Private Limited Company Registration in India
Starting business in India can be an extremely challenging task, especially when one is faced with the overwhelming legal and bureaucratic hurdles involved in the process. A Private Limited Company is one of the most popular and preferred legal structures for small to medium-sized businesses in India. The registration of a Private Limited Company in India is governed by the Companies Act, 2013, and the process can be quite complicated and time-consuming. However, the benefits associated with this type of business structure far outweigh the challenges, and it’s certainly worth the effort and investment. In this blog post, we will explore the process of Private Limited Company registration in India, its advantages, and why it’s the ideal legal structure for your business. So, let’s dive in and explore the world of Private Limited Companies in India!
1. Introduction to Private Limited Companies
Are you considering starting a small business? Have you heard of private limited companies? A private limited company is a type of business entity that is privately held and limited to small businesses. It offers the advantage of limiting owner liability to their shareholdings and restricting the number of shareholders to 200, making it a popular choice among entrepreneurs.
One of the key advantages of registering a private limited company in India is that it protects the shareholders from personal liability. This means that as a shareholder, you will only be liable to pay for the company’s debts and liabilities to the extent of your contribution. The company has a separate legal entity from you, allowing it to manage its assets and liabilities independently.
Despite the compliance requirements, entrepreneurs prefer private limited companies as it allows them to raise funds through equity and expand their business while limiting their liability. Additionally, a private limited company is registered with the Registrar of Companies (ROC) under the Companies Act 2013, adding a layer of trust as the company’s details can be accessed through the Ministry of Corporate Affairs (MCA) portal.
A private limited company also offers the benefit of “perpetual succession,” meaning it continues to exist until it is legally dissolved, regardless of any changes in membership. Other forms of company registration exist, but a private limited company is a well-respected and trusted option among businesses in India. Registering a private limited company may seem complicated, but with the right assistance, the process can take place effortlessly and efficiently.
2. Advantages of Private Limited Company registration in India
Are you planning to start a business in India? One of the best options for you is to register your company as a Private Limited Company. This business structure offers numerous advantages over other forms of companies. Firstly, a Private Limited Company provides limited liability protection to its shareholders, which means that your personal assets are safe in case of any financial loss. Additionally, a Private Limited Company has a separate legal entity from its members, which enables it to own assets and sue or be sued in its own name.
Another major advantage of a Private Limited Company is that it is considered as a more credible and trustworthy form of business structure. This helps the company to expand more easily and attract more investors. Moreover, with a Private Limited Company, you get the option to issue sweat equity shares and provide employee stock options, which can help increase employee morale and motivation.
Lastly, a Private Limited Company allows for 100% foreign direct investment, without the need for prior government approval. This makes it easier to establish partnerships with foreign businesses and expand globally. So, if you are looking for a business structure that offers limited liability protection, separate legal entity, credibility, employee benefits, and global expansion opportunities, then Private Limited Company registration in India is the way to go.
3. Procedure for Online Registration of Private Limited Companies in India
Are you planning to start a business in India? Registering a Private Limited Company (PLC) might be the best option for you. With the help of online registration services, you can easily complete the company registration process in just a few steps. IndiaFilings and Vakilsearch are two of the most highly recommended providers of company incorporation services in India.
The registration process involves registering directors with the Ministry of Corporate Affairs (MCA), picking the right company name, and drafting and filing the necessary documents for company registration. Once the process is complete, you will receive an incorporation certificate and PAN and TAN documents, allowing you to open a current bank account and start your business.
One of the advantages of registering a PLC is that it offers limited liability to shareholders while imposing certain ownership restrictions. This enhances the credibility of your business and can lead to increased consumer trust. Moreover, foreign subsidiaries are typically established in India as private limited companies due to the absence of restrictions on foreign shareholding.
To register a PLC, you will need to provide documents such as proof of identification and proof of residency for directors and shareholders. The capital contribution is left up to the shareholders, who determine the capital structure. The face value of a share, authorized capital, and paid-up capital are some of the concepts to keep in mind while setting up the capital structure.
Registering a PLC in India has never been easier. Choose a reliable and professional online registration service provider and get started on building a successful company today.
4. Documents Required for Private Limited Company Registration
For looking to establish a Private Limited Company in India, it is crucial to have the correct paperwork. Not only will this ensure a smooth incorporation process, but it will also pave the way for benefits such as taxation, business expansion, and quicker sanction of business loans.
To start, one of the most important requirements for setting up a company is the list of documents. The Registrar of Companies (RoC) is very specific about the documents submitted during the process of registration. Any discrepancies or mistakes in documentation could lead to the rejection or delay of your application.
If you are an Indian national registering a Private Limited Company, you will need to submit government ID proof, utility bills, and a specimen signature on a blank document. Moreover, if you are an NRI, you will need identity proofs like a voter ID or passport, and a notarized version of all documents.
