A Private Limited Company is an organization that is privately owned by a small group of people. Hence it is also known as a ‘privately held company. Management and investors are highly attracted to the structure of Private Limited Company and hence for third party investments. The incorporation of a Private Limited Company registration in India requires a minimum of two people who will be the directors and a maximum of 200 people can be the shareholders. A Private Limited Company is one of the popular forms of business entities in India. An approximate of 90% of the companies in India are registered under the Private Limited Company. There are more than 150,000 companies that are being incorporated annually. It acts as a separate legal entity with an insubstantial liability.
The incorporation of a Private Limited Company is done under the Indian Companies Act, 2013. As suggested by the term “Limited” in the name itself, the liability of the members or the owners is limited to certain extent, though there are certain restrictions laid combined with privileges offered. For the registering a Private Limited Company, the Ministry of Corporate Affairs (MCA) has mandated a process of Incorporation by providing all the necessary filled forms and other formalities on their online platform that ensures the fast and easy process. Presently under the “Make in India” program, the Government of India promotes the Incorporation of Business in India. Once the procedure is fulfilled under Act, the establishment and commencement of the Company becomes operational.
Documents required for incorporating a private limited company
Passport size photograph
Copy of PAN card
Copy of electricity bill
Sale deed (if owned)
Copy of Aadhaar card
Address proof of Director/ Bank Partner (Bank Statement/ Mobile/ Telephone
With the following simple steps a Private Limited Company can be Incorporated with the time period of 15-18 days:
Step 1: Obtain a DSC (Digital Signature Certificate)
The foremost step to register a private limited company is to acquire the DSC of the Directors and Subscribers to MOA. Any e-form is filed with the Ministry after affixing the DSC of the authorized Signatory for Company Incorporation. Also, it is required for the application of the Memorandum of Association (MOA) and the Articles of Association (AOA).
Step 2: Obtain DIN for Directors
Director Identification Number (DIN) is an identification number for a director. It is to be obtained by the one who is to be the director of the company. Under this step, the DIN allotment is carried out by the Ministry to the Individual for the acting Director in a company. The DIN is a unique number such as the PAN Card for any person and is applied and allotted once in the lifetime.
Step 3: Name approval Application
The next step in company incorporation is to make an application for reservation of the name for the proposed company. The application is to be made in Form INC-1, where one can apply for a maximum of 6 names in order of preference. the point to be noted here is that the names applied should not be identical or should not resemble with any existing Company or LLP or Registered Trademark. Once the proposed name is approved, it is reserved for the applicant for a period of 60 days, under which time period one has to apply for the Incorporation of Company, non-compliance of which leads to withdrawal of the name granted by the Ministry.
Step 4: Application for Certificate of Incorporation
Once the name is reserved for the proposed company, one shall proceed for making the Application of Certificate of Incorporation in SPICe form accompanied with SPICe_MOA and SPICe_AOA. The application is submitted by paying the requisite Stamp Duty as applicable in case of concerned state on the portal. Once the application is successfully submitted, the form for application of PAN and TAN of the company is generated online, which shall be duly submitted after affixing the DSC with MCA.
Step 5: Formulation of MOA and AOA
The MOA and AOA stands for Memorandum of Association and Articles of Association, respectively. MOA and AOA are the two most important documents for any company and marks the last step in the process of registering a Company. MOA of company clearly state the scope of operations of the company, whereas AOA states how the company will be carrying the operations as per the laid Act. In case of a Private Limited company, the Articles should mandatorily consist of he following three clauses in addition to general clauses:
Limitation on the number of members up to 200.
Restriction on transfer of shares.
Prohibition on accepting securities from the public.
For submitting this application, one shall collect following documents first:
Utility Bill and NOC from the owner for the Registered Office address of the Company;
Rental Agreement with the owner of registered office, if premises is rented;
Consent to act as a Director of the company in form DIR – 2;
Affidavit and declaration by first subscriber(s) and director(s) in form INC – 9 (duly franked and notarized);
Certified True copy of the self-attested Identity proof of the first subscriber(s) and director(s).
After the due verification of the application and documents provided, the concerned RoC may grant the Certificate of Incorporation (COI). It is a conclusive proof of existence of the company, wherein the date of Incorporation, Company Identification Number (CIN) and Permanent Account Number (PAN) is mentioned with the sign and seal of the Registrar. Once, the Certificate of Incorporation is granted, the company may commence the Business Activity as the Incorporation procedure is completed.
The risk to personal assets is limited: The liabilities of the shareholders of a private limited company are limited. It means if a private company if in financial trouble the shareholders would not have the risk of loosing their personal assets.
Benefits claimed under the Startup India Scheme: under this scheme one can avail a lot of benefits like raising the funds, subsidy for the trademark registration etc.
Easy transferrable ownership: under the Private Limited Corporation subscribing or leaving the company is easy. Also it is easier to transfer the company.
A different legal entity: Legally, a Private Limited Company or PLC is a separate entity from the owner. Thus, the Company will be responsible for its own assets and liabilities, and debtors and creditors. The creditors cannot legally proceed against the owner to recover their invested money.
Raising the capital: Entrepreneurs usually prefer registering their business as a Private Limited Company or PLC as it becomes easier for them to sell equities and raise funds through them.
Perpetual succession: It allows an uninterrupted existence of the business till the time it is legally dissolved. Since a company is a separate entity, the death or cessation of a member does not affect the functioning of the company. It keeps functioning in spite of a change in membership.
Taxation: the companies are often taxed at a lower rate and are provided by better taxable benefits as compared to other forms of business organizations.