A private limited company is a type of business entity in India that is privately held and limited by shares. It is a legal structure that provides limited liability protection to its shareholders and ensures that the company’s operations are governed by the Companies Act, 2013. This type of company is preferred by entrepreneurs who want to start a business with a few trusted partners, as it allows them to maintain greater control over the company’s management and operations. In a private limited company, the shareholders cannot sell their shares publicly, and the number of shareholders is limited to a maximum of 200. It is a popular choice for small and medium-sized enterprises (SMEs) in India.
Private limited companies are important in India due to several reasons. Firstly, it provides limited liability protection to its shareholders, which means that the personal assets of shareholders are not at risk in case of the company’s losses or debts. This helps to encourage entrepreneurship and investment, as it reduces the risk associated with starting and running a business.
Secondly, private limited companies are governed by the Companies Act, which provides a legal framework for their operations. This helps to ensure that they are run in a transparent and accountable manner, with clear rules and regulations that protect the interests of shareholders, employees, and other stakeholders.
And finally, private limited companies are preferred by investors and lenders, as they are perceived as more reliable and stable compared to other types of businesses. This makes it easier for them to raise capital and secure funding from banks, financial institutions, and other investors.
Importance of preparation before registration
Preparing before registering a private limited company in Chennai India is important to ensure a smooth and successful registration process. This involves conducting research to identify the appropriate business structure, defining the company’s goals and objectives, and creating a business plan. It is also important to identify and finalize the shareholders, directors, and other key personnel, as well as decide on the company’s name and register it with the Registrar of Companies. Additionally, it is important to ensure that all necessary documents and paperwork are in order, such as the Memorandum of Association, Articles of Association, and other legal documents. Proper preparation can help avoid delays and ensure compliance with legal requirements, setting the company up for success in the long run.
Benefits of proper preparation
Proper preparation for the private limited company registration in India offers several benefits, such as:
- Helps to choose the right business structure and avoid costly mistakes in the future.
- Enables the company to define its goals and objectives, ensuring clarity of purpose.
- Provides a roadmap for the development, journey and growth of a company.
- Facilitates the identification of the right shareholders, directors, and other key personnel.
- Enables the company to create a robust business plan, which can be used to secure funding and attract investors.
- Helps to ensure compliance with legal requirements and avoid delays in the registration process.
- Enables the company to start operations smoothly and achieve its objectives efficiently.
- Provides a strong foundation for long-term success and growth.
Understand the Private Limited Company Structure
A private limited company is a form of business entity that is privately held and has a share capital. It offers its stockholders limited liability protection and is controlled by the Companies Act 2013. Entrepreneurs who wish to create a firm with a few trusted partners prefer private limited companies / corporations because they allow them to keep greater control over the company’s administration and operations.
Types of private limited companies
In India, private limited companies are governed by the Companies Act, 2013, and are a popular form of business entity. There are different types of private limited companies that can be incorporated in India, based on their activities, ownership, and share capital. Here are some of the most common types:
- One Person Company (OPC): A company with only one shareholder, who is also the sole director.
- Small Company: A company with a lower turnover and a smaller share capital.
- Producer Company: A company formed for the promotion of the interests of its members engaged in the production, marketing, and sale of agricultural produce.
- Non-profit Company: A company formed with the objective of promoting art, science, education, religion, charity, or any other similar objective.
- Section 8 Company: A company formed with the aim of promoting social welfare, charity, education, environment protection, or any other similar object.
- Holding Company: A company formed with the primary purpose of holding shares in other companies.
- Subsidiary Company: A company that is controlled by another company, which holds the majority of its share capital.
These are some of the types of private limited companies that can be incorporated in India, and each type has its own specific characteristics and regulations.
Structure of a private limited company
In India, a private limited company is a separate legal entity that is owned and controlled by its shareholders. The structure of a private limited company typically includes shareholders, directors, and a company secretary. The shareholders are the owners of the company and have the right to vote on company matters, while the directors are responsible for managing the day-to-day operations of the company. A company secretary is appointed to ensure compliance with the Companies Act, 2013, and other applicable laws. Private limited companies also have a Memorandum of Association and Articles of Association, which set out the objectives and regulations of the company. The company is required to maintain proper records and accounts and is subject to annual audits.