In addition, it is important to ensure that all utility bills submitted are no older than three months, and that the PAN card name matches the name on all other proofs. Finally, for the registered office of the company, you will need to submit the latest gas, electricity or telephone bill, a sales or property deed, and a no-objection certificate from the property owner.
With all these documents submitted and steps taken care of, you can expect the incorporation of your Private Limited Company to take around 10-12 working days. Ensure that all documentation is correct and complete and give your business-in-the-making the best start.
5. Minimum requirements for Private Limited Company registration
Before registering your private limited company in India, make sure you have met the minimum requirements. First, you’ll need at least two shareholders, with a maximum of 200, collectively known as promoters. Shareholders can be individuals, HUF, partnership firms, or other companies, as long as all comply with FDI rules and regulations. Second, you’ll need at least two directors, with a maximum of 15. Directors have daily management responsibilities and must comply with relevant laws. These directors must be individual residents, with at least one of them a citizen of India. Residency is established by staying in India for at least 182 days in the preceding financial year.
Next, you must choose an appropriate name for your company, which must not resemble any existing company or LLP in India or match any registered trademarks. You’ll also need a registered office address and NOC from the premises owner. It can be your residential address, but the company nameplate should always be visible, and the owner must issue an NOC. Finally, you should prepare the necessary documentation, including identity and address proofs, digital signatures, and board resolutions. With these requirements fulfilled, you’ll be on your way to registering your private limited company in India.
Are you planning to start a business in India? Registering your business as a Private Limited Company can be a wise decision. This type of legal entity is governed by the Companies Act 2013 and requires a minimum of 2 Directors and 2 Shareholders. The Directors should include at least one Indian resident and citizen. Registering a Private Limited Company in India is easy, quick and affordable with prices starting from just Rs. 7899. With IndiaFilings, you will receive an incorporation kit that includes share certificates, invoicing, GST Filing, Banking, Payroll and Zero Account Maintenance Charges for a year.
When you register your Private Limited Company with IndiaFilings, you will have access to all the necessary documents required for registration. The proposed directors of the company must provide proof of identification and address. They can present either their Passport, Driver’s License, Election ID, Ration Card or Aadhar ID. As proof of residency, they must submit a Bank Statement, Electricity Bill or Phone Bill generated within the last two months. If one of the shareholders is a company based in India or abroad, documents such as Board resolution and Incorporation Certificate should be submitted.
The capital structure of a company can be determined by its shareholders. The face value of a share is usually Rs.1, Rs.10, Rs.100, Rs.1000 or Rs.10000. The authorized capital is the total value of shares a company can issue to shareholders and can be increased at any time after incorporation. The paid-up capital of a company cannot exceed the authorized share capital. Once you have determined the capital structure and have decided on a company name, an application for company name approval must be submitted to the Ministry of Corporate Affairs. Then you can proceed with the incorporation process and start your business in India.
7. Foreign Direct Investment (FDI) restrictions in Private Limited Companies
Foreign Investment (FDI) restrictions are in place for Private Limited Companies in India. While FDI is permitted up to 100% in most sectors, there are certain sectors where it is prohibited or restricted. For instance, lottery and gambling businesses are completely prohibited for foreign investment, including franchise and management contracts. Similarly, FDI is not allowed in real estate or construction of farmhouses, except for the development of townships, roads, bridges, city, and regional infrastructure. Additionally, the petroleum sector, natural gas/LNG pipelines, investing companies in infrastructure and service sectors, and establishment or operation of a satellite require approval from the Foreign Investment Promotion Board (FIPB).
8. Checklist of Documents required for Private Limited Company registration
Are you planning to register your Private Limited Company in India? If yes, then you must know about the list of documents required for the process. Firstly, you need to get a PAN Card for all the directors. You also need to submit an ID proof, such as a driving license, passport, or voter ID. Additionally, you need to provide an electricity bill or any other utility bill as proof of the registered office. For the address proof of all the partners, you must submit self-attested residential proof, which can be in the form of an electricity bill, latest bank statement or mobile bill. All of these documents must not be older than two months.
It is crucial to note that the liability of the members of a Private Limited Company is limited to the number of shares held by them. Also, the company can be incorporated within 15 working days after obtaining the certificate of incorporation. Therefore, gathering the relevant documents before the application process can save time and ensure a smooth registration process.
In conclusion, the required documents for a Private Limited Company registration in India include PAN Card of all directors, ID proof of all directors, address proof of the registered office, and self-attested residential address proof of all partners. Make sure to obtain all the documents within the specified time limit to ensure a hassle-free registration process.
