The start-up ecosystem has been gaining prominence across India for a while now. More and more entrepreneurs are mushrooming with ideas and are finding the courage to go ahead with company registration. The investment sector is also growing and as a result, helping with the development of the economy. As more and more people head out and start things of their own, the need for company registrations services and business consultancy services also rises. In this article, we will go over the benefits, liabilities, and minimum requirements you need to meet to register as a private limited company.
What is a private limited company in India?
A private limited company works as a privately-owned business structure that comprises private stakeholders. It is registered as per the guidelines of the Ministry of Corporate Affairs. Similar to the liability structure of a Limited Liability Partnership, the stakeholders in a private limited company have a liability that is proportional to the number of shares they hold. Hence, shareholders cannot be held liable for damages caused that goes beyond the inherent value of their shares in the company. Here, the company can have up to a maximum of two hundred members, above which it becomes a publicly traded Public Limited Company.
Characteristics of a Private Limited Company
As per Section 2 of the Companies Act, 2013, a private company has the following characteristics:
1.Membership and Directors: Requires a minimum of two and a maximum of two hundred shareholders. Every Private Limited company must have at least two directors to complete the company registration process.
2.Limited liability: The liability of all members has a limit which is determined by the number of shares they hold in the business. Also, due to this nature of the company structure, the personal wealth and assets of shareholders are not at risk.
3.Legal status: Private Limited companies enjoy a separate legal status and function as an individual business entity.
4.Perpetual Succession: Such companies enjoy perpetual succession, which means the company exists in the eyes of the law until dissolved or liquidated formally. As a result, the death of its founding members does not lead to the automatic shutdown of the business.
5.Minimum paid-up capital: To complete the company registration process of a private limited company, the shareholders must provide a minimum paid-up capital anointing to INR 1 lakh.
What are the requirements you need to meet to start a Private Limited Company?
Company registration is a long and drawn-out process in India that requires entrepreneurs to meet various requirements. The eligibility criteria and requirements to incorporate a Private Limited company in India are as follows:
1.As per the statutory requirement in the Companies Act, 2013, all private companies must have at least two and less than a maximum of 200 members.
2.All the directors must have a unique director identification number, better known as DIN from the Ministry of Corporate Affairs.
3.At least one of the company’s directors must be an Indian resident. This means that he or she must have stayed in India for at least 182 days in the past year.
4.All companies incorporated in India must have a unique name that adheres to specific rules and guidelines. Entrepreneurs must consider the following three factors before deciding a name for their business venture.
●The primary name of the company
●The activity will carry out or engage in
●Add Private Limited Company at the end of the name
1.Since the exact name required by the entrepreneurs might not be available, it is always better to send around five or six options to the Registrar of Companies. Also, none of the names submitted must have a strikingly similar resemblance to an existing brand or company name.
2.Registered office address: After company registration, the entrepreneurs will have to provide details regarding their permanent office address to the ROC. As per company registration laws, a registered office address is a location from where the company conducts its main affairs and places all of its important documents.
3.Documents and Licenses: After obtaining a company registration certificate, a private limited company will have to obtain several other licenses and certificates to begin operations. Furthermore, to obtain all of these licenses, it will need to submit several supporting documents electronically via online methods. All the Directors must also obtain Digital Signature Certificates to validate their identities online.
What are the advantages of a Private Limited Company?
1.Provides Limited liability helping shareholders protect their wealth and private assets
2.Unlike public companies that require seven members to start, a private limited company requires only two making it easier to begin the business.
3.Since the investors, shareholders, and founders own the company’s shares, they have direct control over the company’s management.
4.Easy to buy, share, and transfer ownership through the purchase and selling of shares.
5.Perpetual succession laws enable the company to maintain its existence regardless of the condition of its members.
When it comes to the disadvantages of starting a private limited company, there is only one that comes to mind. Such companies have several compliance formalities and filing requirements which can become complicated and confusing. However, with the right help from a company registration service, this disadvantage quickly disappears. As a result, a private limited company is a viable and sustainable business structure in India.
What are the documents required for private limited company registration?
Directors will need the following documents to complete the company registration process:
1.ID and address proof of all directors
4.NOC from the property owner in case the property is rented
5.Sale deed or property deed in case you own the property
Steps involved in Private Limited Company registration
2.Choose an appropriate name, and search for availability
3.Draft e-Memorandum of Association and e-Articles of Association
4.Apply for company PAN and TAN
5.Register the company with the RoC and open a bank account