Overview

A Private Limited Company is one of the most common legal entities preferred by most Entrepreneurs in India. Even the biggest brands, like PhonPe, Flipkart, etc., preferred Private Limited Companies over other legal entities at the time of their business registration. 

Before starting any business, registering your own company can help you in many ways, such as attracting more customers, generating more capital, providing enhanced stability, shielding your company from personal liability etc. A private limited company is among the most common types of legal entity, which several entrepreneurs in the country prefer. In India, the private limited company is governed by the Companies Act 2013.

 A Private limited company in India can be registered with at least two people and two shareholders. The companies registered as private limited companies in India are governed by the Companies Act 2013 and the Companies Incorporation Rules 2014. When a company in India is registered as a private limited company, its ownership is divided among its shareholders according to the capital invested by the shareholder in the company as a share investment.

 Thus, if you also want to register your business as a private limited company in India and you want to know more about private limited company registration, capital required for it etc. Then following, this article will provide detailed knowledge about private limited company registration.

Benefits Of Private Limited Company Registration

There are many benefits of registering a business. Here are a few reasons why you need to consider the Private Limited Company registration over other business models.

Limited Shareholders Liability: When you register the Private Limited Company, the risk is limited only to the capital contributed to the business. The personal assets of the shareholders and owners of the company are not at stake in case the business incurs any loss. 

Separate Legal Existence: The company has its own existence apart from the owners. The company gets into legal agreements and contracts, has its own assets, etc. Even if the owners change or leave the company, these assets remain with the company.

Ease of Raising Funds/Investments: As Private Limited Companies are more compliant in structure, most reputed banks prefer to give loans and investments. Even HNIs, Venture Capitalists, etc., will be more inclined towards investing in a Private Limited Company because of its ease of ownership transfer and limited liability for shareholders.

Checklist To Register A Private Limited Company

As per the Companies Act of 2013, here is the checklist for registering a Private Limited Company:

Two Directors: At least two directors are needed to register a Private Limited Company. The number can go up to 15 directors. Also, at least one of these directors must be from India.

No Trademark Business Name: The Business name selected must be unique and should not match any of the existing businesses or companies in India.

Minimum Capital: A Private Limited Company needs an authorized capital of at least Rs.1 Lakh.

Registered Office: It is not mandatory to have a commercial space as a registered office for a Private Limited Company. Instead, a rented house also works if the landlord provides NOC.

Ownership Clarity: In a Private Limited Company, the shareholders remain the business owners, while the decision-making power is in the hands of the company’s directors. It ensures that ownership is maintained for the sake of shareholders and promoters.

The Private Limited Company registration provides better credibility and limited liability protection for the shareholders and owners of the company.

Capital Required To Start a Company

A private limited company can be quickly started in India with minimum capital. No fixed amount is required to register a business as a private limited company in India. The company’s shareholders being incorporated can effectively determine the capital they want to invest in the company. However, while keeping up the capital structure of a private limited company, some few concepts should be kept in mind, which are as follows:

• The face value of the share refers to the price per share with which the company is incorporated. Usually, the face value of the share is Rs1, Rs 10, Rs 100, Rs 1000 or Rs 10,000.
• The total value of the shares the company can issue to its shareholders is the authorized capital. While registering a company, it is incorporated with an authorized capital value of Rs 1 lakh or Rs 10 lakh. However, suppose a higher amount of authorized capital is required; in that case, the company can pay additional fees to the Ministry of Corporate Affairs, and the authorized capital of a private limited company can only be increased after incorporation.
• The number of shares issued to the shareholders for which they have deposited their money into the company is known as paid-up capital. However, the paid-up capital of a private limited company cannot be more than the authorized share capital of the company.

Steps To Register A Private Limited Company

RUN Name Approval: Before proceeding with the company registration, one must submit the business name for approval on the Ministry of Corporate Affairs website. Usually, in under five working days, the applications are approved.

Digital Signature for Directors: The Ministry of Corporate Affairs usually accepts the filings only if the directors’ digital signature is present on it. It is issued by the Certification Authority in India. Before the company’s incorporation, it is essential to get the digital signatures of the directors. The directors must submit their identity proof and complete a video KYC to get the digital signature.

Incorporation Application Submission: After obtaining the digital signatures, You must file the incorporation certificate in the SPICe form to the Ministry of Corporate Affairs with all the required attachments. Articles of Association and the Memorandum of Association of the Private Limited Company are filed along with the incorporation certificate. These applications as well are approved under five working days.