Pvt Ltd Company Pre-Registration Steps
- Choosing a unique name for the company – Choosing a unique company name for a private limited company is a crucial pre-registration point in India. The name should not be identical or similar to any existing company’s name or trademark. The name should also not violate any existing laws or be misleading. A name availability search should be conducted on the Ministry of Corporate Affairs website to ensure the proposed name is available for use.
- Acquiring a digital signature certificate (DSC) – Acquiring a Digital Signature Certificate (DSC) is an essential pre-registration point for registering a private limited company in India. It is a digital certificate that serves as an electronic signature, allowing individuals to sign documents and forms electronically. DSC is mandatory for all directors and authorized signatories of the company, and it is required for filing various documents with the Registrar of Companies (ROC) during the registration process.
- Obtaining a director identification number (DIN) – Obtaining a Director Identification Number (DIN) is a pre-registration requirement for registering a private limited company (PLC) in India. DIN is a unique identification number assigned to directors or proposed directors of a company. To obtain a DIN, the director must submit an application online to the Ministry of Corporate Affairs (MCA) and provide the required documents such as a PAN card, Aadhar card, and photograph. Once approved, the DIN can be used for all future filings and registrations.
- Drafting the company’s memorandum of association (MOA) and articles of association (AOA)
The Memorandum of Association (MOA) is a crucial document for registering a private limited company in India. It outlines the company’s objectives, powers, and scope of business operations. The MOA of private limited company must include the:
- company’s name,
- registered office address,
- authorized capital, and
- liability of shareholders.
It must be drafted in accordance with the Companies Act, 2013, and signed by all subscribers in the presence of witnesses.
The Articles of Association (AOA) outline the rules and regulations that govern the internal workings of a private limited company in India. This document typically covers matters such as the company’s share capital, the appointment and removal of directors, voting rights, and the distribution of profits. By drafting the AOA as a pre-registration point, companies can ensure that their legal structure and operating procedures are clearly defined from the outset.
Documents Required for PLC Registration
The documents required for the private limited company registration in India include the:
– Memorandum of Association,
– Articles of Association,
– a declaration by a professional certifying the compliance of all legal formalities,
– proof of registered office address,
– proof of identity and address of directors and shareholders, and
– PAN and TAN numbers.
Other documents such as rental agreement, NOC, and board resolution may also be required depending on the specific case.
Understanding the importance of each document
Each document required for the registration of a private limited company in India serves a specific purpose and is important in its own right.
- Memorandum of Association: It defines the company’s objectives and scope of activities, including the authorized share capital and the rights and liabilities of shareholders.
- Articles of Association: It outlines the company’s internal rules and regulations, including the management and operations of the company.
- Declaration by a professional: It certifies that all legal formalities have been complied with and that the documents submitted are genuine and accurate.
- Proof of registered office address: It establishes the company’s registered office address and serves as proof of identity for the company.
- Proof of identity and address of directors and shareholders: It helps to verify the identity and address of the directors and shareholders, ensuring compliance with KYC norms.
- PAN and TAN numbers: These are mandatory tax identification numbers that are required for conducting business in India.
Each document is essential for the registration process and ensures compliance with legal requirements, setting the company up for long-term success.
Tips for gathering and organizing the documents
- Gather all necessary documents such as ID proof, address proof, and PAN cards of directors and shareholders.
- Obtain a digital signature certificate (DSC) for directors and shareholders.
- Prepare a Memorandum of Association (MOA) and Articles of Association (AOA).
- Get the company name approved by the Registrar of Companies (ROC).
- Register for a Director Identification Number (DIN) for each director.
- Obtain a Permanent Account Number (PAN) for the company.
- Organize the documents in a systematic manner and keep copies of all documents for future reference.
