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Overview of Private Limited Company Registration
Currently, Private Limited Companies make up to almost 96% of the total companies in India. Till November 20, 2023, there are 25,99,660 private limited companies registered in India. The huge number of company registrations amounts to the ease and benefit provided by India. Though registering a company in India is not mandatory but the company registration offers significant benefits to the founders as well as stakeholders. By the end, you will be able to understand the key legal requirements to register a private limited company in India, along with its compliance obligation and much more.
What is a Private Limited Company?
In India, there are several companies that can be registered. A Private Limited Company is one of them. A Private Limited Company bearing the suffix of ‘Pvt. Ltd.’ at the end of its name is a separate legal entity registered under the Companies Act, 2013with the Registrar of Companies (ROC). The main feature of this type of company is that it offers limited liability protection to its shareholders; it means that the liability of the shareholders is only up to the extent of shares held by them, and the personal assets of shareholders (owners) are protected from the obligations of the company. The company can be owned by multiple shareholders and managed by appointed directors. It is separated from the owners of the company, and its legal existence continues even if there are changes in the ownership or management, which provides security and stability to the company.
Why Should You Register a Private Limited Company?
There are several compelling reasons why forming a Private Limited Company can be beneficial:
-
Limited Liability Protection
As a private limited company, the liability of its shareholders is restricted to the unpaid amount on their shares. This means that if the company faces financial distress or legal liabilities, the personal assets of the shareholders (directors or members) will not be at risk.
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Separate Legal Entity
A company is a juristic person in the eyes of law. The legal entity of the company is distinct from its shareholders and directors. The company is capable of entering contracts in its own name, it can sue and can be sued in its own name. The liability and credibility of the company is separated from its stakeholders.
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Perpetual Succession
The existence of the company is independent of the existence of its shareholder or director. Unlike a partnership or sole proprietorship, the private limited company enjoys a perpetual succession, which means that the existence of the company is affected by the death, insolvency, or retirement of any shareholder or director. This perpetual succession guarantees the continuity of the business even if one of the company's stakeholders leaves the company.
-
Easy Transferability of Shares
Registering a company in India offers easy transferability of shares means that shares of the company can be transferred from one shareholder to another. The leverage smoothens out the transaction in management of the company and later enhances the flexibility in business operations of the company.
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Access to Investments and Funding
Capital can be easily raised in a registered Private Limited Company offers as Equity shares can be easily issued by company to raise fund. Issuing equity shares attracts potential investors and venture capitals to invest in the company.
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Increased Trustworthiness
Registering a Private Limited Company enjoys greater market credibility as compared to other business structures. The greater credibility leads to increased trustworthiness among investors. The advantage is gain by the company due to its registration. Registering a company makes the company legally recognizable and shows that it meets with the regulatory standards.
Checklist for Private Limited Company Registration in India
- Minimum 2 directors with at least 1 is a resident of India
- Minimum 2 shareholders
- DIN and DSC obtained from Ministry of Corporate Affairs
- Proof of identity and address for all directors and shareholders
- Proof of registered office address
- Unique name of the company (after checking availability on MCA website and Trademark Website)
- MOA and AOA drafted
- Decide on the share capital and shareholding pattern
- Consent form signed by all directors
- Submit all required documents for filing with the Registrar of Companies (ROC)
Documents Required for Pvt Ltd Company Registration in India
1. Identity Proof of Directors and Shareholders
The formation of a private limited company needs the filing of name proof for both directors and owners. This includes papers such as the PAN Card, Passport, and Voter ID, which serve as vital proof to show the names of people working with the company.
2. Address Proof of Directors and Shareholders
Another important paper needed for company registration is the Address Proof of directors and owners. This generally includes papers like the Aadhar Card, bank accounts, and driving licenses, which show the home addresses of the company's workers.
3. PAN Card
A PAN Card is a necessary record for directors and owners of a Private Limited Company. This unique identification number is important for financial reasons and legal tasks, ensuring clarity and responsibility within the company.
4. Passport-size Photographs
Submission of Passport-sized Photographs is necessary during the private company registration process. These pictures are used for various formal reasons and papers, helping identify and show leaders and owners.
5. MOA and AOA
The Memorandum of Association and Articles of Association are important papers needed for filing. The MOA describes the company's goals and area of operations, while the AOA sets the business's internal rules and management structure. These papers are important for describing the company's organisation and processes.
