Private Limited Company
A Private Limited Company is the most common kind of legal entity chosen by Indian businessmen. Private Limited Companies are officially controlled by the Companies Act, 2013. There are few basic requirements to register a company in India:
- Minimum of 2 Directors out of which 1 director should be Indian resident. Maximum directors can be 15 only at a time
- Minimum of 2 shareholders out of which directors may or may not be a shareholder
- DIN (Director identification number) for all directors
- Need to have a registered office in India
Registering a Private Limited Company is lengthy and a tough process. However, ComplianceBuddy can assist you in the entire process at a very reasonable fee.
Process for Private Limited Company Registration
ComplianceBuddy simplifies the process of incorporating your private limited company. We offer fastest company registration by assisting in selecting the appropriate name, collecting the required documents and liasoning with the department if required. Save time and effort, and start your business journey today.
Below are the major steps for registering a private limited company in India:
- Reserving the Business Name
Reserving a company name is the first and foremost step in incorporating a company. An application with 1 or 2 business names for approval is submitted to the MCA (Ministry of Corporate Affairs) to reserve the company name. In case the applied names get rejected, 1or 2 additional business names are reapplied. Generally, the MCA takes upto 5 working days to approve the above application.
- Obtaining Digital Signature for Directors
Digital signatures are mandatory to be obtained for the directors before incorporation, as all signatures for MCA filings are accepted with a digital signature issued by a certification authority in India. Regular signatures are not acknowledged by MCA. Once name approval is obtained, ComplianceBuddy shall apply for and secure digital signatures for the directors from a certifying authority.
To get the digital signature, the directors need to submit a copy of their ID proof and complete a video KYC procedure. In case the director is a foreign citizen, the passport and additional documents need to be submitted to and apostilled by a local embassy.
- Submitting Incorporation Application
After getting the digital signature, the incorporation application can be filed in SPICe Form to the Ministry of Corporation Affairs with relevant documents. Along with the incorporation application, the MOA (Memorandum of Association) and AOA (Articles of Association) are also filed. If the MCA finds your incorporation application is complete and acceptable, you will be granted Incorporation Certificate along with PAN in 5 business working days once the inspection is over.
Documents Required for Incorporation
Followings are the necessary documents required for private limited company incorporation with ComplianceBuddy :
- Aadhaar Cards of the Directors
- PAN Cards of the Directors
- Passport size photograph of the Directors
- Latest Bank Statement of the Directors
- A unique business name for company
- Address proof of the Registered Office
- Business Contact/ Mobile Number & Email ID
Advantages of Private Limited Company
The main advantage of establishing a private limited company in India as opposed to other entity kinds are as follows:
Distinct Legal Entity: A company is a juristic person as well as a legal entity. As a result, a business enjoys a wide range of legal rights, including the ability to buy land, take on debt, employ people, etc. A corporation’s members are not held personally accountable for the company’s obligations because a company is a distinct legal entity.
Limited Liability: A Private Limited company is a distinct legal entity with restrictions on liabilities. As a result, the investors are not responsible for the company’s damages in excess of the amount they contributed as share capital.
Undisturbed Existence: According to the legal concept of “perpetual succession,” a company will remain in existence until it is formally dissolved. A company stays alive irrespective of membership fluctuations because it is a distinct legal entity and is untouched by the retirement or other exit of any of its members.
Raising Funds: A private limited business has a variety of funding alternatives. A business can raise money from investors, stakeholders, investment groups, venture capitalists, private equity firms, foreign money, non-bank financial companies (NBFCs), banks, and other financial organizations. Investors can only provide both debt and equity funds to a corporation.
Disadvantages of a Private Limited Company
Although establishing a company has many benefits, it may not be the best choice for all businessmen for the following reasons:
Mandatory Audit
A private limited company needs to appoint a chartered accountant or a CA firm as auditor and complete the audit work within 30 days.
Compliance Burden
- Accounts must be Audited by a Statutory Auditor
- Filing of Form MGT 7
- Filing of Financial Statement (Form AOC-4)
- Statutory Audit of Accounts
- Maintenance of Statutory Registers
Mandatory Current Account Opening
Within 180 days of the private limited company’s registration, a current account in a bank must be opened in its name, and the enrollment amount must be transferred. The company certificate would not be issued, and a fine would be applied, if the above procedures were not followed.
For a private limited company, the following papers are needed for opening a bank account:
- Incorporation Certificate of Company
- Directors KYC Documents
- Resolution of the Board approving the Directors’ opening of a bank account
- Address Proof of the Company
At ComplianceBuddy, we collaborate with a number of banks to facilitate the easy opening of current accounts for our clients’ businesses.
GST Registration: Optional
The directors have the option to choose to register for GST at the same time as incorporation throughout the company registration process. However, unless specific turnover thresholds are met, a corporation is not required to be registered under the GST. You can approach ComplianceBuddy® team to know more about the GST registration requirements.
A Quick comparison to help you choose right form of Business Entity
Below table is a quick summary of cost benefit analysis to help you decide which company suits you best:
| Parameters | Pvt Ltd Company | LLP | Partnership Firm | Sole Proprietorship |
| Registration | Mandatory | Mandatory | Optional | No formal registration |
| Governing Law | Companies Act, 2013 | LLP Act, 2008 | Indian Partnership Act,1932 | No governing law |
| Registering Authority | Ministry of Corporate Affairs | Ministry of Corporate Affairs | Registrar of Firms | No Registering Authority |
| Restriction on Business Name | existing / Identical Name not allowed | existing / Identical Name not allowed | No restriction | No restriction |
| Legal Status of Entity | Separate Legal Entity | Separate Legal Entity | No Separate Entity | No Separate Entity |
| Minimum Number of Members | Minimum 2 persons | Minimum 2 persons | Minimum 2 partners | Only one |
| Maximum Number of Members | Maximum of 200 members | Unlimited number of partners | Maximum of 20 partners | Only one |
| Ownership Transferability | Can be transferred | Can be transferred | Not Transferable | Not Transferable |
| Taxability of profits | Taxed at 30% with surcharge | Taxed at 30% with surcharge | Taxed at 30% with surcharge | As per Indicidual Slab |
| Reporting / Annual Filings | AOC 4 & MGT 7 annually | AOC 4 & MGT 7 annually | Not required | Not required |
| Registration Cost | Rs 15,000 onwards | Rs 7,500 onwards | Rs 5,000 to 7,500 | RS 3,000 to 8,000 |
If you are still not able to decide which form of entity suits your business, kindly connect with our team.
