India is a growing market with a vast consumer base, and it has become an attractive destination for businesses looking to expand their reach. The country’s government has implemented several reforms to ease starting and running a business, making it more accessible to entrepreneurs. One of India’s most popular business structures is the private limited company.
This article will discuss the requirements, process, and legal obligations of forming a private limited company in India. We will provide a step-by-step Pvt Ltd registration guide to help entrepreneurs navigate the process and understand their legal obligations.
What is a Private Limited Company?
A private limited company is a type of business structure that limits the liability of its shareholders. In a private limited company, the number of shareholders is limited to a maximum of 200, and the company’s shares cannot be publicly traded. This structure is ideal for small and medium-sized businesses looking to raise funds from a limited number of investors.
Advantages of a Private Limited Company
One of the main advantages of a private limited company is limited liability. This means that the liability of the shareholders is limited to the amount of money they have invested in the company. This protects the shareholders’ personal assets in case the company incurs losses or faces legal action.
Another advantage of a private limited company is perpetual succession. This means that the company’s existence is not affected by the death or departure of any of its shareholders. The company continues to exist, and the shares can be transferred to the heirs or new shareholders.
A private limited company also has a separate legal identity from its shareholders. This means the company can enter into contracts, own property, and sue or be sued in its own name.
Requirements for Forming a Private Limited Company in India
A private limited company must have a minimum of two directors, and at least one of them must be a resident of India. A director is a person who is responsible for managing the affairs of the company and making decisions on behalf of the company. The shareholders appoint the directors, which the shareholders can also remove.
A private limited company must have a minimum of two shareholders, and the maximum number of shareholders is limited to 200. The shareholders are the company’s owners and invest in the company by buying its shares. The shares cannot be publicly traded, and the transfer of shares is restricted.
4) Minimum Capital Requirement
Unlike in the past, there is no longer a minimum capital requirement for incorporating a private limited company in India. However, the company must have a minimum authorized capital of Rs. 1 lakh. The authorized capital is the maximum capital the company can raise through issuing shares.
5) Registered Office Address
A private limited company must have a registered office address in India. This is the address where all official correspondence and notices will be sent. The registered office address can be a commercial or residential address, and the registrar of companies must verify it.
Process for Incorporating a Private Limited Company in India
The process for incorporating a private limited company in India is as follows:
- Name Approval – The first step in incorporating a private limited company is to obtain name approval from the Registrar of Companies (ROC). The company’s name must be unique and not be similar to the name of an existing company. Once the name is approved, it is valid for 20 days.
- Digital Signature Certificate (DSC) and Director Identification Number (DIN) – The next step is to obtain a digital signature certificate (DSC) and a director identification number (DIN) for the directors. A DSC is required to sign the electronic forms submitted to the ROC, and a DIN is required for every director of the company.
- Preparation of Documents – The next step is to prepare the necessary documents, including the memorandum of association (MOA) and articles of association (AOA). The MOA contains the objectives and scope of the company’s activities, while the AOA contains the rules and regulations for the company’s internal management.
- Filing of Forms with the Registrar of Companies (ROC) – The next step is to file the necessary forms with the ROC, including the incorporation, MOA, and AOA. Once the forms are filed, the ROC will review the documents and issue a certificate of incorporation if everything is in order.
- Certificate of Incorporation – The final step is obtaining the incorporation certificate from the ROC. This certificate proves that the company has been incorporated and is authorized to carry out its activities.
Legal Obligations of a Private Limited Company
A private limited company in India has several legal obligations, including the following:
1) Maintenance of Statutory Registers – The company must maintain several statutory registers, including the register of members, directors, charges, and loans and investments. These registers must be updated regularly and kept at the registered office address.
2) Filing of Annual Returns and Financial Statements – The company must file annual returns with the ROC, which contain information about the company’s activities and financial status. The company must also file financial statements, including the balance sheet, profit and loss account, and cash flow statement.
3) Conducting Annual General Meetings (AGM) – The company must conduct an annual general meeting (AGM) every year to present the financial statements to the shareholders and to elect or re-elect the directors.
4) Payment of Taxes – The company must pay various taxes, including income tax, goods and services tax (GST), and professional tax.
Private limited company registration in India can be a complex process, but it offers numerous advantages to entrepreneurs. By limiting the liability of the shareholders and providing perpetual succession, a private limited company is an ideal structure for small and medium-sized businesses. With the right guidance and support, entrepreneurs can successfully incorporate a private limited company in India and reap the benefits of this popular business structure.
Looking to start your own Private Limited Company in India? Kanakkupillai can help you get there quickly and easily!
Our expert team can guide you through the entire process, from company registration to compliance, and ensure you’re always in good standing with the authorities. With our help, you can focus on building your business while we handle the paperwork.
- GST Return Filing Online
- Trademark Registration Online
- Income Tax Return Filing Online
- Sole Proprietorship Registration Online
FAQ on Pvt Ltd Company Formation in India
Limited companies have some advantages for people who want to run their own businesses rather than becoming sole traders or forming a partnership. One of the main advantages of a limited company is that liability for shareholders or owners is limited and personal assets are protected.
A private limited company is an individual entity created by law, has the limited liability of its members, restricts the transfer of its shares, and limits the total number of members up to 200.
The companies that run Flipkart, Ola, Snapdeal, Carat Lane, and Zoom Car are all private entities, while those that run Zomato, MakeMyTrip, and Infibeam are among the first Indian internet startups to have gone public
First, a private company is its own legal entity. This means that you and your shareholders will not be held personally liable for any debts incurred by the company. Second, investors, customers and suppliers will often feel more comfortable when dealing with a registered company.
Minimum age to register a company in India is 18 years. This is mandated by the Companies Act, 2013, which sets the minimum age requirement for companies as well as individual directors