|
S. No. |
Document Name |
Required for |
|
1. |
Proof of Identity (PAN, Passport, etc.) |
Directors and Shareholders |
|
2. |
Proof of Address (Utility Bills, etc.) |
Directors and Shareholders |
|
3. |
Proof of Registered Office Address |
Registered Office of the Company |
|
4. |
Director Identification Number (DIN) |
Directors |
|
5. |
Digital Signature Certificate (DSC) |
Directors |
|
6. |
Memorandum of Association (MOA) |
Company |
|
7. |
Articles of Association (AOA) |
Company |
|
8. |
Proof of Ownership/Rent of Registered Office |
Company |
|
9. |
Consent of Directors |
Directors |
|
10. |
Shareholders Agreement (if it exists between the shareholders) |
Shareholders |
|
11. |
Declaration by Promoters |
Promoters and Directors |
|
12. |
Share Capital Details |
Company |
|
13. |
Passport & Address Proof (for the directors who are not resident of India) |
Foreign Directors |
Private Limited Company Registration Process in India
The registration process for a Private Limited Company is straightforward but requires compliance with several legal and procedural requirements under the Companies Act 2013. Below are the step-by-step processes involved:
Step 1: Obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN)
Before registering the company, the Directors of the proposed Private Limited Company are mandated by Law to two critical documents that are as follows:
- Digital Signature Certificate (DSC): This certificate is crucial for signing the documents electronically during the registration process of company. DSC ensures the authenticity of the signatures of the directors on electronic filings and save the company from potential frauds.
- Director Identification Number (DIN): As per Section 153 of the Companies Act 2013, every director of a company must obtain a DIN. This is a unique identification number issued by the Ministry of Corporate Affairs (MCA). It helps in tracking the directors in the company and ensures the accountability and transparency of the directors towards the company.
Step 2: Reserve a Company Name (Section 4 of the Companies Act, 2013)
The second most essential step is to reserve the name of the company. The name must be unique, not similar to any existing company, and should not infringe on any registered trademarks. The law mandates the company name should reflects the business activity of the company and it should comply with the naming conventions laid down by the Registrar of Companies (ROC).
- The proposed name should be checked for availability using the MCA portal.
- You will need to submit a Name Reservation Application online through the MCA's RUN (Reserve Unique Name) service.
Step 3: Draft the Memorandum of Association (MOA) and Articles of Association (AOA)
The next crucial step is the submission of the Memorandum of Association (MOA) and the Articles of Association (AOA), which are critical documents that need to be drafted as part of the registration process:
MOA: Memorandum of Association is the document that outlines the main objectives, purpose, activities, and scope of the company. It specifies the activities are being taken by the Company. The document ensures that the company operates within the scope and objectives of the company as outlined. It is pertinent to note that once MOA is drafted, the MOA, it cannot be amended. Directors and shareholders are mandated by law to sign the MOA.
AOA: Article of Association is the document that lays out the rules and regulations for the internal management of the company. It lists the rights and duties of directors, stakeholders, and individuals. It contains-
- The company name and form of business
- Purpose/Objective of the Company
- Capital structure of the company
- Corporate governance of the company
- Administration of the corporate records.
It is pertinent to note that the changes can be made in the AOA of the company with the approval of the directors. Directors and shareholders are mandated by law to sign the MOA.
Step 4: File Incorporation Documents with the Registrar of Companies (ROC)
Once the MOA and AOA of the company are drafted and are ready to be filed, the next step is to file them online through the MCA portal with the appropriate fee with the following necessary documents with the Registrar of Companies (ROC):
- Identity Proof of Directors and Shareholders: This can be a PAN card, passport, or voter ID.
- Address Proof of Directors and Shareholders: This can include Aadhar cards, bank statements, or utility bills.
- Proof of Registered Office Address: This includes documents the registered office of the company, if the registered office of the company is taken on rent then it shall include the rental agreement or electricity bill of the company.
- Consent from Directors: Each director of the company is mandated to consent to their appointment and sign that consent form.
Fee Structure for Filing MOA and AOA with ROC
There is a different fee for filing MOA and AOA with different authorized capital. The fee structure is as follows:
- Authorized Capital up to ₹1 Lakh - Rs. 500
- Authorized Capital Between ₹1 Lakh and ₹5 Lakh - Rs. 1000
- Authorized Capital Between ₹5 Lakh and ₹10 Lakh - Rs. 2000
- Authorized Capital Between ₹10 Lakh and ₹50 Lakh - Rs. 3000
- Authorized Capital Between ₹50 Lakh and ₹1 Crore - Rs. 4000
- Authorized Capital Between ₹1 Crore and ₹5 Crore - Rs. 5000
- Authorized Capital Between ₹5 Crore and ₹10 Crore - Rs. 6000
- Authorized Capital Exceeding ₹10 Crore - Rs. 7000
Step 5: Obtain a Certificate of Incorporation
Once all the documents are verified by ROC and ROC is satisfied with the compliance of the company, Certificate of Incorporation will be issued by the ROC. The certificate officially states that the Private Limited Company is incorporated officially marks the formation of your Private Limited Company. A Corporate Identification Number (CIN) is also included in the Certificate which is the unique Identification number for each company.
Compliance and Legal Requirements for Private Limited Companies
A Private Limited Company has to comply with a number of statutory obligations. These include:
1. Appointment of Directors:
It is mandated that a Private Limited Company must have at least two directors and one of the directors must be a resident of India, i.e., the director must have stayed in India for at least 182 days during the preceding one year.