Documents Required for Private Limited Company Registration

For private limted company registrations, documents requirements are simple and handy. You must have the following documents under MCA:

# Documents of the Company’s Director

1. PAN Card.
2. Aadhaar Card.
3. Voter Id/Driving Licence/Passport(Any One)
4. Bank Statement/Electricity bill(Not older than two months)
5. Passport-size photograph.
6. Email Id & Mobile No.

# Proof of the Company’s Registered Office Address

If the Business premise is owned through any proposed directors

1. Electricity Bill
2. Consent letter @Rs 10 stamps duty

 If the Business premise is rented

1. Rent Agreement
2. Electricity Bill
3. Landlord NOC

Compliances for a private limited company

After completion of the registration process of a company in India, the company must cohere to certain compliances as per the rules and regulations to avoid penalties, potential fines, legal repercussions, etc. Thus, the compliances which the private limited company must adhere to are discussed below:

• Within thirty days of incorporation of the company, it must appoint a practising, registered and certified chartered accountant ( CA).
• In every financial year, the private limited company must file for income tax returns using the form ITR-6. The company must file the income tax returns much before the deadline of the financial year. Moreover, the company’s income tax return must be filed digitally using the digital signature of the director.
• Another compliance that the private limited company must follow after its incorporation is that individuals with the director identification number ( DIN) must undergo a DIN KYC process. The company gets the DIN when incorporated, and the KYC process of the DIN helps verify the phone number and the email address on file with the Ministry of Corporate Affairs ( MCA). 
• Every financial year, the Ministry of Corporate Affairs must get a copy of the financial statement from every company registered in India. The private limited company, which incorporates between January and March, must elect to include the first MCA annual return in the annual filing only for the following fiscal year. The MCA yearly return components include AOC-4 and MGT-7. These documents are signed digitally by the working professionals and the directors.
• As specified in the MOA, the shareholders must deposit the subscription amount within 180 days of the company’s incorporation, and the company must also create a current bank account. Similarly, to receive the business incorporation certificate, the company’s shareholders with paid-up capital of Rs 1 lakh should deposit Rs 1 lakh into the company’s bank account. Moreover, they should also file a copy of their bank statement with the Ministry of Corporate Affairs ( MCA)

Bank Account For Private Limited Company

After the company’s registration process is completed, it must open its current bank account in its name within 180 days of completing the registration process. Once the current bank account of the private limited company is opened, the subscription amount must be deposited in it.

However, if the company’s bank account is not opened and the subscription amount is not deposited, then the commencement of business certificate won’t be issued to the private limited company, and an appropriate penalty would be levied. While opening a current bank account of a private limited company, the following documents are required:

• • KYC documents of the directors
  • Address proof of the company
  • Incorporation certificate of the company
  • Board resolution authorizing the directors to open a bank account

Advantages of a Private Limited Company

 The advantages of a private limited company are as follows:

• Separate legal entity

One of the significant advantages of registering a company as a private limited company is that it will become a legal entity. The company is both a juristic person and a legal entity. It will get broad legal rights such as incurring debts, hiring people, and acquiring property.

• Limited liability

Another benefit of a private limited company in India is that it will also have limited liability provisions along with a separate legal entity. It means that shareholders of the company won’t be liable for the company’s loss for the amount that they invested as share capital.

• Fund raising

Registering a private limited company will open numerous gates for it for fundraising. The company can raise funds from angel investors, venture capitalists, shareholders, foreign funds, NBFC banks, private equity funds etc. 

• Uninterrupted Experience

The company would also get the advantage of uninterrupted experience. It would have perpetual succession that signifies it will continue to exist until it is legally dissolved. As the company would benefit from a separate legal entity, it will be unaffected by the departure or death of any members, and it would continue to exist even if its membership changes.

Disadvantages of a Private Limited Company

The disadvantages of the private limited company are discussed below:

• Less number of members

A private limited company would have a maximum of 200 members. At the same time, the private limited company can have numerous members.

• Restriction on share transfer

Another disadvantage of a private limited company is that it would restrict its share transfer. The transfer of shares in a private limited company is not allowed per its AOA, and the shares cannot be listed on the stock exchanges.

• Unable to issue prospectus

The disadvantage of a private limited company is that it cannot issue a prospectus and cannot invite the public to subscribe to its shares.