A Private Limited Company, as per the Companies Act of 2013, is privately owned by shareholders, not listed on the stock exchange, and prioritises shareholder interests. In India, it requires a minimum of 2 Directors and 2 Shareholders, with at least one Director being an Indian resident.
Foreign Direct Investment (FDI) up to 100% is permitted in most sectors, with minimal restrictions on foreign shareholding, making company registration in India a popular choice in India.
Types of Business Structures in India
There are different types of business structures to choose from while registering your business. These include:
Proprietorship Firm:
- Established and managed by a single person.
- Sole proprietors bear full control and liability.
- Ideal for small businesses with low investments.
Partnership Firm:
- Formed by two or more individuals sharing profits and liabilities.
- Regulated under the Partnership Act, 1932.
- Suitable for small businesses with multiple owners.
One Person Company (OPC):
- Introduced in 2013 for single promoters.
- Allows sole proprietorship within a corporate framework.
- Registered under the Companies Act, 2013.
Limited Liability Partnership (LLP):
- Separate legal entity with limited partner liabilities.
- Established under the Limited Liability Act, 2008.
- Blends features of partnership and company structures.
Private Limited Company:
- Recognised as a distinct legal entity.
- Directors manage company affairs; shareholders invest.
- Registered under the Companies Act, 2013.
Public Limited Company:
- Formed by seven or more members.
- Directors oversee operations; liability limited to shares held.
- Ideal for medium to large businesses seeking public capital.
Comparative List of the Different Types of Business Structures in India
Given below are the various business structures in India with a comparative analysis:
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Type of Company
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Ideal use
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Tax Advantages
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Legal Compliances
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Limited Liability Partnership (LLP)
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Service-oriented businesses or businesses with low investment needs
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Tax holiday for the first 3 years under Startup India and depreciation benefits
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Submission of business tax returns and ROC (Registrar of Companies) returns
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One Person Company (OPC)
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Sole owners looking to limit their liability
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Tax holiday for the initial 3 years under Startup India, increased benefits on depreciation, and exemption from dividend distribution tax
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Submission of business tax returns and ROC returns
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Private Limited Company
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Businesses with a high turnover
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Initial 3-year tax holiday under Startup India, increased depreciation benefits
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Submission of business tax returns, ROC returns, and mandatory audits
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Public Limited Company
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Businesses with a high turnover
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Initial 3-year tax holiday under Startup India
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Submission of business tax returns, ROC returns, and mandatory audits
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Types of Private Limited Companies
The different types of private limited companies include the following:
Company Limited by Shares:
- Shareholders' liability limited to nominal share amount in Memorandum of Association.
Company Limited by Guarantee:
- Member liability limited to the amount of guarantee specified in Memorandum of Association.
- Guarantee invoked only during winding up.
Unlimited Companies:
- Members have unlimited personal liability for the company's debts and liabilities.
- Still considered a separate legal entity; individual members cannot be sued.
Why Is It Important to Choose the Right Business Structure?
Given below are the main reasons why it is important to choose the right business structure:
- Legal Compliance: Choosing the right business structure ensures compliance with Indian laws, regulations, and taxation norms.
- Liability Protection: Structures like LLPs or private limited companies shield personal assets from business debts.
- Tax Implications: Each structure has distinct tax implications, so selecting the right one can minimise tax liabilities and maximise profits.
- Funding Opportunities: Structures like private limited companies make it easier to raise capital through share issuance, appealing to investors and lenders.
- Operational Flexibility: Different structures offer varying operational flexibility, allowing owners to tailor roles and decision-making processes to their needs.
- Long-Term Goals: The chosen structure should align with long-term growth, expansion, and exit strategies like mergers or going public.
Benefits of Online Company Registration
The benefits of company registration in India include the following:
Legal Entity:
- Recognised as a distinct entity with its own rights and responsibilities.
- Protects personal assets of directors; liability is limited to company's obligations.
Minimum Capital Requirement:
- No stipulated minimum capital requirement.
- Can be registered with as low as Rs. 10,000 as total authorised share capital.
Tax Efficiency:
- Eligible for corporation tax relief on profits.
- Lower tax rate on dividends distributed to shareholders.
Uninterrupted Existence:
- Remains unaffected by changes in membership.
- Continues to exist independently despite changes.
Limited Liability:
- Members' liability is restricted to unpaid amounts on shares.
- Personal assets safeguarded; not responsible for company's debts beyond shareholding.
Fundraising:
- Attracts funds from venture capitalists or angel investors.
- Access to additional financial resources for growth and expansion.
Transferability of Shares:
- Shares can be easily transferred to other individuals.
- Straightforward process involving share transfer form and certificates.
Ease of Management:
- Flexibility in setting up bank accounts and managing administrative tasks.
- Online accounting software tailored for Private Limited Companies streamlines operations.