2. Annual Filing (Section 137 and 92 of the Companies Act, 2013)
- Every Private Limited Company must file an Annual Return with the ROC. This includes details of the company’s financial performance, shareholding pattern, and other business activities.
- The balance sheet and profit and loss account must also be submitted within 30 days of holding the Annual General Meeting (AGM).
- Companies must hold an AGM each year to review the company’s financial position and make decisions on key matters, such as the appointment of auditors and the approval of financial statements.
3. Statutory Registers (Section 118 of the Companies Act, 2013)
Private Limited Companies are required to maintain certain statutory registers, including:
- Register of members
- Register of directors and key managerial personnel
- Register of charges (if any)
4. Compliance with Tax Laws
Private Limited Companies must comply with Income Tax and GST regulations of India. The compliance includes appropriate and timely filing of income tax returns with the Income Tax Departments, obtaining the GSTIN number of the company if it is applicable and regular and timely payments of taxes.
Tax Benefits of a Private Limited Company in India
Private Limited Companies enjoy certain tax benefits in India provided under the Income Tax Act of 1961 that have the potential to maximize the profits of the businesses. Below are some of the key tax benefits enjoyed by the Private Limited Companies in India:
|
Tax Benefits |
Private Limited Company |
Sole Proprietorship |
Partnership Firms |
|
Tax Rate on Profit |
Only 25% for turnover up to ₹400 Crore and 30% for more |
Depends upon the personal income tax bracket (10% - 30%) |
Depends upon the personal income tax bracket (10% - 30%) |
|
Tax Deductions for Expenses |
Yes, on salaries, rent, and assets of the company |
No tax deductions for personal income |
Yes, but profits are taxed as personal income |
|
Depreciation on Assets |
Yes, it reduces the taxable income |
No tax deductions for personal income |
Yes, it reduces taxable income |
|
Dividends Tax |
No tax on dividends shared with shareholders (since 2020) |
Not applicable as the owner has sole right over the profit |
Not applicable as profit is shared among the partners |
|
Carry Forward of Losses |
Yes, the company can carry forward losses to reduce future tax bills |
Not available |
Yes, the firm can carry forward losses to reduce future tax bills |
|
GST Benefits |
Yes, tax can be claimed back on business expenses |
Not applicable unless and until it is specifically registered for GST |
Yes, tax can be claimed back on business expenses |
Why Choose Kanakkupillai for Private Limited Company Registration?
Kanakkupillai is a trusted service provider for Private Limited Company registration in India. With years of expertise, we offer end-to-end assistance in setting up your business. Our services include:
- Expert Guidance: Our team of legal and accounting professionals helps you through every step of the registration process.
- Efficient Processing: We ensure you a quick and hassle-free registration process aimed at minimizing delays.
- Transparent Pricing: We offer clear pricing with no hidden fees. Every fee is made clear at the beginning.
- Post-Registration Services: We offer comprehensive services like GST registration, tax filing, and compliance support, to ensure your business remains complaint throughout the year.
Frequently Asked Questions
What is the minimum capital required to register a Private Limited Company?
There is no minimum paid-up capital requirement for registering a Private Limited Company in India.Can a foreigner be a director in a Private Limited Company?
Yes, foreigners can be directors, but at least one director must be a resident of India, as per Section 149 of the Companies Act, 2013.How long does it take to register a Private Limited Company in India?
The registration process generally takes between 7-15 business days, depending on the speed of document verification and approvals.What are the legal standards for Private Limited Companies?
Compliance Requirements: Private Limited Companies must stick to several compliance requirements under the Companies Act, 2013, including having yearly general meetings, filing annual reports, hiring accountants, and more.Do I need a physical office for registration?
Yes, a registered office in India is mandatory. This office must be in a location where official correspondence and notices from the ROC can be sent.What are the perks of choosing a Private Limited Company structure?
Advantages of Private Limited Company: Benefits include limited liability protection, ease of getting capital via shares, constant succession, reliability, and agreement with regulatory norms.Can a Private Limited Company change to a Public Limited Company?
Conversion to Public Limited Company: Yes, a Private Limited Company may change to a Public Limited Company.What is the difference between a Private Limited Company and a Limited Liability Partnership (LLP)?
Difference from LLP: The basic difference between a Private Limited Company and a Limited liability Partnership (LLP) rests in their structure and responsibility features. A Private Limited Company has owners and limited liability protection, whereas an LLP has partners with limited liability but without shares.How can I change the name of my Private Limited Company?
Changing Company Name: To change the name of a Private Limited Company, you need to follow the way given by the Ministry of Corporate Affairs in India.What are the penalties for non-compliance with legal duties for Private Limited Companies?
Penalties for Non-Compliance: Punishments for non-compliance with regulatory requirements for Private Limited Companies might change depending on the individual infringement and may include fines or other legal punishments as per the Companies Act, 2013.We Provide Best Quality
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