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Overview of Private Limited Company Registration
Private limited company registration in India refers to the legal process of incorporating a private limited company under the Companies Act, 2013. It is one of the most preferred business structures in the country, because it offers limited liability protection to its shareholders, a distinct legal identity, and perpetual succession. In India, the registration process is regulated by the Ministry of Corporate Affairs (MCA). As per Section 7 of the Companies Act, 2013, registration of a company requires filing of incorporation documents, including the Memorandum of Association (MoA) and Articles of Association (AoA), along with e-Form SPICe+ (INC-32) to the MCA. The Registrar of Companies (ROC) issues a Certificate of Incorporation once all formalities are fulfilled.
What is a Private Limited Company?
A private limited company is a business entity registered under the Companies Act, 2013, where ownership is restricted to a specific group of individuals, shares cannot be publicly traded and the liability of the shareholders is limited to the extent of the amount invested.
Features of a Private Limited Company
- Limited liability: Shareholders are liable only up to the value of their shares.
- Minimum and maximum members: It requires a minimum of 2 shareholders and two directors, with a maximum of 200 members.
- Eligible for investment: A private limited company can raise funds through private equity, venture capital, and the issue of shares.
- Name requirement: The name of the company must end with “Private Limited” (e.g., ABC Technologies Private Limited).
- Mandatory registration: The company must be registered with the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013.
- No minimum capital requirement: There is no mandatory minimum paid-up capital; the company can be incorporated with minimum capital.
- Compliance requirement: A private limited company must adhere to statutory obligations, including conducting regular board meetings, maintaining proper books of accounts, undergoing annual audits, and filing annual returns and financial statements with the Registrar of Companies (RoC).
Types of Private Limited Companies
There are three types of private limited companies in India:
- Company Limited by Shares: It is the most common type of private company. Shareholders’ liability is limited to the unpaid amount on their shares. Capital is divided into shares, and ownership is determined by shareholding.
- Company Limited by Guarantee: In this structure, the liability of members is limited to the amount they agree to contribute in case of winding-up. The company is generally formed for non-profit objectives such as promoting arts, education, research, or charity.
- Unlimited Company: In this structure, the members have unlimited liability for debts and obligations of the company. The structure is rarely chosen due to high financial risk.
Legal Framework Governing Private Limited Company Registration
A private limited company is governed by the following:
- Ministry of Corporate Affairs (MCA)
- Companies Act, 2013
- Companies (Incorporation) Rules, 2014
- Registrar of Companies (RoC)
- Companies (Appointment and Qualification of Directors) Rules, 2014
- Income Tax Act, 1961
Why Should You Register a Private Limited Company?
- 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.
- Separate legal entity: A company is a juristic person in the eyes of the law. The legal entity of the company is distinct from its shareholders and directors. The company is capable of entering into contracts in its own name, and it can sue and be sued in its own name.
- Perpetual succession: The existence of the company is independent of the existence of its shareholders or directors. Unlike a partnership or sole proprietorship, the private limited company enjoys perpetual succession, which means that the existence of the company is not 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.
- Easy transferability of shares: Registering a company in India offers easy transferability of shares, meaning that shares of the company can be transferred from one shareholder to another.
- Access to investments and funding: Capital can be easily raised in a registered private limited company, as the company can easily issue Equity shares to raise funds.
Tax Benefits of a Private Limited Company in India
Private limited companies enjoy certain tax benefits in India, as provided under the Income Tax Act, 1961:
|
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 |
Documents Required for Registering a Private Limited Company in India
1. Identity proof of directors and shareholders
- PAN Card - Mandatory for all Indian nationals
- Passport - Mandatory for foreign nationals
2. Address proof of directors and shareholders
(Any one of the following, not older than 2 months)
- Aadhaar Card
- Voter ID Card
- Driving Licence
- Passport
- Bank Statement (with recent transactions)
- Utility Bill (electricity, water, or gas bill)
3. Residential proof
(Any one of the following, not older than 2 months)
- Bank Statement with full residential address
- Rent Agreement (if applicable)
4. Passport-size photographs
- Recent colour photograph of all directors and shareholders (JPEG or passport standard)
5. Registered office address proof
- Utility Bill - Electricity bill, gas bill, water bill, or property tax receipt (not older than 2 months)
- Ownership Document - If the property is owned by a director or shareholder (sale deed or title document)
- Rent Agreement - If the office is rented
- No Objection Certificate (NOC) - From the owner of the premises, permitting the company to use the address
6. Digital Signature Certificate (DSC)
7. Director Identification Number (DIN)
8. Memorandum of Association (MoA)
9. Articles of Association (AoA)
10. Declaration by Directors and Subscribers
- Form INC-9: Declaration by subscribers and directors confirming they are not convicted or disqualified under the Companies Act
- Form DIR-2: Consent to act as a director
11. Board Resolution (if applicable)
12. Resolution for Name Authorization (if applicable)
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 submit two critical documents:
- Digital Signature Certificate (DSC): This certificate is crucial for signing documents electronically during the registration process of a company. DSC ensures the authenticity of the signatures of the directors on electronic filings and saves the company from potential fraud.
- 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
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 that the company name should reflect 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 being taken by the Company. The document ensures that the company operates within the scope and objectives as outlined. It is pertinent to note that once the MOA is drafted, the MOA cannot be amended. Directors and shareholders are mandated by law to sign the MOA.
- AOA: Articles of Association are the document that lays out the rules and regulations for the internal management of the company. It lists the rights and duties of the directors and stakeholders:
- The company name and form of business
- Purpose/Objective of the Company
- Capital structure of the company
- Corporate governance of the company, and
- 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 on the MCA portal with the appropriate fee, along with the following necessary documents with the Registrar of Companies (ROC):
- Identity Proof of Directors and Shareholders: It can be a PAN card, passport, or voter ID.
