Private Limited Company Registration
Setting up a business in India often involves choosing a private limited company as a preferred option. This structure offers shareholders limited liability protection while placing specific ownership constraints. In contrast, in the case of an LLP, partners oversee the management. Private limited company registration allows for a clear distinction between directors and shareholders.
What is a private limited company
In India, a private limited company is a privately held entity with limited liability, and it ranks among the nation's most favored business structures. This popularity is primarily attributed to its numerous advantages, including limited liability protection, ease of formation and maintenance, and its status as a distinct legal entity. A private limited company enjoys legal separation from its owners and necessitates a minimum of two members and two directors for its operation. Here are the key characteristics of a private limited company in India:
Limited Liability Protection : Shareholders of a private limited company are liable only to the extent of their shareholding. Their assets remain safeguarded, even in cases of financial setbacks incurred by the company
Separate Legal Entity : A private company possesses its own distinct legal identity. It can own property, engage in contracts, and initiate or defend legal actions under its unique name.
Minimum Number of Shareholders : A private company must have a minimum of two shareholders and cannot exceed 200 shareholders.
Minimum Number of Directors : A private limited company necessitates a minimum of two directors. At least one of these directors must be an Indian citizen.
Minimum Share Capital : The company must maintain a minimum paid-up capital of Rs. 1 lakh or a higher amount as specified.
Name of the Firm : The private limited company's name must conclude with the words "Private Limited."
Restrictions on Share Transfer : The right to transfer shares within a private limited company is restricted. Shares can only be transferred with the approval of the Board of Directors or following the company's Articles of Association.
Prohibition on Public Invitation : Private limited companies are prohibited from inviting the public to subscribe to their shares or debentures.
Compliance Requirements : Private limited companies are obligated to adhere to various legal and regulatory obligations, including maintaining proper financial records, conducting annual general meetings, and filing annual returns with the ROC.
In summary, the attributes of a private limited company in India make it a favored choice among entrepreneurs, owing to its advantageous features and relatively straightforward structure.
Types of Private Limited Companies :
Company Limited by Shares : Shareholders' liability is limited to the nominal share amount mentioned in the Memorandum of Association.
Company Limited by Guarantee : Member liability is limited to the amount of guarantee specified in the Memorandum of Association. This guarantee is invoked only during winding up.
Unlimited Companies : Members of unlimited companies have unlimited personal liability for the company's debts and liabilities. However, they are still considered a separate legal entity, and individual members cannot be sued.
Requirements for Registering a Company in India :
Directors and Members: A minimum of two directors and 200 members are required for Private Limited Company Registration in India, as per the Companies Act of 2013.Directors must have a Director Identification Number (DIN) issued by the Ministry of Corporate Affairs (MCA).At least one director must be an Indian resident, having spent 182 days in India in the previous calendar year.
Company Name : When selecting a name for a private limited company, two factors must be considered: The name should reflect the principal activity of the business
Address of the Registered Office: After the company registration process, the company must provide the permanent address of its registered office to the company registrar. Business operations occur in this office, and all relevant company documentation is maintained.
Advantages of a Private Limited Company
A Private Limited Company is one of India's most popular business structures. It offers several advantages and some disadvantages, let us explain.
Limited Liability : Shareholders' responsibility is restricted to the extent of their capital contribution, safeguarding personal assets from the company's financial obligations and liabilities.
Distinct Legal Identity : A Private Limited Company possesses an independent legal identity distinct from its proprietors. It has the capacity to own assets, engage in contractual agreements, and initiate or defend legal actions under its own name.
Continuous Existence : The company's existence persists irrespective of shifts in shareholders or directors. Its existence is not contingent upon the lifespan of its associates.
Ease of Funding : Raising capital by issuing shares to investors, venture capitalists, or angel investors is easier. This structure attracts external investment.
Tax Benefits : Private Limited Companies may qualify for various tax benefits and exemptions, making them tax-efficient entities.
Credibility and Trust : Having "Pvt. Ltd." in your company name often instills more confidence and trust in customers, suppliers, and partners.