Legal Proceedings:
- Right to initiate legal proceedings and defend itself in court.
- Capacity to bring forward legal claims.
Dual Partnership:
- Can enter valid contracts with members.
- Allows individuals to hold multiple positions within the organisation.
Foreign Direct Investment (FDI):
- Permits foreign entities or individuals to invest directly in the company.
Eligibility for Online Company Registration
For online company registration in India, certain essentials must be fulfilled, including the requirements for directors and shareholders and also the necessary documents.
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Requirement
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Details
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Shareholders
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Minimum of 2 shareholders
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Directors
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Minimum of 2 directors, maximum of 15 directors
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At least one director must be a resident of India
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Shareholder/Director Overlap
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The same person can act as both a shareholder and a director
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Director Identification Number (DIN)
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All directors must obtain a Director Identification Number (DIN)
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Digital Signature Certificate (DSC)
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All directors must possess a Digital Signature Certificate (DSC)
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Documents Required for Online Company Registration
The documents required for online company registration are:
- PAN Card
- ID Proof
- Address Proof of the Applicant
- Passport Size Photos of the Applicant
- NOC from Owner (if that property is rented)
- Address Proof of Place of Business
Company Registration Process
The following steps outline the company registration process:
Step 1: Obtain Digital Signature Certificate (DSC)
- Required for filing forms on the MCA portal.
- Mandatory for proposed directors and subscribers of MoA and AoA.
- Obtainable from government-certified authorities or online within two days.
- Class 3 category DSC needed for directors and subscribers.
Step 2: Get Director Identification Number (DIN)
- Necessary for anyone aspiring to be a director.
- Obtained while filing the SPICe+ form.
- SPICe+ form allows DIN for a maximum of three directors.
- Additional directors can obtain DIN via DIR-3 form post-incorporation.
Step 3: Register on MCA Portal and Fill SPICe+ Form
- Register on MCA portal to access services.
- Fill SPICe+ form for company registration.
- Reserve company name in Part-A of SPICe+ form.
- Name approval is important; similar names lead to rejection.
- After name approval, fill Part-B with company and director details, attach documents, DSC, and submit online.
Company Registration Cost in India
- The company registration cost in India varies based on factors like the number of directors, members, authorised share capital, and professional fees for registration of private limited company.
- Company registration fees in India range from Rs. 6,000/to Rs. 30,000/-.
- Seeking professional advice is recommended for any company registration in India, ensuring legal compliance and efficiency.
Compliances Post Company Registration in India
Given below is a checklist of all the necessary compliance requirements that must be fulfilled:
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Compliance
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Requirement
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Board Meetings
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- Public limited companies: Minimum of four annually.
- Private limited companies: Minimum of two annually.
- Attendance: 1/3rd of total directors or minimum 2 directors.
- Notice: 7 days prior.
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Annual General Meeting
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- Held annually with a gap of 15 months between meetings.
- Discusses financial statements, auditors' appointment, dividends, and remuneration matters.
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Appointment of Auditor (Form ADT-1)
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- Auditor must be appointed within 30 days of incorporation.
- Form ADT-1 filed with the Registrar of Companies.
- If a new auditor within 15 days of AGM, Form ADT-1 filed.
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Director Disclosure
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- Form MBP-1 disclosure of interests in other companies annually.
- Form DIR-8 disclosure of non-disqualification each financial year. Qualifications of new directors to be declared.
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Accounts Auditing
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- Statutory Auditor required for preparing, verifying, and auditing annual financial reports and statements.
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Filing of Form MGT-7
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- Within 60 days of AGM, file Form MGT-7 containing various details including meetings, office, shareholding, legal matters, compliance certification.
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Filing of Financial Statement (Form AOC-4)
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- Form AOC-4 filed within 30 days of AGM containing balance sheet, CSR activities, related party transactions, P&L account, audit report, auditor, and board meeting particulars.
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Statutory Audit of Accounts
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- Accounts audited by CA at end of financial year with reports filed with registrar.
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Maintenance of Statutory Registers
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- Mandatory maintenance of registers, board/AGM minutes, creditors meetings, and debenture holder meetings.
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Other Non-RoC Compliances
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- Private limited companies must adhere to non-RoC obligations including TDS/GST payments, filing returns, periodic dues, advance tax, IT returns, and tax audit reports.
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Why Choose StartupFino for Online Company Registration?
A Private Limited Company registration provides a structured and secure business setup for entrepreneurs looking to start and grow their ventures. While forming a Private Ltd. Co., certain requirements and compliances must be adhered to in order to make the incorporation and its functioning more effective.
StartupFino is a company that specialises in offering complete services for Online Company registration in India. We can help you with all requirements from providing advice in the initial phase to ensuring that you meet all the necessary requirements, while also keeping your company in perfect legal standing.
