What is a Private Limited Company?

A private limited company in India is a privately held entity with limited liability and is one of the most popular business structures in the country. Its popularity stems from various advantages such as limited liability protection, ease of formation and maintenance, and its status as a separate legal entity. A private limited company enjoys legal separation from its owners and requires a minimum of two members and two directors to operate. Here are some key characteristics of a private limited company in India:

Limited Liability Protection: Shareholders are liable only to the extent of their shareholding. Their personal assets remain protected even if the company faces financial setbacks.

Separate Legal Entity: The company has its own distinct legal identity, allowing it to own property, enter contracts, and engage in legal proceedings under its name.

Minimum Number of Shareholders: A private limited company must have at least two shareholders and can have up to 200.

Minimum Number of Directors: A minimum of two directors is required, with at least one being an Indian resident.

Minimum Share Capital: A minimum paid-up capital of Rs. 1 lakh or as defined is required for the company.

Name Requirement: The company’s name must end with “Private Limited.”

Restrictions on Share Transfer: Share transfers are restricted and can only occur with the approval of the Board of Directors or according to the Articles of Association.

Restriction on Public Invitations: Private limited companies are not allowed to issue invitations to the general public to purchase debentures or shares.

Compliance Requirements: These firms must comply with a variety of legal and regulatory requirements, including keeping correct financial records, holding annual general meetings, and filing yearly returns with the Registrar of Firms (ROC).

Types of Private Limited Companies

• Company Limited by Shares: Shareholders’ liability is limited to their share capital.
• Company Limited by Guarantee: In the event of winding up, members’ liability is restricted to the amount they have agreed to contribute.
• Unlimited Companies: Members have limitless personal liability for the company’s debts, even though the corporation is a separate legal entity.

Advantages of a Private Limited Company

1. Limitation of Risk to Private Property: Members of a limited liability company have limited liability. As a shareholder, your corporate responsibility is only up to the amount of your investment. Partners are not personally liable and do not have to pay for the company’s liabilities out of their assets. 
2. Separate Legal Entity: The Private Limited Company has a separate legal entity from the customer. This means that the company is responsible for managing its assets and liabilities, debtors, and creditors. You are not responsible for any loss to the company. Therefore, the creditor cannot take action against you to get your money back.
3. Continuous Existence: The company continues to exist regardless of changes in ownership or management.
4. Raising Capital: Private Limited Company registration comes with compliance requirements but is preferred by entrepreneurs as it helps them attract investors and raise their capital through shares while limiting their liability.
5. Tax Benefits: Potential access to various tax exemptions and benefits.
6. Credibility and Trust: Indian companies are registered with the Registrar of Companies (ROC) under the Companies Act, 2013. Company details can be viewed by anyone through the Ministry of Enterprise (MCA) portal. In addition, all directory details will be provided at the time of incorporation of the company. The “Private Limited” tag enhances the company’s credibility.

Disadvantages of a Private Limited Company

1. Compliance Burden: Requires adherence to various regulatory requirements.
2. Complex Setup: More costly and complex to establish compared to simpler business structures.
3. Share Limits: Restricts share transfers and limits the number of shareholders to 200.
4. Public Disclosure: Financial information must be publicly disclosed.
5. Exit Complexity: Selling or exiting the company is more complex than other structures.
6. Slower Decision-Making: Decisions can be slower due to the involvement of shareholders and directors.

Requirements for Registering a Company in India

• Directors and Members: At least two directors and up to 200 members are required. Directors must have a Director Identification Number (DIN) issued by the MCA, and at least one director must be an Indian resident.
• Company Name: The name should reflect the principal business activity and end with “Private Limited.”
• Registered Office Address: The company must provide a permanent address for its registered office where business operations are conducted and documents are maintained.

Company Registration Process in India

STEP-1: Acquire a Digital Signature Certificate (DSC): All directors and shareholders need a DSC from the Controller of Certification Agencies (CCA).

STEP-2: Obtain Director Identification Number (DIN): Essential for all directors and must be included in the registration form.

STEP-3: Name Reservation (SPICe+ Part A): Submit the SPICe+ Part A form to reserve a unique company name.

STEP-4: Submission of Company Details (SPICe+ Part B): Provide detailed information about the company’s capital, registered office, directors, subscribers, and necessary attachments.

STEP-5: Prepare and Submit Incorporation Forms (SPICe+ MOA and AOA): Draft the Memorandum of Association (MOA) and Articles of Association (AOA) and obtain digital signatures before submission to the MCA.

STEP-6: AGILE-PRO-S Form: Register for GST, EPFO, ESIC, a bank account, and a shop and establishment license if applicable.

Certificate of Incorporation

Upon successful verification, the MCA will issue the Certificate of Incorporation (COI) with the Company Identification Number (CIN), PAN, and TAN.

Document Checklist

• For Indian Citizens: A self-attested copy of their PAN card, a passport-sized photo, an Aadhaar card, proof of identity, and proof of address.
• For Foreign Citizens: Notarized documents, passport-sized photo, passport, and address proof.
• Registered Office Documents: Proof of business address, rent agreement (if applicable), and owner’s no objection certificate.

Register Your Company through RC Tax Consultancy LLp

Rc Tax consultancy LLP specializes in private limited company registration services in India, offering comprehensive guidance and support throughout the registration process. Our team of professionals will help you choose a suitable and unique company name, gather the right paperwork, get the necessary certifications, and make sure all legal criteria are met. You may concentrate on your business objectives by putting your trust in Rc Tax consultancy LLP to handle your company registration process in a professional and effective manner.