Register a Private Limited Company in India

 In India’s diverse business landscape, it’s a wise decision for entrepreneurs to register a private limited company to establish a legally compliant entity. A private limited company offers benefits such as separate legal entity status and limited liability, making it an attractive option for startups and small businesses. We’ll guide you through the process of Private Limited Company Registration in India, ensuring that you smoothly navigate the legal requirements.

What is a Private Limited Company?

Before we proceed, let’s define what a Private Limited Company is.

A private limited company is a company that is owned by non-governmental organizations or a relatively small number of shareholders or members of a company. Usually, a private company does not offer or trade its shares to the general public on the stock exchanges, but rather the private stock of the company is owned and traded.

In legal terms, Section 2 (68) of the Companies Act, 2013 defines a private company as: 

“A Company having a minimum paid-up share capital as may be prescribed, and which by its articles,

(i) restricts the right to transfer its shares;

(ii) except in case of One Person Company, limits the number of its members to two hundred;

(iii) prohibits any invitation to the public to subscribe for any securities of the company.”

Types of Private Limited Company

There are 3 types of Private Limited Company:

1. Company Limited by Shares: In these types of companies, the liability of the members is limited to the amount of shares they have subscribed to as mentioned in the Memorandum of Association. Shareholders cannot be held liable or asked to pay more than the capital they have invested in the company.

2. Company Limited by Guarantee: In a private limited company limited by guarantee, each member’s liability is limited to the amount they commit to undertake in the Memorandum of Association. This means that the members of such a company cannot be held accountable for an amount greater than the guarantee provided by the member in the Memorandum of Association.

It’s important to note that the shareholder’s guarantee in a company limited by guarantee can only be sought in the case of the company winding up. The guarantee of the members of a company limited by guarantee cannot be withdrawn when the company is still in operation.

3. Unlimited Companies: Unlimited corporations are companies where the members’ liability has no restrictions. In other words, each member is liable for the entire amount of the company’s debts and liabilities. This means that if the company goes bankrupt or is wound up, creditors have the right to impose the company’s debt and liabilities on its shareholders.

Advantages of a Private Limited Company

The following are the advantages of a Private Limited Company in India:

• 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 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

Step by Step Process to Register a Private Limited Company in India

Steps for registering a Private Limited Company in India are listed below:

STEP 1: Chose a Unique Name

The most crucial step is selecting and unique name for your company. It must be ensured that the selected name is not identical or similar to any existing companies and also comply with the guidelines set by the Ministry of Corporate Affairs (MCA). We will assist you in conducting a complete and thorough check on the MCA portal for name availability before you proceed.

STEP 2: Obtaining a Digital Signature Certificate (DSC)

When starting with the company the director must obtain a Digital Signature Certificate (DSC) from a government-approved agency. This DSC is absolutely essential for filing forms electronically with the Registrar of Companies (RoC).

STEP 3: Obtaining a Director Identification Number (DIN)

The owner or elected member of a company needs to apply for a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA). This unique identification number is mandatory for anyone intending to become a director in a company incorporated in India.

STEP 4: Documentation

You need to gather documents such as identity proof, address proof, PAN card (copies), and photographs of directors and shareholders. Alongside these, you must draft the Memorandum of Association (MoA) and Articles of Association (AoA) which are essential documents that define the company’s regulations, structure, and objectives.

STEP 5: Filing for Incorporation

You have to complete the Incorporation process by submitting the required forms and documents to the Registrar of Companies (RoC) online through the MCA portal. After paying the required charges you have to wait for approval.

STEP 6: Obtaining a Certificate of Incorporation

After thorough scrutiny of your documents and compliance with legal requirements, the RoC will issue you the Certificate of Incorporation. This document now will signify the formal existence of your Private Limited Company.

STEP 7: Applying for PAN and TAN

You now need to apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). These are essential and mandatory for taxation and financial transactions of the company.

STEP 8: Statutory Compliance and Post-Incorporation Formalities

After incorporation, you must ensure timely compliance with statutory requirements such as conducting board meetings, maintaining statutory registers, and filing annual returns with the RoC. You can also open a bank account in the company’s name for business transactions.

Conclusion

Registering a private company in India involves a systematic approach, adherence to legal formalities, and meticulous documentation. With our help, you can lay a strong foundation for your business endeavors, ensuring compliance with regulatory norms and setting your company on the path to success in the dynamic Indian business landscape.

FAQs

Q1) What is the meaning of a Private Limited Company?

A Pvt. Ltd. is a small company that is handled by a group of people privately. The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded.

Q2) Is it possible for a small firm to register as a Private Limited Company?

Yes, a small firm can register with the Indian government as a private limited company. It gives them credibility and a positive image of their company in the eyes of suppliers, future customers, and financial institutions. It assists the organization in obtaining loans with minimal compliance from banks or potential clients when going into contracts.

Q3) What are the documents required for the Private Limited Company Registration?

Following are the documents that are required at the time of Private Limited Company registration in India:

• Photograph of all the Directors
• PAN Card of all the Directors
• ID Proof of all the Directors (Driving License/Passport/Voter ID)
• Electricity Bill or any other utility bill for the address proof of the Registered Office

Q4) When should I file the Annual returns of my Private Limited Company?

Private Limited Companies are required to file their Annual Accounts and Returns disclosing details of its shareholders, directors, etc to the Registrar of Companies. Such compliances are required to be made once a year.

Q5) As per Indian law, how many maximum directors can a Private Limited Company have?

As per Indian law, The Indian Companies Act, 2013 states that A Private Limited Company in India can have a minimum of 2 directors and a maximum of 15 directors.

 However, The Company may appoint more than 15 directors, only after passing a special resolution.

Q6) Do Private Companies have to release annual reports?

It is mandatory for all the companies that are registered under MCA to file their annual reports with the concerned ROC every year. However, for Private Limited Companies, it is not mandatory to publish or release their annual report for public access.