Private Limited Company is a business organization that provides limited liability or legal protection to its shareholders while placing restrictions on ownership. Such an entity also places limitations on the rights of shareholders to transfer their shares to others.
This business entity combines the good parts of company structure while limiting the liabilities of the members to a minimum. Considered ideal for ensuring continuity of existence, Pvt. Ltd. Co. allows plenty of room for expansion as it is easy to raise capital compared to other forms of business registrations.
How To Create A Private Limited Company?
Understanding the basic necessities of a Pvt. Ltd. Co is vital in the creation of one.
Private Limited Companies require a minimum of two (2) and a maximum of fifty (50) shareholders.
No member holds the right to invite more members or the public to subscribe to the share capital of the company.
And lastly, a Pvt. Ltd. Co. requires a minimum paid up capital of rupees one lakh (INR 1,00,000). The framework of this business entity is designed to protect it against hostile takeovers.
There are some who argue that when compared to an LLP, PLC does not grow beyond a certain point as there is an upper limit on the number of members. However, the general PLC entities are ideal for business with a long term prospective. Unlike with LLPs, raising capital internationally is not an issue in the case of a Private Limited Companies. LLPs are ideal for startups with domestic fundraising prospects.
Pvt Ltd Co. have a operating principles that must be followed. Some of the important ones are as follows-
A Pvt. Ltd. Company must maintain a book of accounts and have the said accounts audited every year
Tax returns of the company must be filed without fail every year
Subsidiaries of Foreign companies must receive RBI approval before functioning
All companies must compulsorily have registrations with important authorities like TAN, VAT, PAN, Service Tax etc based on suitability
How To Register A Pvt. Ltd. Company And Make It Legally Valid?
As of now there are two methods through which you can register your Pvt. Ltd Co. One is a conventional process which may time a longer time to attain completion while the other is fairly new and takes fewer days to attain completion. Both procedures are more or less the same, they only differ in a few steps.
The Conventional Process
Step 1 – DIN & DSC
Potential members/ shareholders must apply for Director Identification number(DIN) and Digital Signature Certificate (DSC). DIN is a unique combination of numbers used to identify potential or existing Directors. DSC is the electronic equivalent of paper/ physical certificates.
Step 2 – Name Registration
Step two would consist of picking a name for your company and checking for the availability of the same with the Ministry of Corporate Affairs (MCA). This makes sure that there are no two businesses operating under the same name. At least one and a maximum of six (6) names must be submitted via form INC-1 to the MCA.
Step 3 – MOA & AOA
Step 2 comprises of preparing the Memorandum of Association, a document describing the fundamental provisions of the constitution of the company and the Article of Association which describes the rules that govern the internal management of the company.
Step 4 – Filing e-forms
The following documents, along with required mandatory attachments must be submitted to the Registrar of Companies –
INC-7 Application of Incorporation of Company
INC-22 Notice of situation of registered office
DIR-12 Particulars of director appointments and managerial personnel
Step 5 – Fee payment
Step 5 involves paying the required fee and stamp duty to Registrar of Companies. Payment must be made online and not in physical cash.
Step 6 – Document verification & incorporation
This is the concluding step of the process and it involves the Registrar of Companies verifying all the documents you submitted so far. Once a review is done, the authorities may suggest changes that are to be made. Once this is done, they will issue a digitally signed Certificate of Incorporation via email to chief correspondents/ directors.
The New Method
The initial steps are pretty much the same for this process as well. If you wish to proceed with this method, execute steps 1 and 3 of the conventional process and then file Form INC-29 along with the name you have picked with the Registrar of Companies. INC-29 does the combined functions of Forms INC-7, INC-22 and DIR-22.
If the name you picked gets approved, MCA will email the Certificate of Incorporation to the directors. However, if the name is not available, you may have to file form INC-29 again with a different name.
Frequently Asked Questions
What are the requirements to be met by a person wishing to be a Director?
A potential Director must be natural person and must be over eighteen years of age. Apart from this, no restrictions are place on the citizenship, nationality or residency of a candidate. This means that foreign nationals too can be a Director.
If you are a budding entrepreneur hoping to a company in your name, you’ve come to the right place. LegalDesk is equipped with all the necessary tools and staff to help you ease through the registration process of a Pvt. Ltd. Co. Contact us to get assistance on starting your own company. Do it now and have no regrets in life!