One of the most popular legal structures for incorporating a company in India is Private Limited Company. Registering a private company in India should be the first and foremost priority as a registered company enjoys multiple benefits starting from easy registration to easy dissolution. Private limited company setup is most popular among growing companies and startups because of easy outside funding, limited liability of shareholders and offering of employee stock options to pull in top talent.
Eligibility and characteristics of registering Private Limited company in India
- No minimum capital requirement for incorporating a private company in India.
- Every company can conduct any business activity provided, it is not illegal. Company can alter its business activities by taking prior approval of shareholders in general meeting and subsequently altering its Memorandum of Association (MOA).
- Directors or members of a private limited company have limited liability towards its creditors however liability of the company will always be unlimited. In other words, in case of default, creditors or banks can only sell the assets of the company but not director’s personal assets.
- Minimum 2 members are required in case of incorporation of a private limited company. If at any time during the course of the company, this minimum limit threshold falls, the company is required to restore the number of shareholders to the threshold limit within 6 months again.
- Maximum 200 people can be members in a private limited company. Generally, in case of a private company shares are not freely transferable. Shares cannot be offered to general public and consequently cannot be traded on a stock exchange.
- Minimum 2 and maximum 15 individuals can be directors of the company who are responsible for its management. Such maximum limit can be extended after passing special resolution.
- At least one director should be an Indian resident who stayed in India for more than 120 days in previous year.
Our services include
- Filing for name approval via Spice+
- Company formation via Spice+
- Applying for Permanent Account Number (PAN) / Tax collection and deduction Account Number (TAN)
- Registration under EPFO
- Registration under ESIC
- GSTIN through AGILE Pro form is optional
- Bank account opening
- Filing of INC20A i.e. declaration for commencement of business
- Obtaining DSC
- Accounting and booking services
- Trademark registration, if any
- Auditing and assurance services
- Registration, returns and certifications
- Handling representation, assessment and litigations
Following documents are required for incorporating private limited company in India
For directors and shareholders of the company:
- PAN card of all the Indian directors and shareholders of the company and Passport for foreigners
- Any Id proof of all the directors and shareholders of the company (Except Aadhar Card copy)
- Latest bank statement / utility bill which is not older than 2 months
- Passport size photographs
For registered office of the company:
- In case of owned property
- Registry proof, or
- House tax receipt
- In case of rented property
- Latest utility bill,
- Rent agreement, and
- No objection certificate from the owner of rented property
Advantages of incorporating private limited company in India
Private limited company enjoys multiple benefits as mentioned below:
- Banks, investors and venture capitalists prefer investing in private limited company.
- Easy registration and management.
- Private company’s shares are not traded on stock exchanges hence they are not required to adhere to the stringent securities market regulations. In other words, flexibility of partnership firm and advantages of public limited company constitute private company.
- Allocation as well as redistribution of shares to investors or other directors is convenient.
- Owner of sole proprietorship is personally liable for payment of liabilities or debts whereas in a private company concept of limited liability is adhered to, followed by the concept of separate legal entity.
- Lucid dissolution or winding-up procedure.
- Confidentiality is maintained as private companies are not mandatorily required to reveal financial results to general public, however, financials are filed with MCA and can be accessed on payment of requisite fees. This also eliminates the pressure of meeting the expectations of both shareholders as well as analysts.
Concerns regarding private limited company
- A private company can have maximum 200 members only.
- A private company has to undergo a range of post-incorporation compliances including holding board meeting, getting accounts audited, maintaining registers and filing of returns.
- Minimum requirement of two members often leads to division of ownership. Hence, any major decision would require the consent of two different people.
- Procedure of winding up of a company can be complex, lengthy and time consuming as compared to an unregistered partnership firm.
- Though having limited liability, members of a private company will be personally liable in the following cases:
- The name of the company is misstated in any contract or act, then those who have executed the contract or undertaken the activities will be personally liable.
- In case of winding up, if any contract or activity is carried on with the motive of defrauding creditors, persons who are knowingly party to the contracts will be personally liable.
Despite these disadvantages, entrepreneurs prefer opting for a private limited company structure for the flexibility in share transferability and inherent future growth.
For detailed procedure on incorporating private company in India, click here.