Private Limited Company Registration in India: Register Now

Starting a business in India is a significant step towards growth and success. One of the most popular and advantageous ways to structure your business is by registering it as a private limited company. In this blog, we will check the process of Private Limited company registration in India, covering the features, document check list, advantages and disadvantages and so on. 

What is a Private Limited Company? 

A private limited company is a type of business entity that is privately held for small businesses. The liability of the shareholders is limited to their shares, the company has a separate legal identity from its owners, and it offers several benefits such as limited liability, ease of raising capital, and more credibility. 

A private limited company in India is a popular business structure that offers several advantages and distinct features. Some of the key characteristics of a private limited company are listed here: 

• Separate Legal Entity 
  • A private limited company has a separate legal identity, separate from its shareholders and directors.
  • This means the Pvt Ltd company can own property, enter contracts, sue, and be sued. 

• Limited Liability 
  • On the shares, the liability of shareholders is limited to the amount unpaid. Shareholders’ personal assets are protected and cannot be used to pay off the company’s debts. 

• Perpetual Succession 
  • A private limited company has a continuous existence, irrespective of changes in ownership or management. The company remains in existence until it is legally dissolved. 

• Minimum and Maximum Number of Members 
  • A minimum of at least two shareholders must be there for a private limited company.
  • A maximum of 200 shareholders can be there. This restriction ensures the company remains private and closely held. 

• Minimum and Maximum Number of Directors 
  • A private limited company must have at least two directors and a maximum of fifteen.
  • Out of the directors, at least one must be a resident of India. 

• Restrictions on Transfer of Shares 
  • In a private limited company, share transfer is restricted. Shares can only be transferred with the approval of other shareholders, which helps maintain control within a small group of people. 

• No Invitation to the Public 
  • To subscribe to shares or debentures, a private limited company cannot invite the public.
  • This restriction helps maintain the company’s private status and control over ownership. 

• Name Suffix 
  • The name of a private limited company must end with “Private Limited” or “Pvt. Ltd”.
  • This differentiates the company from other business structures and indicates the company’s legal status. 

• Compliance and Regulatory Requirements 
  • Private limited companies must comply with various regulatory requirements, including filing annual returns, financial statements, and maintaining statutory registers. They are subjected to periodic audits. 

• Share Capital 
  • A private limited company must have a minimum paid-up share capital, as specified by the company.
  • There is no maximum limit on the share capital, allowing for flexibility in raising funds. 

• Taxation 
  • Private limited companies are subject to corporate tax rates and are eligible for various tax benefits and exemptions.
  • They must also comply with Goods and Services Tax (GST) regulations, if applicable. 

• Foreign Investment 
  • A private limited company can accept foreign direct investment (FDI) under the automatic route, subject to sectoral caps and regulations. This allows for easier access to foreign capital and investment. 

• Management and Control 
  • The management of a private limited company is typically handled by the board of directors.
  • Shareholders have the right to vote on key decisions, but day-to-day operations are managed by the directors. 

What are the types of Private Limited Companies? 

In India, private limited companies can be classified into different types based on specific criteria. Here are the main types: 

• Company Limited by Shares: 
  • The shareholder’s liability is limited to the amount unpaid on their shares. 

• Company Limited by Guarantee: 
  • Members’ liability is limited to the amount they agree to contribute to the company’s assets in case of winding up. 

• Unlimited Company: 
  • Members have unlimited liability, extending to their personal assets. 

What are the advantages of Private Limited Company?

Company Registration in India offers various benefits like limited liability, separate legal entity and so on. Let’s see the advantages of Private Limited Company. 

• Limited Liability:
  • Shareholders’ personal assets are protected; their liability is limited to their shareholding. 

• Separate Legal Entity:
  • The company has its own legal identity, separate from its owners, allowing it to own property, sue, and be sued. 

• Perpetual Succession:
  • Even if the ownership or management changes, the company continues to exist. 

• Ease of raising Capital:
  • Easier to attract investors and secure loans from banks. 

• Credibility:
  • Enhances business credibility and trustworthiness with clients, vendors, and investors. 

• Tax Benefits:
  • Potential for tax savings through various deductions and exemptions available to private limited companies. 

What are the disadvantages of Private Limited Company?

