Private Limited Company Registration

Private Limited Company Registration

If you want to open a business it is necessary to decide the goals, the structure of the business and the type of the entity. Nowadays entrepreneurs choose a private limited company to run their business because the liability of the private limited company is limited.

Why register for Private Limited Company

A company is a separate legal entity with perpetual succession for lawful purposes. A private limited company can be formed with 2 persons or more by subscribing their names or his/her name to a memorandum and complying with the requirements of the Companies Act, 2013 in respect of the registration.

It is compulsory for all private companies to register under the Companies Act, 2013 and to subscribe to the Memorandum of Association.

After registration, the company shall have all powers of exercising as the functions of an incorporated company under the act. Such a company will have the power to acquire, hold, and dispose of property, both movable & immovable, tangible & intangible, to contract and to sue and be sued by the said name from the date of registration mentioned in the certificate of incorporation.

The company becomes a legal person having its separate operations.

A legal personality emerges from the moment of incorporation of the company and from those moments the other persons do subscribe in the MOA (Memorandum of Association) and other persons joining as the members are called as a body corporate.

The private limited company is governed by the Ministry of Corporate Affairs.

As soon as the company has been registered, the permanent address of the company’s registered office is to be filed with the registrar of the company. The Registered office is the place where all the affairs related to the company are conducted and it is the place where all important documents related to the company are kept.

Benefits of having a private limited company

  • The liability of shareholders is limited: In a private limited company, the liability of shareholders is limited. Such liability can be either limited by shares or limited by guarantee. The members are not at risk because, in case of failure by the company to pay its debts, the members are not personally liable to pay for the same.
  • Can be formed only with 2 persons: In the case of a public company, a minimum of seven (7) members are required to incorporate a company but a private limited company can be formed only with 2 persons as the shareholder of the company.
  • Perpetual succession: The existence of the company is not affected by the death of the member. Members may come and go but the operations of the company will continue.
  • Separate entity: A company’s existence is different from that of its members. A company can sue and be sued, can hold property in its own name. The members are not owners of the company’s property instead the company itself is the real owner of the property.
  • Considerable credibility: A private company is required to open certain information about its affairs. Such information is made available to the public so that people who are related to the company can get all the details regarding the company. This information helps in greater reliability and helps the private limited company make their business more reliable.
  • Can be easily wound up: It is easy for the private companies to wound up because the business of such companies can be sold to other companies or can be transferred to any other entity without disturbing the current business.
  • Good image/Goodwill/Reputation: Trading as a private limited company helps in creating a good image and reputation. It also helps in portraying a professional image which would help us to influence many new investors and to grab more opportunities.
  • Benefits of Tax: The company registered in Indio faces the lowest tax rates as compared to other countries.
  • The benefit of Foreign Direct Investment: Most of the FDI in India comes through the companies. Many foreign investors consider it appropriate to invest in companies in the form of FDI.
  • Can raise money via private placement of shares: A private limited company can raise money through private placement raising money through private placement. Raising money in LLP and sole proprietorship is quite difficult but in private limited companies, money can be raised from a closed group of 200 people.
  • Well governance structure: The private limited companies are governed by the companies act, 2013 and such companies have to comply with the provisions of the act and certain legal requirements. This would help in creating a better governance structure.

About private limited company registration

A private limited company is formed with 2 or more persons. The status of a private company is between a partnership and a public company.

The liability of the members/shareholders of a private limited company is limited. Section (2) of the Companies Act, 2013 defines a private limited company as:

A company:

  1. Having a minimum share capital as may be prescribed
  2. Restricts the transfer of shares
  3. Prohibits invitation to the general public

The private company is owned by private people or private stakeholders. The members of a private limited company cannot be made liable beyond their liability as their liability is limited. This is the most important benefit of a private limited company.

To run a private limited company, a minimum of 2 members are required and the maximum cap is 200. Also, 2 directors are required to operate the private company.

The existence of a private company is not affected by the existence of its members even if all the members die, the private company will continue to run all its operations because it has its own separate legal existence.

Requirements of a private limited company registration

The following points are to be kept in mind when applying for a private limited registration for the company:

  1. Shareholders and directors:
    1. It is provided in the act that a minimum of 2 members are required to incorporate a private limited company and a maximum there can be 200 members.
    2. 2 directors are required to run the company.
    3. The directors of the private limited company have to comply with certain norms of the act, such as:
      1. Each of the directors has to obtain a DIN (director identification number) issued by the MCA
      2. From the two directors, one must be a resident of India.
  2. Regarding the name of the private limited company: While deciding the name of the company, three aspects should be considered:
    1. The main name of the company
    2. Activity the company will carry out
    3. The name shall contain Pvt. Ltd. company in the end.
  3. Address of Registered Office: As soon as the company is registered, the permanent address of the registered office must be filed with the registrar of companies within the prescribed time limit.
  4. Acquiring other documents: Companies must obtain digital signature certificates to verify the authenticity of the documents when the documents are submitted in electronic form.

Procedure to register a Private Limited Company

  1. Digital signature certificate: DSC (Digital Signature Certificate) is compulsory. The cost of obtaining a digital signature certificate depends on the certifying agency. DSCs are required for registration purposes.
  2. Apply for Director Identification Number (DIN): The director of the company has to obtain a DIN. It is an identification number of the director.
  3. Name approval
  4. Filing electronic memorandum of association (MOA) and articles of association (AOA) to register a private limited company.
  5. Application for PAN and TAN: The application of PAN and TAN is to file using forms 49A and 49B. All the details will be auto-filled after the SPLICe form submission.
  6. ROC will then issue a certificate of incorporation with PAN and TAN
  7. A currency account in the name of the company is to be opened.

Documents required for a private limited company Registration

  1. Mandatory documents required to be submitted by the directors and shareholders. The scanned copies of the following:
    • Passport size photos
    • Bank statement
    • Government ID proof
    • PAN Card
    • Signature of director on a blank document (specimen signature)
  2. Other documents which must be file for private limited company registration are:
    • MOA and AOA
    • Declaration and affidavit by the first director and subscriber
    • Permanent office address proof
    • ID proof of directors as well as their residential address
    • ID proof of members and subscribers and proof of their residential address.
    • No Objection Certificate (NOC) from associated partner/sole proprietor of an existing company.

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