9. Capital structure concepts for Private Limited Companies
When for a Private Limited Company in India, understanding the capital structure concepts is essential. With a maximum of 200 shareholders, the total capital of a private limited company is the total of all the shares held by each member. As per the Companies Act of 2013, there are two types of private limited companies, one limited by shares, and the other limited by guarantee.
In a private limited company limited by shares, the liability of the shareholders is only up to the normal value of shares owned by them. Therefore, the liability of the members is limited by the amount they will contribute or guarantee to pay if the company goes bankrupt, making it a safer choice when distributing the liability amongst shareholders.
In addition to the limited liability factor, private limited companies can also not have their shares publicly traded or transferred, guaranteeing better protection and security for members. The company needs at least two and up to fifteen directors, with one director being an Indian resident. A minimum of two shareholders or members and an authorized capital fee amounting to at least Rs. 1 lakh is necessary. Lastly, the company must have a registered office address in India to proceed with the registration process.
10. Steps involved in registering a Private Limited Company in India
Are you planning to start your own business in India? If yes, then registering your company as a private limited company has numerous benefits. As a shareholder of a private limited company, you are only liable to pay for the company’s liability to the extent of your contribution and not from your personal assets. Moreover, the company has a separate legal entity, and it is responsible for managing its own assets and liabilities. The liabilities of the company cannot be recovered from shareholders since the company’s losses don’t affect their personal accounts.
To register a Private Limited Company, the primary step is to obtain a DSC (Digital Signature Certificate). The registration process is done entirely online; thus, the forms require a digital signature. A digital signature is mandatory for all subscribers and witnesses in Memorandum and Articles of Association. To apply for a DIN (Director Identification Number), you need to fill Form DIR-3 or file it online. Once the DIN is approved, you can apply for the name for the company.
After obtaining the name, the next step is to draft the Memorandum and Articles of Association. After drafting theA and AOA, get them stamped with the appropriate stamp duty and signatures of at least two subscribers. The next step is to fill the essential forms (Form 18 and 32) and attach mandatory documents listed in the eForm. Submit the forms with requisite filing and registration fees and send the physical copy of MOA and AOA to the RoC. After processing of the Form is complete, obtain the Certificate of Incorporation from RoC.
In conclusion, registering your company as a private limited company in India is worth the investment and effort. With a legal entity that’s different from its shareholders, perpetual succession, and other benefits, it’s a smart choice for small businesses.
11. Affordable price for Private Limited Company registration
If you are planning to register a Private Limited Company in India, the process has become simpler, quicker, and affordable than ever before. With IndiaFilings, you can complete your company registration online at a very affordable price of just Rs. 7899. This price includes government fees & stamp duty, incorporation kit with share certificates, invoicing, GST filing, banking, payroll, and zero account maintenance charges for the first year. You can also get GST invoice with Input Tax Credit and complete company registration within ten days. By opting for a Private Limited Company registration, you’ll have a separate legal entity for your business, which provides limited liability protection for the shareholders and directors. It is the most preferred type of legal entity among millions of Indian entrepreneurs and popular startups like Flipkart, PhonePe, and Swiggy.
To register a Private Limited Company in India, you need to fulfill some minimum requirements like having at least 2 directors with one being an Indian citizen and resident, and 2 shareholders. There’s no restriction on foreign shareholding, and 100% foreign direct ownership is permitted in most sectors in India. You can start a company with a minimum amount of capital and determine the capital you wish to contribute. Hence, opt for a Private Limited Company registration at an affordable price and enjoy numerous benefits.
12. Disadvantages of Private Limited Company registration in India
Are you considering a Private Limited Company registration in India? While it has its benefits, there are also some disadvantages you should be aware of.
Firstly, the registration process can be time-consuming and costly, unlike an unregistered entity. Compliance formalities, such as holding board meetings and filing annual returns, also add extra responsibilities.
Additionally, a minimum of two persons is required to act as both directors and shareholders, making it difficult for sole entrepreneurs to establish a Private Limited Company.
Furthermore, while the company enjoys limited liability protection, in certain circumstances, personal liability of directors and members can arise.
Despite these challenges, a Private Limited Company continues to be the most preferred type of legal entity for doing business in India. Do your research and consider the advantages and disadvantages before making a decision.
13. Frequently Asked Questions (FAQs) about Private Limited Company Registration in India
Are you interested in registering your business as a Private Limited Company in India but have some questions? Here are some FAQs that might help clear up any doubts.
What is a Private Limited Company?
A Private Limited Company is a small company handled by a group of people privately, with liability limited to the number of shares held by its members. The shares of this type of company cannot be publicly traded.
Can small businesses register as a private limited company?
Yes, small firms can register as a Private Limited Company in India. Doing so can help provide credibility and a positive image to potential clients and financial institutions, making it easier to obtain loans.
Do shareholders need any special qualifications for Private Limited Company registration? No, no professional or educational qualifications are required to become a shareholder in a Private Limited Company. Any individual who is sound of mind can start a company.
