The process of private limited company registration in India is organized and efficient to enable entrepreneurs to set up their business within the legal framework. A private limited company is one of the most popular business structures in India as it provides limited liability protection, distinct legal entity status, fundraising ease and credibility. This blog will give you a concept regarding how to incorporate a private limited company in India.
What is a Private Limited Company?
A Private limited Company in India is a private Company whose liability is limited to the shareholding. These key characteristics make this business structure preferred:
- Limited Liability Protection: Shareholders are liable only for how much they invested in the company.
- Separate Legal Entity: The company has a legal identity separate from its owners.
- No Minimum Number of Shareholders & Directors : At least two shareholders and two directors are needed.
- Restrictions on Share Transfer: Shares can be transferred only with Board approval.
- Prohibition on Public Invitation: The company can not solicit the public to subscribe to its shares.
Steps for Private Limited Company Incorporation in India
Here are the steps for private limited company registration in India:
Step 1: Buy a Digital Signature Certificate
Step one of pvt ltd company registration is obtaining a DSC. The DSC signs electronic papers and verifies information supplied.
- Choose a Certification Agency: Choose a Certification agency authorized by the Controller of Certification Agencies to issue DSCs.
- Send Required Documents: Provide passport size pictures, Aadhaar card, PAN card, telephone number and email address. Foreign nationals also must submit notarized and apostilled documents, in case applicable.
- Verification & Issuance: The DSC is issued following verification.
Step 2: Seek Director Identification Number
Anybody applying to be a Director within a company should have a Director Identification Number. To obtain a DIN:
- Filing of DIR 3 Form: Send the DIR-3 form and supporting documents including identity proof and address proof to the Ministry of Corporate Affairs.
- Approval & Issuance: The DIN is going to be assigned once verification is done.
Step 3: Name Reservation for the Company (SPICe+ Part A)
A critical step of company registration in India would be to reserve a distinctive name for the company. This involves:
- SPICe + Part A Form: You can propose two names for the company in the form. The name should refer to the primary business activity.
- Approval by MCA: The MCA will consider the names proposed and approve one in case it meets the naming guidelines.
Step 4: Submission of Company Details (SPICe + Part B).
After the name is approved, the company info must be supplied on the SPICe + Part B form. That includes:
- Capital & Registered Office Details: Information regarding the authorized and paid up capital of the company and also the location of the registered business office.
- Director and Subscriber Details: Details of the directors and subscribers with DINs and DSCs.
- Stamp Duty & Statutory Payments: Stamp duty and other statutory fees paid.
- PAN and TAN Application: Application for Permanent Account Number & Tax Deduction and Collection Account Number of the company.
Step 5: Drafting and Submission of Incorporation Forms (SPICe + MOA & AOA)
The Memorandum of Association & Articles of Association are necessary documents for incorporating a private limited company in India. They describe the company’s goals, rules and regulations. The steps are the following:
- Drafting MOA & AOA: Prepare the AOA and MOA based on the Companies Act, 2013.
- Digital Signatures: Get digital signatures from subscribers and professionals who are incorporating.
- Submission to MCA: Send the signed MOA & AOA & SPICe + forms to the MCA.
Step 5: Filing AGILE-PRO-S Form
AGILE-PRO-S is a consolidated form of numerous registrations for a brand new business. That includes:
- Goods & Services Tax: Registration for GST if the business pays GST.
- Employees’ Provident Fund Organisation: For companies with over 20 employees – registration for EPFO.
- Employees’ State Insurance Corporation: Registration for ESIC for companies with over ten employees.
- Bank Account: Opening a bank account under the company name.
- Shop and Establishment License: This particular license might require registration, if any.
Step 7: Certificate of Incorporation issuance
The MCA issues the Certificate of Incorporation following effective verification of all documents submitted. The COI contains:
- Company Identification Number: A unique 21 digit number identifying the company.
- PAN & TAN: Issued by Income Tax Department.
- Date of Incorporation: The actual date of incorporation of the business.
Step 8: Compliance After Incorporation
Once the private limited company registration is completed you must follow post-incorporation compliance. They include:
- Board Meetings: Tend the first board meeting within 30 days of incorporation.
- Share Certificates: Within two months issue share certificates to shareholders.
- Statutory Registers: Maintain statutory registers like the register of members, directors and charges.
- Financial Records: Create annual financial statements and also maintain correct financial records.
- AGM: Hold the AGM within 6 months following the conclusion of the financial year.
- Annual Filings: File annual returns and financial statements with the ROC.
Advantages associated with Private Limited Company Registration
A private limited company registration in India has several benefits:
- Limited Liability: Protects shareholders ‘personal assets.
- Unique Legal Identity: The company may own property, enter agreements, sue or be sued in its very own name.
- Ease in Raising Funds: Attracts investors with its structured and credible framework.
- Perpetual Existence: The company remains in existence despite ownership changes.
- Tax Benefits: Eligible to a number of tax exclusions & perks.
- Credibility: The tag “Pvt Ltd” reflects credibility and trustworthiness of the business.
Disadvantages associated with a Private Limited Company Registration
A Pvt Ltd company has several disadvantages too:
- Compliance Burden: Requires compliance with different regulatory requirements.
- Complex Setup: The incorporation procedure might be complicated and lengthy.
- Restricted Share Transfer: No shares can be freely transferred.
- Public Disclosure: Financial data is private information that might violate privacy.
- Higher Costs: The incorporation and compliance costs are higher than other business structures.
Conclusion
Private limited company registration in India is a structured procedure with clear guidelines to ensure businesses are legally compliant. Following the steps given here will help entrepreneurs in the company registration in India process easily. The incorporation of private limited company in India offers numerous benefits and increases the credibility & growth potential of the business. Regardless if you’re a novice entrepreneur or a veteran business owner seeking to formalize your operations, knowing and following these actions will guarantee a successful enterprise.
FAQs
How does a private company form?
The major steps in creating a company are the following : Promotion stage. Registration stage. Incorporation stage. Commencement of Business stage.
How much will it cost to create a private limited company in India?
Cost of registering a Private Limited Company in India or Registration of Pvt Ltd Company will be between INR 6,000 / – and INR 30,000 / – based on No. of Directors, No. of members, authorized share capital & Professional costs.
Is LLP or Pvt Ltd company registration better?
Pvt Ltd businesses may provide ESOPs – Employee Stock Ownership Plans – in which workers own business shares. This makes private limited companies the best option for employees. Pvt Ltd status might improve the company reputation and attract talent.
What are MoA and AoA?
The Memorandum of Association and Articles of Association tend to be different documents. The MoA describes the key details of the company whereas the AoA includes the company’s internal rules and regulations.
How much capital does Pvt Ltd company require?
The private limited company must have authorized share capital of Rs. 1 lakh. It need not have any minimum paid up share capital because of an amendment to the Companies Act.
