Among the various entities given under Companies Act of 2013, Private Limited Company registration is one. These types of entities are the most preferred among the business owners. This is because it offers various benefits like perpetual succession, limited liability, separate legal entity status, various tax exemptions etc. The best thing about these Private Limited Companies is that they can be formed online. The entire process of incorporation of the Private Limited Company is online and one can complete it smoothly with the help of professionals. Professional help is suggested so that there will be no mistake while filing an application for the registration of such entities. Mistakes can result in unnecessary delays hence one must avoid mistakes in the application form. If you want to know more about the Private Limited Company keep reading the current write-up till the end.
What is a Private Limited Company?
A Private Limited Company is a type of business entity regulated under the Companies Act of 2013, offering limited liability to its shareholders. It stands as a popular choice among entrepreneurs due to its various advantages such as simple online registration, gaining credibility and trust in the market, and attracting potential investors. However, it involves complicated procedures and higher costs during incorporation, possesses strict compliance requirements, and lacks the rights of Indian citizenship or easy establishment of subsidiary companies. Additionally, it risks having its corporate veil lifted by courts in cases of fraudulent practices or wrongdoing. Therefore, it is a business entity that provides a degree of security and convenience while requiring meticulous attention and adherence to legal formalities.
Important Factors of the Private Limited Companies
There are many things due to which Private Limited Company is the first choice of the entrepreneurs. Some of the key points which you must know, if you already have a Private Limited Company or you are thinking about to register the one are mentioned below:
Advantages of Private Limited Companies
- It’s an online process, saving time and allowing completion from anywhere.
- No need to run around for vendors; professionals can manage it easily.
- Building reputation is key in a competitive market, aiding business establishment and profitability.
- Government verification makes these companies trustworthy, allowing potential customers to view detailed information online.
- Offers various benefits like perpetual succession, distinct liability, tax-exempt status, dependability, and transparency.
- Accessible data and government supervision make them attractive to investors.
Disadvantages of Private Limited Companies
- Setting up a Private Limited Company involves a complex, law-bound process.
- Missing a single step can lead to application rejection or the need for clarification
- Requiring professional assistance for completion.
- It’s not straightforward and can be a bit overwhelming for business owners.
- Establishing a Private Limited Company involves heavy fees and costs.
- Registration fees vary across states, making the incorporation process relatively expensive.
- Many individuals believe that after incorporating, a Private Limited Company operates like a partnership or proprietorship.
- There are pre and post compliances that must be met to avoid penalties.
- Each compliance form has its separate government fee, making it complicated and costly to maintain.
- Even though Private Limited Companies are recognized as a legal entity, it cannot attain citizenship rights, as per the law.
- If a Private Limited Company holds 100% shares in a subsidiary, it can raise suspicions of ill intentions.
- Sometimes the corporate veil might be lifted, and thorough inspections may be conducted by authorities.
- Courts have the authority to expose the truth when a company’s platform is used for fraud or wrongful conduct.
- Instances of fraudulent intentions might lead to the company’s incorporation being denied
Key Requirements of Private Limited Company Registration
- At least two directors are needed to start private limited companies.
- Choose a name for the company that’s unique and not already in use.
- A physical address for official communication is necessary.
- Personal details of directors and shareholders, address proof, and photos are required.
- Minimum capital requirement to start the company
- The company should have a bank account.
Different Types of Private Limited Company
There are total three types of Private Limited Companies in India which are mentioned below:
- In companies limited by shares, shareholders’ liability is limited to the number of shares they own in the company. They aren’t responsible for more than the value of their shares. Shareholders aren’t liable for the company’s debts.
- In the company’s limited by guarantee, shareholders are accountable only for the guaranteed amount mentioned in the Memorandum of Association. They’re responsible for the specific amount guaranteed.
- In the unlimited Companies, shareholder liability isn’t limited. They’re accountable for the company’s debts. Despite this, shareholders retain a separate legal identity and cannot be sued individually.
Process of Registering Private Limited Companies
Given below is the step by step procedure to register a Private Limited Companies:
- Decide a unique name for your company
- Check the availability of the name you selected on the MCA
- Apply before the office of Registrar of Companies, commonly popular as RoC for name approval.
- Collect necessary documents like address proofs, identity proofs, and Memorandum and Articles of Association (MOA and AOA).
- Get Digital Signature Certificates (DSC) for the proposed directors of the company.
- File the application for company incorporation along with the required documents
- Pay the prescribed registration fees according to the authorized capital of the company and the state you’re registering in.
- Once the application is submitted it will reviewed by the registrar of the companies and if it find everything correct and up to the mark, the registrar of the companies will issue CIN that is Company Incorporation Certificate
- Use the Certificate of Incorporation and other documents to open a bank account in the company’s name and also get PAN and TAN number of the company
- With the incorporation and other formalities complete, you can start your business operations.
Key Documents Required to Register a Private Limited Company
The list of the key documents without which Private Limited Companies cannot be registered are mentioned below:
- An identity number issued to directors. Directors must have a valid DIN.
- A digital signature for online documents and forms.
- A document defining the company’s objectives and operations.
- The rules and regulations which must be well drafted are required for the company’s management.
- Address proof of directors, like Aadhar card, passport, or driver’s license.
- Identity proofs like PAN card or Aadhar card of directors and shareholders.
- Provide a rental agreement in case the office is on rent, otherwise electricity bill, or property tax receipt for office location needed
- Permanent Account Number of directors and shareholders.
- Recent photographs of directors and shareholders.
- A declaration that the company complies with all legal requirements.
Conclusion
Entrepreneurs like Private Limited Companies due to their advantages, but setting one up can be tough. Though the process is online and time-saving, it’s complex and needs serious attention to follow the rules. You need to pay attention to the details to avoid penalties. Choosing a unique name and following the step-by-step process is necessary. But remember, it’s intricate and can cost a lot, so think carefully if you’re planning to start a Private Limited Company.
