Overview

A Private Limited Company Registration is the most popular form of corporate legal registration in India. A private limited company is a company which is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them.Shares of Private Limited Company cannot be publically traded. It can be initiated with a minimum of two Directors (Individuals only) and two Shareholders (Individuals or Corporate entities). Both Directors and Shareholders may or may not be the same person.
Private Limited Company is preferred as it ensures limited liability and provides a separate legal entity to the business. The company incorporation procedure results in clear ownership of the company defined by the share capital. Incorporation of a company is the first step in scaling your business as it paves the way for outside funding while enabling you to attract top talent by offering stock options. However, one needs to take into account mandatory audits and higher compliance which could be tough to maintain. On the other hand, higher compliance will lend better credibility to your business than any other form of incorporation of a company in India.

ADVANTAGES

Not just one or two but there are numerous reasons why you should go for private limited company registration. Let’s find out what they are:

Simple Registration Process

Private Limited Company can be registered by just two or more persons, by complying with the prescribed limited formalities as per the Companies Act, 2013.

Limited Liability

Limited liability is one of the greatest advantages of a Private Limited Company. If any legal liability arises, then neither it’s member nor it’s director’s personally affected; the Liability of the members is only for the npaid amount on shares held by them and not more than that. Shareholders are not liable for the Company’s debts and liabilities.

Separate Legal Entity

One of the most interesting advantagesof a Private Limited Company is that it is distinct from that of its members. A company is a separate entity having its rights & Obligations.

Perpetual Succession

A company with ‘perpetual succession’, has continued or uninterrupted existence until it is legally shut down. The Company, being a separate legal entity, is not affected by the death of any member but continues to be in existence.

Easy Transferability

Shares of a Private Limited Companyare easily transferable by a member to any other person. No complicated formalities are there.

Owning Property

A company is a separate legal person, can purchase, own, enjoy and alienate or sale, property in its name. No member or shareholder can make any claim upon the property of the company so long as the company is a going concern.

DOCUMENTS/DETAILS REQUIRED FOR PRIVATE LIMITED COMPANY REGISTRATION

  1. Two proposed names of Proposed Company.
  2. Main Objectives of company
  3. Authorized & Paid Capital
    1. Copy of PAN card
    2. Copy of Identity proof (Aadhaar Card/Passport/Driving License/Voter Card)
    3. Copy of Address Proof (Latest Bank statement/Electricity Bill/Telephone bill/Postpaid Mobile Bill)
    4. Passport Size photograph
    5. Mobile No. and Email ID.
    6. Educational Qualification
    7. Shareholding Details
    1. Utility Bill such as electricity bill/telephone bill/Postpaid Mobile Bill/Gass Bill for proposed Registered office address of company.
    2. NOC/Rent Agreement

FREQUENTLY ASKED QUESTIONS

FOR SMALL BUSINESSES, WHAT ARE THE BENEFITS OF PRIVATE LIMITED COMPANY ?

It provides creditability to business in the eyes of financial institutions, suppliers and potential clients. As it makes easier for companies to get loans at favorable terms from banks or convincing potential clients while entering into deals .

IS THERE ANY QUALIFICATION TO BECOME A DIRECTOR OR SHAREHOLDER IN A PRIVATE LIMITED COMPANY ?

Any individual can become a shareholder in a private limited company. For becoming a director in a company, no professional or educational qualification is required.

WHAT ARE THE RESPONSIBILITIES OF A DIRECTOR ?

The director has been entrusted with the responsibility of managing the company in the best efficient manner. The responsibility of a director depends upon the kind of directorship he holds in the company. For instance, an executive director or a managing director has greater responsibility than a non-executive director who might hold the directorship as an expert or consultant. A director is liable for misconduct or fraud or if found guilty of default.

IS IT ALLOWED TO CHANGE REGISTERED OFFICE OF THE COMPANY AFTER REGISTRATION ?

Yes, A company can change its registered office any time after following specified procedure. The changed address can be situated within the same state or in a different state from the state in which it was originally registered.

WHAT IS DIRECTOR IDENTIFICATION NUMBER (DIN) ?

Any person intending to become director in a company must apply for director identification number, issued by the Ministry of Corporate Affairs. Proof of identity and address is required to be submitted along with requisite fee while submitting the application for DIN. If the documents are in order, the DIN is approved within 3-4 days. The approved DIN is valid for life and the same DIN can be used by the director, even if he/she has directorship in more than one company.

CAN REGISTERED OFFICE MAY BE SITUATED OUTSIDE INDIA?

No, it must be situated in India Only.

WHO CAN SET UP A LIMITED COMPANY?

Any individual of any nationality may register a limited company subject to a few conditions:

  • They are not an undischarged bankrupt
  • They have not been restrained by court order
  • They are not subject to UK government restrictions

DOES REGISTRATION OF MY COMPANY NAME ALSO MEAN THAT MY TRADEMARK IS PROTECTED?

No. Company law is different from trademark law. You cannot stop someone using a trademark which is the same or similar to yours merely by registering your name with Companies House.

WHAT IS THE DIFFERENCE BETWEEN SHAREHOLDERS DIRECTORS?

The directors are responsible for the day to day running of the company and ensuring it meets its responsibilities and deadlines. The shareholders own the company and have the right to vote on many issues. The extent of ownership and level of voting rights are based on the percentage of issued shares they own. An individual can be both a director and shareholder of a company.

DO I NEED TO RETURN ANY DOCUMENTS ANNUALLY?

Yes, you must provide a number of documents following your ‘Accounting Reference Date’ (ARD). This date is usually the last day of the month your company was incorporated and occurs each year; it is the date that your financial year ends where the accounts are to be made up to. You have 10 months from your ARD to return the following documentation to Companies House:

  • A profit and loss account (or income and expenditure account if the company is not trading for profit)
  • A balance sheet signed by a director
  • An auditors report signed by the auditor (if appropriate)
  • A directors report signed by a director or the secretary of the company
  • Notes to the accounts
  • Group accounts (When necessary)
Yes, a Foreign National or an NRI can be a Director of a Private Limited Company in India after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be a Resident Indian.

CAN A FOREIGN NATIONAL OR AN NRI HOLD SHARES OF A PRIVATE LIMITED COMPANY?

Yes, a Foreign National or an NRI Foreign Companies can hold shares of a Private Limited Company subject to Foreign Direct Investment (FDI) Guidelines.

GST REGISTRATION IS REQUIRED FOR PRIVATE LIMITED COMPANY ?

GST Registration is optional till the 20 lakh rupees turnover and for north east state 10 lakh rupees turnover. it’s a completely separate registration apart from private limited company registration.