Private Limited Company

Creating a Private Limited Company Registration

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Private Limited Company establishment or registration is the most popular corporate structure in India.

What is the cause of this, then? Why entrepreneurs focus more on incorporating their businesses as Private Limited Companies than on other types of business structures

What advantages do Private Limited Companies have when they incorporate?

Here, we’ll go into great depth about how to incorporate a company as a private limited company.

What is a private company?

A private corporation is one that meets the minimum paid-up share capital requirements set forth in its bylaws. —

  • limits the transferability of its shares;
  • limits its members to 200, with the exception of one-person companies.

With the exception that they will be treated as one member for the purposes of this section if two or more people jointly own one or more shares in a company:

further provided that—

  • Persons who are currently employed by the company,
  • Persons who were previously employed by the company but were members of the organisation while they were employed there, and Persons who remained members of the organisation after the employment ended,

shall not be included in the number of members; and

  • prohibits any public request to subscribe for any company securities;

Private Company Types

There are three different forms of private companies, however the Private Company- Limited by Shares is the most ideal for commercial purposes. because it is the most widely regarded and provides the greatest level of protection for its members.

  • Company Limited by Shares: In this type of company, the shareholders’ liability is capped to the value of their ownership stake in the business or the unpaid share balance.
    A member cannot be held responsible for paying more than what he invested in the company.
  • Business Limited by Guarantee: In a company of this sort, each member guarantees that they will be held accountable.
    • Such a member’s obligation is constrained by the scope of his guarantee.
    • He is only responsible for the assurance he gave the business.
    • A member’s pledge of support can only be invoked during the company’s dissolution.
    • The best candidates for this sort of business are clubs, trade groups, societies, etc. that only need a small amount of working cash.
  • Unlimited Company: In such companies, the members’ liability is uncapped. It implies that their personal assets may be used to settle the obligations and liabilities of the business.
    Notably, this does not imply that there isn’t a distinct legal entity. Both the business and its employees remain distinct.
    The majority of promoters in India opt to incorporate as a Private Company Limited by Shares.

What does “limited liability” entail and how does it help businesses?

“The greatest single invention of the contemporary era is the limited liability corporation.”

What comes to mind when you hear the word “limited”? Both negative and positive ideas are triggered by it. Limitations can be quite helpful in certain situations, such as keeping your car within the legal speed limit or setting credit card spending caps to prevent extravagant vacations and pointless purchases.

Similar to this, limited liability is the “limit” that comes after a company’s name.
“Limited liability” is a strategy to ensure that a business owner doesn’t put his or her personal belongings at danger in the event the company fails.

Simply put, if a corporation loses money in any situation, its shareholders are responsible for selling off firm assets alone for compensation. In actuality, the stockholders’ private, individual assets will not be considered.
As a result, each member’s culpability is only as great as their ownership stake in the business.

As a result, each member’s culpability is only as great as their ownership stake in the business.

Benefits of Limited Liability Companies

  • Members- To form a private limited company, a minimum of 2 members are needed.
  • Limited Liability – Each Member’s Liability is Limited to the Capital Contribution.
  • Capital–A Private Limited Company can be started with no minimum capital. However, in order to qualify as a Private Company Limited by Shares, at least one share must be subscribed for.
  • Separate Legal Entity- According to the legislation, the company is a separate legal entity and a juristic person. A person who is not a natural person or a human being is known as a juristic person. The Company is therefore an artificial person with broad legal competence who is able to both own property and incur debts in its own name. In relation to such debts, a company’s members and directors are not liable to the company’s creditors. A Private Limited Company is therefore a legal entity distinct from its members.
  • Possession of the right to sue and be sued- To sue is to take legal action against or file a lawsuit in a court of law. A firm can bring legal action on its own behalf because it is an artificial person.
  • Perpetual succession: A firm has “perpetual succession,” which is continuous existence up until its formal dissolution. Being a distinct legal entity, a business is unaffected by the passing of any of its members and survives any changes to its membership or board of directors.

Requirements for Private Limited Company Registration

  • Members: The following members may not form a private limited company under the Companies Act of 2013:
    • 2 members are required as a minimum, and
    • 200 is the maximum number of members allowed (except in case of OPC) (Two or more people holding a share in common will be treated as a single member.)
  • Director: An individual who controls or oversees the company’s business affairs is known as a director.
    A firm, despite having a distinct legal personality, is actually an artificial person without a physical existence of its own. It needs a live entity to act on its behalf to manage its affairs, and that’s where the board of directors comes in.
    • For a private limited company to be registered, there must be a minimum of two directors.
    • The Ministry of Corporate Affairs issues Director Identification Numbers (DINs) to each director (MCA).
    • A director must have lived in India for at least 182 days in the previous calendar year in order to qualify as a resident of India.
  • Name: The appropriate company name selection is a crucial component. The company name shouldn’t be the same as or similar to the name of any other company that already exists. All private corporations must finish their names with the phrase “private limited company.” According to the 2013 Companies Act’s provisions, failure to comply carries a penalty.
  • Registered office address: The company’s registered office is where the majority of business is performed and where all paperwork is kept.
    • The promoter should include the paperwork containing the planned address of the company when filing the documents for incorporation.
    • The planned address for the company’s registered office may, however, be altered with the company registrar after the business has been registered, if necessary.
  • Objects: The purpose for which the company was founded as well as specifics on the pursuits the company will make following incorporation.
  • Majority: Generally speaking, the capital structure would consist of two parts:
    • The maximum amount of capital for which the Company may issue shares to shareholders is known as the “authorised share capital,” which may be increased at any moment in the future by complying with all legal requirements.
    • Paid up share capital is the sum of money for which the company issued shares to the shareholders in exchange for their payment.

how to form a private limited company

The applicant must conduct the following actions after choosing a company name:

Step 1: Submit a director/subscriber DSC application

Step 2: Submit an application to reserve the company name: There should be at least two names suggested.

Step 3: To register the private limited company, submit the Spice form along with the e-MOA and e-AOA.

Step 4: The RoC will provide CIN along with a PAN and TAN.

Checklist of Documents/information required for registration Private Limited Company

DSCPhoto and ID and Address Proof
Name of the CompanyMinimum Two Names
Registered Office AddressOwnership Proof Like Sales Deed
In case of rented Premises, Rent Agreement shall be required
Utility Bill not older than Months
No Objection certificate from the Owner of the Premise
Objects of the CompanyDetailed objects to be pursued by the Company
Capital StructureAmount of Authorized and Paid up capital Detail
Credentials of Promoters and DirectorID and Address proof Consent of Director (DIR-2) Declaration in Form INC 9 Email and Contact details Occupation detail
Education details