Private Limited Company registration not only has advantages, but also disadvantages. Some of the major disadvantages of Private Limited Company are as follows; 

• Regulatory Compliance: 
  • Must comply with numerous regulations and file annual returns, financial statements, and other documents. 

• Limited Capital: 
  • Cannot raise funds by issuing shares to the public, limiting the potential for capital growth. 

• Restrictions on Transfer of Shares: 
  • Shares can only be transferred with the consent of other shareholders, limiting liquidity. 

• Cost: 
  • Higher setup and maintenance costs compared to other business structures like sole proprietorship or partnership. 

• Disclosure Requirements: 
  • Required to disclose financial information and other details, which may not be desirable for some business owners. 

What are the requirements for company registration in India?

Before you start the Private Limited company registration process, ensure you meet the following requirements: 

• Minimum of 2 Directors: 
  • Any one director should be an Indian resident. 

• Minimum of 2 Shareholders: 
  • Directors can also be shareholders. 

• Unique Name: 
  • The proposed company name must be unique and not like any existing company or trademark. 

• Registered Office Address: 
  • A physical address in India where the company’s registered office will be located. 

What are the documents needed for Private Limited Company Registration in India?

To register a private limited company in India, various documents are necessary including: 

• Identity Proof of Directors and Shareholders:
  • PAN card (mandatory for Indian nationals) 
  • Passport (for foreign nationals) 
  • Voter ID, Aadhaar card, or driving license 

• Address Proof of Directors and Shareholders:
  • Passport 
  • Statement from bank or utility bill (not older than 2 months) 

• Registered Office Address Proof:
  • Rent agreement and NOC from the property owner (if rented) 
  • Sale deed or property deed (if owned) 
  • Utility bill (electricity, water, or telephone bill) 

• Other Documents:
  • Digital Signature Certificate (DSC) for all directors 
  • Director Identification Number (DIN) for all directors 
  • Memorandum of Association (MOA) along with Articles of Association (AOA) 
  • First subscribers and directors’ declaration in Form INC-9 
  • Proof of business activity, if applicable

What are the steps to register Private Limited Company?

For completing Private Limited Company Registration in India, you must follow this step-by-step process. 

• Obtain Digital Signature Certificate: 
  • All directors need a Digital Signature Certificate to sign documents electronically. 
  • You can obtain DSC from certifying authorities. 

• Apply for Director Identification Number: 
  • Directors must have a Director Identification Number. 
  • You can apply for DIN online by filling out the DIN application form and providing the necessary documents. 

• Name Approval: 
  • Propose a unique name for your company and submit it for approval. 
  • The name should comply with the naming guidelines and not be like any existing company or trademark. 

• Prepare Documents: 
  • Memorandum of Association:
    • Defines the company’s scope of activities. 
  • Articles of Association:
    • Defines the rules and regulations of the company. 
  • Form SPICe+:
    • An integrated web form for company registration. 
  • Form INC-9:
    • Declaration by the first subscribers and directors. 

• Filing for Incorporation: 
  • Submit the prepared documents along with the required forms to the Registrar of Companies (ROC). 
  • Pay the requisite fees for registration. 

• Verification and Approval: 
  • The ROC will review the application and documents. 
  • If everything is in order, the ROC will issue a Certificate of Incorporation (COI). 

• PAN and TAN Application: 
  • Along with the incorporation documents, apply for the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). 

Post-Incorporation Compliance

After Pvt Ltd company registration in India, ensure the following compliances: 

• Opening a Bank Account:
  • Open a current account in the company’s name. 
• Stamp Duty Payment:
  • Pay the stamp duty on the issued share certificates. 
• Register for GST:
  • If applicable, register for GST. 
• Other Licenses:
  • Obtain any other licenses required for your business operations. 

Conclusion

In conclusion, Private limited company registration in India offers numerous benefits for business owners. You can successfully register your private limited company and enjoy the advantages of limited liability, separate legal identity, and enhanced credibility. It’s essential to ensure all details and documents are accurate and complete. 

If you are looking to register your Private Limited Company in Bangalore or Hyderabad, the first step is consulting an expert like 24eFiling. Our team will help you register your dream company and make the process hazzle free. 

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