transferable
6 A public company can issue a prospectus A private company is forbidden from issuing a prospectus.
7 Holding a statutory meeting is mandatory. Statutory meetings are not compulsory.

What are the Documents Required for the Formation of a Company?:

  • Proper Identity Proofs such as PN card, Aadhar card, a valid driving license, or an Indian passport of the standing directors and shareholders of the company
  • Moreover, valid proofs of the address of the company’s directors and shareholders, such as the most recent telephone bills, electricity bills, and statement of accounts from the bank
  • Rental agreement and a NOC from the owner, if the company’s registered office is in a rented property
  • Sale deed, if the company is situated in its own property
  • Director Identification Number (DIN) and Digital Signature Certificate (DSC) is required for the directors of the company.

What Is the Process to Register a Company in India?:

Despite the fact that the company registration process is not very tedious, it requires a series of steps to be followed and also mandates the submission of the requisite documents as elucidated earlier. Therefore, the right option would be to delegate the registration to concerns that carry out company registration services.  

Also being a perpetual corporate body, a company has a number of compliances that have to be met. The following are the various steps that have to be adhered to, to get a private company registered.

Step 1

The first step would be to acquire the DSC for the directors of the company.

Step 2

The DIN must be obtained from the MCA. The DIN is a unique 8 digit number through which the details of the directors are maintained in the database.

Step 3

The availability for the name of the company must be checked, by making an application for the same.

Step 4

The forms  SPICe+ and INC-32 are to be duly filled and submitted while making an online application.

Step 5

The Memorandum of Association (MoA) and the Articles of Association (AoA) are to be presented.

Step 6

An application must be made for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number) mandatorily to get the company registered.  

The registrar verifies the documents and if it is satisfactory, the certificate of incorporation (COI) is awarded along with the PAN and TAN. Further, once the company registration certificate is received, an account has to be begun in an authorised bank in the name of the company to perform the financial transactions of the company.

How to Find the Company Registration Number (CRN):

The CRN can be found on the official MCA website. Various details with respect to the company such as its CRN, its directors, type of the company, etc can be deduced from the website.

Step1 : In the MCA home page, an option called “MCA Services” is present. On Selecting that a dropdown appears.

Step 2: Moreover, on Selecting “Master Data” from the options, another list appears. Select “View Company or LLP Master Data”.

Step 3: On selecting the above option, the user is navigated to the next page, wherein the user is supposed to enter the name of the company, and the CIN. The entered data is checked with the database, and the relevant information about the company such as the date of incorporation, registration number, the status of the company, etc are fetched.

How Long Does it Take to Register a Company?

Now that the majority of the operations pertaining to the registration of a company take place online, the process is completed within 9-10 days, provided all the necessary documents are ready. The time frame is also inclusive of the time taken to get the DSC, the DIN, and the name approval for the company.

What Is the Cost of Registration of a Company in India?

 The fee to be given to the government to register companies was waived effective from January 2019. Also, previously, the registration costs of a private company would vary depending upon the shared capital of the company. But now, the concept of minimum shared capital is not being considered. Further, the professional fee for the registration of companies varies depending upon the processes and complexities involved in getting the company registered.

Further, the various forms of company registration cost in India would be somewhere from ₹1500/- to ₹15000/-. The cost would also depend on the state taxes. Likewise, when it comes to the registration of a private limited company, the cost would come ₹6000/- to ₹60,000. This would again depend on various factors like the number of members present in the company, number of directors, etc along with the professional fee.

Thus, registering a private limited company is the first step in establishing a successful business. Similarly, an eminent entrepreneurial journey depends on how well the key decisions are taken. Right from the business to be established, to the corporate entity to be taken for the respective business, an entrepreneur has to pitch in at various instances to take the right decision.

Moreover, that being said, getting into the intricacies of registrations and taking care of the compliances can turn burdensome to any business owner. Further, to ease such challenges, our experts here at VakilSearch can help the business be registered at the quickest possible without any hassles, as we clearly understand how important the business is for every entrepreneur. Moreover, a business owner can thus rest assured that the registration of the company will be accomplished at the snap of a finger when done by us.

Recent Posts

Related Posts

Tags: No tags

Leave A Comment

Your email address will not be published. Required fields are marked *