Registering a private limited company is one of the most popular ways of starting a business in India. It has various tax and regulatory advantages. It is the most prevalent and popular type of corporate legal entity in India. Private limited company registration is governed by the Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014. To register a private limited company, a minimum of two shareholders and two directors are required. A natural person can be both a director and shareholder, while a corporate legal entity can only be a shareholder. Further, foreign nationals, foreign corporate entities or NRIs are allowed to be Directors and/or Shareholders of a Company with Foreign Direct Investment, making it the preferred choice of entity for foreign promoters.
Unique features of a private limited company like limited liability protection to shareholders, ability to raise equity funds, separate legal entity status and perpetual existence make it the most recommended type of business entity for millions of small and medium sized businesses that are family owned or professionally managed.
HOW WE CAN HELP YOU TO START
- We will help you get your Digital Signature (DSC) and Director identification Number (DIN) for all directors (two/three)
- We will then help you pick a unique name using RUN (Reserve Unique Name) with MCA (Ministry of Company Affairs)
- We will help you draft the company MoA (Memorandum of Association) and AoA (Articles of Association)
- We will complete the SPICe form (Simplified Proforma for Incorporating Company Electronically)
- We will send in a request to the NSDL for company PAN & TAN
Identity Proof of directors
- Self-attested scanned copy of PAN Card of directors
- Notarised passport copy for foreign nationals
Address Proof of directors
- Passport / Driving license /Aadhaar card
- Electricity bill / Bank statement (less than 2 months old)
Registered Office Address Proof:
- Rental Agreement OR sale/registration deed (if owned)
- Copy of recent utility bill (electricity/water) or property tax receipt
- No objection certificate from landlord for use of property as registered office (for rented offices)
- Signed Digital Signature Application (hard copy)
- Other incorporation digitally signed and uploaded as soft copies
WHAT YOU HAVE NOW
- DIN for all the directors
- Digital signature token for all directors
- MoA & AoA (Memorandum of Association & Articles of Association)
- Incorporation Certificate from MCA with CIN
- Company PAN card
- Company TAN number
- All supporting documents for opening bank account
SUPPORTING YOUR ON-GOING BUSINESS
- We can maintain your accounts and give you periodic progress reports at end of every month
- We can file your TDS & GST returns
- We can compile and file your income-tax returns
FEATURES OF PRIVATE LIMITED COMPANY
Separate Legal Entity
Private Limited Company is a legal entity and a juristic person established under the Companies Act. Hence, a company has a range of legal capacities including opening of a bank account, hiring of employees, taking on equity or obtaining licenses and more as an independent corporate entity. The members (Shareholders/Directors) of a company have no personal liability to the creditors of a company for company’s debts.
Private Limited Company has ‘perpetual succession’, meaning uninterrupted existence until it is legally dissolved. A company being a separate legal person, is unaffected by the death or other departure of any member and continues to be in existence irrespective of the changes in ownership.
Ownership of a business can be easily transferred in a company by transferring shares. The signing, filing and transfer of share transfer form and share certificates’ is sufficient to transfer ownership of a company. In a private limited company, the consent of other shareholders may be required to effect share transfers.
Private Limited Companies can raise equity funds in India. Companies can also issue equity shares, preference shares, debentures and accept deposits with RBI permission. Banks and Financial Institutions prefer to provide funding to a company rather than partnership firms or proprietary concerns.
Private Limited Company being an artificial person, can acquire, own, enjoy and alienate property in its name. The property owned by a company could be machinery, building, intangible assets, land, residential property, factory, etc., No shareholder can make a claim upon the property of the company – as long as the company is a going concern.
ADVANTAGES OF PRIVATE LIMITED COMPANY
Minimises risk in the business
If the company experience financial distress because of normal business activity, the personal assets of shareholders will not be at risk of being seized by creditors because of limited liability of the shareholders.
Reduces Tax Burden
There are many allowances and tax- deductible costs that can be offset against the profits of a company and the tax would be paid after deducting many costs incurred by you. In addition to that the current level of Corporation Tax is lower than income tax rates.
With the formation of company, you are declaring to the people that you are serious about the business and its continuity. Banks easily provide loans against the security of the company’s assets. The greatest advantage is that you can build right team of people. Quality workforce is not hesitant to be part of the company, because of their sense of security.