Finances and Funding
Understanding the financial requirements for pvt ltd registration
To register a private limited company in India, there are certain financial requirements that need to be fulfilled. The authorized share capital must be decided, which is the maximum amount of capital that the company can issue to its shareholders. A minimum paid-up capital is no longer required for private limited companies. However, the company must have a bank account and maintain proper accounting records, including income statements, balance sheets, and cash flow statements. Additionally, the company must comply with tax laws and obtain necessary tax registrations, such as GST registration, as applicable.
Preparing the initial capital and bank account for the company
To prepare the initial capital for the company, the shareholders must decide on the authorized share capital and issue shares accordingly. The capital can be raised through equity, loans, or a combination of both. To open a bank account for the pvt ltd company, the shareholders must provide the necessary documents such as the Memorandum of Association, Articles of Association, proof of identity and address of directors and shareholders, and PAN and TAN numbers.
Funding options for private limited companies
Private limited companies in India can raise funds through various sources such as equity funding, debt financing, venture capital, angel investors, and crowdfunding. They can also opt for government schemes like MUDRA, Stand-Up India, and Startup India to avail of financial assistance and support.
Overview of legal compliance requirements for private limited companies
The legal compliance requirements for registering a pvt ltd company in India include:
- Obtaining a DIN / Director Identification Number and DSC / Digital Signature Certificate for the proposed directors.
- Conducting a company name availability search and obtaining approval from the Registrar of Companies (ROC).
- Drafting and filing the Memorandum of Association and Articles of Association with the ROC.
- Obtaining a Certificate of Incorporation and Permanent Account Number (PAN) from the ROC.
- Registering for Goods and Services Tax (GST) and other applicable taxes.
- Complying with labor laws, such as the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI).
- Complying with environmental laws, such as obtaining necessary clearances and permits.
- Filing annual returns and maintaining proper accounting records.
- Conducting board meetings and general meetings in compliance with the Companies Act and other applicable laws.
Failure to comply with these requirements may result in penalties or legal action, highlighting the importance of ensuring compliance with all legal formalities.
Understanding the importance of compliance
Compliance is crucial for private limited companies in India to ensure that they meet legal and regulatory requirements. Non-compliance can lead to penalties, legal proceedings, and damage to the company’s reputation. By maintaining compliance, companies can establish trust with stakeholders, maintain their legal status, and operate in a transparent and responsible manner.
Tips for staying compliant
- Stay updated on changes in laws and regulations.
- Maintain accurate / correct and timely files or records of financial transactions.
- File necessary documents with the Registrar of Companies (ROC) on time.
- Conduct regular audits and ensure all necessary licenses and permits are obtained.
- Appoint a compliance officer to oversee compliance matters.
- Train employees on compliance policies and procedures.
- Seek professional help from legal and accounting experts when needed.
In conclusion, preparing for the private limited company registration process in India requires careful planning and attention to detail. Companies must gather and organize necessary documents, obtain digital signatures, and prepare the Memorandum of Association (MOA) and Articles of Association (AOA). They should also explore funding options and understand the importance of compliance to ensure a successful and legally compliant registration process. By following these tips and seeking professional help when needed, companies can navigate the registration process with ease and set a strong foundation for their business in India.
Kanakkupillai is a professional service provider that specializes in company registration services in India. We offer a range of services to assist companies in registering their private limited company, including:
- Providing expert guidance for the registration of the entity.
- Aid with the name approval process.
- Assisting with obtaining Digital Signature Certificates (DSC) and Director Identification Numbers (DIN).
- Preparing Memorandum of Association (MOA) and Articles of Association (AOA).
- Registering the company with the Registrar of Companies (ROC).
- Providing compliance and legal support services.
By associating with Kanakkupillai and availing of our services, companies can ensure a smooth and hassle-free registration process and focus on growing their business in India.
- Proprietorship firm registration
- GST Return Filing Online
- Income Tax Return Filing Online
- Trademark Registration Online
FAQ On Private Limited Company
A private limited company is a group of persons who manage a tiny business. Members of a Private Limited Company are only responsible for the quantity of shares that they actually own. Private Limited Company shares cannot be exchanged on a public market.
