PRIVATE LIMITED
WHAT IS PRIVATE LIMITED?
A private limited company is a type of business entity that is held privately, often by a small group of people. It is registered for specific purposes and complies with the legal stipulations encapsulated in the Companies Act of the respective country. In India, for instance, the Companies Act of 2013 governs the functioning of private limited companies. Here are some key characteristics and details:
Characteristics
Limited Liability: The liability of the members (shareholders) is limited to the amount of capital they have invested in the company. This means personal assets of the shareholders are protected in the event of the company’s financial failure.
Shareholders: A private limited company must have a minimum of two shareholders and can have a maximum of 200. These shareholders can be individuals or other companies, including foreign companies.
Directors: At least two directors are required for a private limited company in India, and at least one of the directors must be a resident of India.
Capital: There is no minimum capital requirement to form a private limited company in India as of recent amendments to the Companies Act.
Restriction on Share Transfer: Shares of a private limited company cannot be publicly traded. Share transfers are possible but restricted by the Articles of Association and usually require the approval of other shareholders.
Advantages
- Limited Liability protects the personal wealth of shareholders in case of bankruptcy.
- Separate Legal Entity status means that the company is responsible for its finances, assets, and liabilities.
- Perpetual Succession ensures that the company’s existence is not affected by the change in ownership or life of its shareholders or directors.
- Brand Credibility: Being a registered company provides greater confidence to vendors and customers.
Disadvantages
- Compliance and Regulatory Oversight: Private limited companies face significant regulatory requirements, including mandatory annual filings, audits, and other legal compliances.
- Limited Capital Raising Potential: Without the ability to issue public shares, these companies may find it challenging to raise capital as compared to public companies.
Formation
The formation of a private limited company involves registering the business with the Registrar of Companies (ROC) under the Companies Act. This process includes filing the necessary documents, such as the Memorandum of Association (MOA) and Articles of Association (AOA), and paying the required fees.
Once registered, the company must follow strict financial reporting and compliance rules but enjoys significant flexibility in managing its internal affairs.
Private limited companies are a popular choice for startups and family businesses due to their flexibility in management and limitations on owner liability.
DOCUMENTATION REQUIRED FOR PRIVATE LIMITED REGISTRATION
Identity Proof
Identity proof: Document verifying personal details and authenticity of identity.
Address Proof
Address proof: Document verifying residency at a specific location.
Rent Agreement Or Ownership Paper Of Business Address
Documentation proving legal tenancy or ownership of business premises.
PAN Card
PAN cards are essential for financial transactions and tax identification.
Passport Size Photo
Passport size photos are used for identification and documentation purposes.
PRIVAT LIMITED REGISTRATION
STEPS REQUIRED
- Obtain Digital Signature Certificates (DSC): Required for online filing of documents.
- Acquire Director Identification Number (DIN): Needed for all proposed directors.
- Name Approval: Apply to the Registrar of Companies (RoC) to check the availability of the company name.
- Draft Memorandum of Association (MOA) and Articles of Association (AOA): Define the company’s scope and regulations.
- File Incorporation Documents: Submit MOA, AOA, and other required documents to the RoC.
- Obtain Certificate of Incorporation: RoC issues this, signifying the company’s existence.
- Apply for PAN and TAN: Essential for tax purposes.
- Open a Bank Account: For company transactions.
STEPS TO BE TAKEN TO INCLUDE A NEW PRIVATE LIMITED COMPANY
Make Unique Company Name
Creating a unique company name involves combining innovation, industry relevance, and memorable elements to establish a distinct brand identity.
Apply For Name Company
To apply for a company name, submit the proposed names to the Registrar of Companies (RoC) for approval and availability check.
Draft All Necessary Documents
Draft necessary documents: Memorandum of Association (MOA), Articles of Association (AOA), Directors’ consent, address proof, and incorporation forms.
Draft MOA, AOA and Spice Form
Draft MOA outlining objectives, AOA detailing regulations, and SPICe Form including company, director details, and digital signatures for incorporation.
E-Sign The MCA Form
E-sign the MCA form using a Digital Signature Certificate (DSC) to authenticate and submit the incorporation documents online.
Submit and Upload The Form
Submit and upload the form on the MCA portal, ensuring all required documents and digital signatures are included for approval.
Get the Certificate
Upon successful submission and approval, receive the Certificate of Incorporation from the Registrar of Companies, confirming your company’s legal existence.