What is the Director Identification Number (DIN)?
The Director Identification Number (DIN) is a unique identification number required for individuals who intend to become directors in a company. It can be obtained by applying through the SPICe form.
Can the registered office of the company be a rented premise?
Yes, the registered office of a Private Limited Company can be rented premises. It is used for the purpose of holding meetings, keeping records, and receiving correspondence from statutory government bodies.
What are the benefits of registering a small business as a Private Limited Company? Registering as a Private Limited Company provides credibility to a business, making it easier to obtain loans at favorable rates from banks and convince potential clients when entering into deals.
Can a sole proprietorship be converted into a Private Limited Company?
Yes, a sole proprietorship can be converted into a Private Limited Company by following the Companies Act 2013 procedures.
Can foreign entities be directors or shareholders in a Private Limited Company?
Yes, any foreign national, entity, or NRI can become a director or shareholder in a Private Limited Company in India.
What are the forms required for Private Limited Company registration in India?
The Ministry of Corporate Affairs has introduced a new form called the SPICe+ for faster company incorporation. Other forms may be required depending on the specific needs of the company.
14. Advantages of Private Limited Company Registration in India
If you’re looking to start a business in India, registering as a Private Limited company could be a great option for you. With this type of registration, your business becomes a separate legal entity, which means you won’t be held personally liable for the company’s debts. One of the biggest advantages of a Private Limited company is its limited liability protection. This means that in case of financial crisis, only the initial investment will be lost and personal assets will remain protected.
Additionally, this type of company structure is highly favored by banks and other financial institutions, making it easier to secure loans and other forms of financing. Private Limited companies also have more options for borrowing money, owning property, and transferring shares. Moreover, it can be a great way to attract top talent as they can be offered shares as compensation.
Furthermore, Private Limited companies can easily expand their business to an international platform as they are allowed to have 100% foreign direct investment without government approval. With all these benefits, registering as a Private Limited company could be the key to your business’s success.
15. Documents required for Private Limited Company registration
When it comes to starting a Private Limited Company in India, there are certain requirements and documents that need to be submitted for registration. These documents are necessary to ensure that all legal formalities are completed and the company is registered with the Registrar of Companies (ROC) in India. Let’s take a look at the documents required for Private Limited Company Registration in India.
1. PAN Card: The Permanent Account Number (PAN) is mandatory for all Indian citizens and entities. It is used for taxation purposes, and thus it is essential to have a PAN card to start a Private Limited Company.
2. Aadhaar Card: The Aadhaar card is an identification document issued by the Indian Government. It is required for all Indian citizens and should be submitted along with other documents for company registration.
3. Digital Signature Certificate (DSC): A DSC is mandatory for all company directors and shareholders. It is an electronic signature that allows you to sign documents online. It must be obtained from a government-approved agency.
4. DIN: The Director Identification Number (DIN) is a unique identification number given to directors of a company. DIN is mandatory for all directors of a Private Limited Company.
5. Name Availability: You need to provide at least three names for your company. The Registrar of Companies (ROC) will check the availability of the name and approve it if it is not already taken.
6. Memorandum of Association (MOA): The MOA is one of the essential documents required for company registration. It contains the objectives of the company and the rules that govern the company’s operations.
7. Articles of Association (AOA): AOA outlines the internal regulations of the company. It defines the roles and responsibilities of directors and shareholders, and it governs the company’s operations.
8. Declaration of Compliance: The Declaration of Compliance is a statement signed by the company’s directors and shareholders. It certifies that all the requirements of the Companies Act have been met, and the company is ready to start operations.
9. Address Proof: To register a company, you need to provide a proof of address of the company’s registered office. It can be a utility bill or rental agreement.
10. Landlord NOC: If the company’s registered office is rented, you need to provide a No-Objection Certificate (NOC) from the landlord.
11. Utility Bills: You need to provide a copy of the latest utility bills like electricity, water, or gas bills as address proof.
12. Bank Statement: A copy of the latest bank statement is essential for Private Limited Company registration. It proves that the company has a bank account.
13. Phone and Internet Bill: A copy of the latest phone and internet bill can be submitted as address proof.
14. Business Proof: You need to provide any business registration proof if the company is an existing business and registering for a Private Limited Company.
15. Residential Proof: Directors and shareholders need to submit residential proof documents like passport, driver’s license, or voter ID card.
16. Passport Size Photo: You need to submit passport size photos of all directors and shareholders. It should be recent, clear, and have a white background.
In conclusion, the above-mentioned documents are required to start a Private Limited Company in India. You need to ensure that you have all the necessary documents ready before starting the registration process. To avoid any confusion, it is advisable to seek professional help from a company registration consultant to guide you through the process smoothly.