Scope of Expansions is higher
Scope for expanding the business becomes high, as the authorized capital can be increased over 1,00,000/- INR, which multiplies the borrowing capacity of the organization and also secures the deposits and loans from Banks and financial institutions as ‘big projects require big investments’.
Multiple Assets Bring Multiple Advantages
You play multiple roles and get multiple advantages. As a director you receive remuneration, as a shareholder you receive dividend, as a lessor you receive rent, etc.
Increases Wealth Leverages
Shareholders do not fear much because their risk is limited to the extent of their share and you can accumulate huge investment from the shareholders and business debt from the lenders.
Transfer of company is easy
You can transfer the entire shareholding to the intended people as an going concern. These changes of ownership, saves the time & money and stamp duty.
Private Limited Company:
Company Law defines a private company as one which
- has a minimum paid-up share capital of Rs. 1 Lakh or such higher capital as may be prescribed and by its Articles of Association restricts the right of transfer of its share limits the number of its members to 200 which will not include members who are employees of the company and members who are ex-employees of the company and were members while in such employment and who have continued to be members after ceasing to be employees.
- prohibits any invitation to the public to subscribe for any shares or debentures of the company and
- Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
In simple words private limited company is a company whose ownership is private usually by family members, friends and relatives.
Minimum Requirement to be fulfilled to Form a Private Limited Company
- Two promoters (Shareholders)
- Two directors
- Authorized capital of Rs.1,00,000
- DIN (Director Identification Number) for all the directors
- DSC (Digital Signature Certificate) for all the directors
About Digital Signature
What is a Digital Signature Certificate (DSC)? The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance program are required to be filed with the use of Digital Signatures by the person authorized to sign the documents.
Class of DSC
The Ministry of Corporate Affairs has stipulated a Class-II or above category signing certificate for e-filings under MCA21. A person who already has the specified DSC for any other application can use the same for filings under MCA21 and is not required to obtain a fresh DSC.
Required documents for getting DSC:
- Specified Form filled as per given guidelines
- ID proof of the applicant (Copy of the PAN card should be attested by the Gazetted officer/Bank manager/Post master).
- Address proof (Passport/Aadhaar card/Driving License/Voter Id/Latest Utility Bill like Electricity bill, Telephone bill, Water bill, Gas bill, etc. Property Tax receipt). This needs to be attested by a Gazetted officer/ Bank manager/ Post master.
- Passport size photo(3.5 cm X 2.5 cm)
About Director Identification Number DIN
The concept of a Director Identification Number (DIN) has been introduced for the first time with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. As such, all the existing and intending directors have to obtain DIN within the prescribed time-frame as notified. DIN is a unique identification number allotted to an individual who is an existing director of the company or intends to be appointed as director of a company. DIN is an 8 digit number.
Required documents/information’s for Allotment of DIN
- Self-attested copy of the PAN Card
- Self-attested identity proof of proposed directors (like Voter ID Card/ Valid Driving License/ Valid Passport/ Aadhaar Card etc.
- Self-attested Address proof of the proposed directors (like Latest Bank Statement/ Telephone or Mobile Bill/ Electricity Bill etc.
- Passport size colour & clear photograph (3.5 cm X 2.5 cm)
- An specified Affidavit by the individual (Declaration by the individual and self-attested*)
- Educational Qualification
- Current Occupation
- Valid Email Id and Mobile Number
Drafting of Bye Laws (MOA & AOA)
The Memorandum of Association (MOA) is a document that sets out the constitution of the company. It contains, amongst others, the main objectives, incidental or ancillary objectives for the attainment of the main objectives and the scope of activity of the company and also describes the relationship of the company with the outside world. The Articles of Association (AOA) contain the rules and regulations of the company for the management of its internal affairs. While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and purposes. It also states the authorized share capital of the proposed company and the names of its first/ permanent directors.
Authorised capital is the maximum value of equity shares that can be issued by a company. On the other hand, paid up capital is the amount of shares issued by the company to shareholders. Authorised capital can be increased after incorporation at any time to issue additional shares to the shareholders.
Foreign Investment / Directors
- NRIs, foreign nationals and foreign entities can register a company and invest in India, subject to the Foreign Direct Investment norms set by the RBI. However, incorporation rules in India require for one Indian national to be a part of the company on the Board of Directors.
Any person over the age of 18 years can become a director in a company. Also, there are no conditions on residency or citizenship. Hence, NRIs and Foreign Nationals can easily start and manage a private limited company in India.