- Address Proof of Directors and Shareholders: It can include Aadhar card, bank statements, or utility bills.
- Proof of Registered Office Address: This includes documents of 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 the 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
The fee for filing the Memorandum of Association (MOA) and Articles of Association (AOA) with the Registrar of Companies (ROC) varies across states, depending on the state in which the company is being registered, as well as the amount of authorised share capital.
|
Companies with Authorised Capital |
Fee in (₹) |
|
Authorised Capital up to ₹1 Lakh |
500 |
|
Authorized Capital Between ₹1 Lakh and ₹5 Lakh |
1,000 |
|
Authorized Capital Between ₹5 Lakh and ₹10 Lakh: |
2,000 |
|
Authorized Capital Between ₹10 Lakh and ₹50 Lakh |
3,000 |
|
Authorized Capital Between ₹50 Lakh and ₹1 Crore |
4,000 |
|
Authorized Capital Between ₹1 Crore and ₹5 Crore |
5,000 |
|
Authorized Capital Between ₹5 Crore and ₹10 Crore |
6,000 |
|
Authorized Capital Exceeding ₹10 Crore |
7,000 |
Step 5: Obtain a Certificate of Incorporation
Once the ROC verify that all the documents are correct and comply with the established standards, a Certificate of Incorporation will be issued by the ROC.
What is a Company Registration Certificate?
A Company Registration Certificate, or Certificate of Incorporation, is issued by the Registrar of Companies as legal proof that a company has been registered under the Companies Act, 2013. It authorises the company to operate as a separate legal entity. A Corporate Identification Number (CIN) is also included in the Certificate, which is the unique Identification number for each company.
Checklist for Private Limited Company Registration in India
- Minimum 2 directors with at least 1 being a resident of India
- Minimum 2 shareholders
- DIN and DSC obtained from the Ministry of Corporate Affairs
- Proof of identity and address for all directors and shareholders
- Proof of registered office address
- The proposed name should not be identical or deceptively similar to any existing company or registered trademark
- Decide on the share capital and shareholding pattern
- Consent form signed by all directors
- Submit SPICe+ Form (INC-32), AGILE-PRO-S (INC-35), e-MOA (INC-33), e-AOA (INC-34) with the Registrar of Companies (ROC)
Compliance Requirements of a Private Limited Company in India
Registration is not the end; every private limited company has to undergo various compliance requirements in India, such as:
- Conducting Board Meeting
- Conducting Annual General Meeting
- Filing of annual return Form MGT-7/MGT-7A
- Filing of the financial statements Form AOC-4
- Filing of the director’s KYC Form DIR-3 KYC
- Maintenance of statutory registers and records
- Disclosure of director’s interest Form MBP-1
- Appointment or resignation of directors Form DIR-12
- Event-based compliance, such as share allotment (PAS-3), alteration of capital, change of registered office, or creation/modification/satisfaction of charges (CHG-1, CHG-4, etc.)
- Income Tax Return filing
- Goods and Services Tax (GST) compliance
Why Choose Kanakkupillai for Private Limited Company Registration?
Registering a private limited company involves numerous legal and procedural steps under the Companies Act, 2013. From securing DIN and DSC to drafting the incorporation document, you need a service partner whom you can rely on. Kanakkupillai ensures a seamless incorporation of your private limited company by providing:
- End-to-end incorporation support: From obtaining DIN and DSC, reserving the company name, to drafting the Memorandum and Articles of Association and filing incorporation documents with the Registrar of Companies, our team provides complete support throughout the registration process.
- Timely and transparent services: We adhere to strict timelines for document preparation, form submission, and follow-ups with regulatory authorities, ensuring the company is incorporated in the shortest possible time without delays.
- Assistance in post-incorporation compliance: Our services do not end with registration. We assist in PAN/TAN application, GST registration, opening of bank accounts, drafting shareholder agreements, and ensuring timely statutory filings post incorporation.
- Digital and remote-friendly process: The entire company incorporation process is handled online, allowing business owners from any part of India to avail of our services without the need for physical presence.
Frequently Asked Questions
Is it mandatory to have a physical office to register a Private Limited Company?
Yes, a registered office address is mandatory and must be supported by a utility bill and a No Objection Certificate (NOC) from the property owner if rented.Can one person register a Private Limited Company?
No. You need at least two shareholders and two directors. For solo entrepreneurs, One Person Company (OPC) is the suitable option.Is it necessary for the directors to be present physically during the registration?
No, the entire process is conducted online. Identity verification and document submission happen electronically.What is the validity of the Certificate of Incorporation?
The Certificate of Incorporation is valid for life unless the company is wound up voluntarily or by an order of the court.Can a salaried individual become a director in a Private Limited Company?
Yes, unless their employment contract prohibits them.Can foreign nationals be directors or shareholders?
Yes, but at least one director must be a resident Indian.What is the minimum capital required for incorporation?
There is no mandatory minimum capital. You can start with any amount as per your business requirement.Is it necessary to appoint a Company Secretary?
Not for private companies with paid-up share capital less than ₹10 crore. But appointing a CS helps with ongoing compliance.Are annual audits mandatory?
Yes, every private limited company must have its books audited annually by a qualified Chartered Accountant.Can the registered office of the company be changed later?
Yes, subject to proper intimation to RoC through prescribed forms like INC-22.Does a Private Limited Company need to file GST?
If the company's turnover exceeds ₹20 lakh (or ₹10 lakh in special category states), GST registration becomes mandatory.What makes Us Different
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