Yes, a small business can apply to become a private limited company with the Indian government. They gain credibility and a good impression of their business in the eyes of vendors, potential clients, and financial institutions. It enables the firm to enter into contracts with potential clients or banks and acquire financing with little compliance.
Private limited company is the simplest and most widely used kind of business registration in India. It can be registered with at least two individuals. It is the most suggested type of business entity for the vast majority of small and medium-sized businesses, whether they are family-owned or managed by professionals, due to the limited liability protection provided to shareholders, the ability to raise equity funds, and the separate legal entity status.
Limited Liability Partnerships are defined as those in which the partners have limited liability at that time (LLP). LLP essentially combines the terms "company" and "partnership." Professionals, medium-sized firms, and small businesses typically prefer it as an alternative method of business registration in India. Limited The LLP Act of 2008 and the LLP agreement signed at the time of incorporation serve as its legal framework.
After receiving the DSCs and DINs, the next step is to file the Form INC-1 to ensure the availability of the proposed name of the private limited business. The company's Memorandum of Association (MOA) and Articles of Association (AOA) will then be drafted if necessary. Finally, Form INC-29 together with all necessary documents will be submitted to the relevant ROC for incorporation of the proposed business.
There is no longer a specific form needed to obtain the DIN if a person wants to become a director of the company. Instead, they must apply for the Director Identification Number. The SPICe form can be used to apply for a DIN. There is no unique form needed.
It is necessary to submit the needed fee together with documentation of the applicant's identity and residence. Approval of the DIN typically takes 3–4 days. Once you receive your DIN, you can use it forever.
In the perspective of financial institutions, suppliers, and potential customers, it gives business credibility. It makes it simpler for businesses to persuade potential customers to enter into arrangements or to obtain loans from banks at advantageous rates.
Yes, after following the Companies Act, 2013, procedures, a sole proprietorship can become a private business registered.
The following documents must be submitted when a private limited company is registered in India:
Picture of each Director taken by PAN ID card for each Director All Directors' Identification (Driver's License, Passport, or Voter ID)
Electric bills, such as an electricity bill, can serve as evidence of a registered office's address.
For a private limited company to be incorporated, there must be a minimum of two directors. One Person Company (OPC) private limited, which allows a single person to establish a private limited company, was created by the Companies Act of 2013. Consequently, if you want to incorporate OPC, you can do it with just one director.
Yes, registration for a private limited company is required because a firm cannot exist without registration.
Following are the ROC requirements that a Private Limited Company must meet:
- Form ADT 1: Within 30 days of incorporation, the BOD shall appoint the company's first auditor, who shall serve in that capacity until the end of the first annual general meeting
2. Form MGT 7: Every year, Form MGT-7 must be submitted by all Indian enterprises. The Ministry of Affairs provides all corporations with an electronic form to complete in order to submit their annual return information. Within 60 days of the date of the annual general meeting, MGT-7 must be filed.
3. Form AOC 4: Within 30 days of the annual general meeting, every private limited company must file its balance sheet, a statement of profit and loss, and a director report in this form.
The above forms must be CA/CS/CWA certified.
The Ministry of Corporate Affairs must receive an application from anyone wishing to register a new company in India (MCA). You can submit your application remotely through the MCA site online. A Digital Signature Certificate (DSC) and a Director Identity Number (DIN), among other things, are required for registration.
- Apply for DSC (Digital Signature Certificate)
- Request a DIN (Director Identification Number)
- Request the availability of the name.To register the private limited corporation, file the EMOA and EAOA.
If a One Person Company's paid up capital surpasses Rs. 50 lakhs or its annual sales turnover exceeds Rs. 2.00 crores, it must be legally transformed into a Private Limited Company.
(Aadhar card, driver's license, ration card, voter ID) evidence of residence (Electricity bill or bank statement) Rental agreement notarized. The property owner's NOC, or No Objection Certificate, is required.