Private Limited Company

How to Register a Private Limited Company in India

Registering a Private Limited Company in India is a straightforward process if you know the steps involved. A Private Limited Company offers multiple benefits such as limited liability, easy fund-raising, and better credibility in the market. Below is a comprehensive guide on how to go about the registration process for a Private Limited Company in India.

Prerequisites

– Minimum of two members (maximum of 200)
– At least two directors (they can be the same as the members)
– A registered office address in India

Step-by-Step Guide

Step 1: Digital Signature Certificate (DSC)

The first step is to get a Digital Signature Certificate for the proposed directors of the company. This digital certificate is necessary for submitting the electronically signed documents to the Registrar of Companies (ROC).

How to Obtain DSC:
1. Apply for DSC via certified agencies like TCS, nCode, etc.
2. Submit identity and address proofs.
3. The agency will then provide a USB token containing the digital certificate.

Step 2: Director Identification Number (DIN)

Each director must have a unique identification number provided by the Ministry of Corporate Affairs (MCA).

How to Obtain DIN:
1. Fill out Form DIR-3 on the MCA website.
2. Attach a scanned copy of identity and address proofs.
3. Submit the form online and pay the applicable fees.

Step 3: Name Approval

Before the incorporation, you’ll need to get the name of the company approved by the ROC.

How to Get Name Approval:
1. Use the RUN (Reserve Unique Name) facility on the MCA website.
2. Submit up to two preferred names.
3. Pay the nominal fee and await approval.

Step 4: Prepare Documentation

Once the name is approved, you need to prepare the necessary documentation for company registration:

1. Memorandum of Association (MOA): This lays down the constitution and objectives of the company.
2. Articles of Association (AOA): This contains the rules and regulations of the company.

Step 5: File Incorporation Forms

Now you’ll need to file the incorporation forms using the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) web form.

1. Fill out the SPICe+ form available on the MCA website.
2. Attach all necessary documents, including MOA, AOA, and address proof for the registered office.
3. Submit the form online along with the requisite fee.

Step 6: PAN & TAN

While submitting the SPICe+ form, you can also apply for the company’s PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number).

Step 7: Certificate of Incorporation

After verification, the ROC will issue a Certificate of Incorporation. This certifies the formation of the company.

Step 8: Bank Account

With the Certificate of Incorporation and PAN, you can now open a bank account in the name of the company.

Step 9: GST Registration

Depending on your business type, you may need to register for GST (Goods and Services Tax). Visit the GST portal for the online registration process.

Step 10: Other Licenses and Registrations

Depending on the nature of your business, you may need additional licenses (e.g., FSSAI for food business, IEC for export-import, etc.)

Post-Incorporation Steps

– Commencement of Business Certificate: Before your company can start its business operations, you’ll need to obtain a Commencement of Business Certificate from the ROC by filing Form INC-20A.

– Auditing: Appoint an auditor within 30 days of incorporation.

– Statutory Filings: Companies have to regularly file various forms and returns (e.g., Annual Returns, Financial Statements) with the ROC.

Costs Involved

The cost of registering a Private Limited Company can vary based on the professional fees of Chartered Accountants or Company Secretaries involved, and it generally ranges from ₹10,000 to ₹20,000, excluding Government fees.

Disclaimer: This article is meant for informational purposes only and does not constitute legal advice. Always consult professionals for any legal proceedings.

Choosing the right business structure is crucial for the success and growth of any enterprise. One of the popular options, especially in countries like India, is the Private Limited Company. While this form of business structure offers a plethora of advantages, it also comes with its own set of drawbacks. In this article, we’ll delve into both the pros and cons to help you make an informed decision.

Advantages of a Private Limited Company

1. Limited Liability
One of the most significant advantages is the financial protection it offers to its shareholders. In a Private Limited Company, the liability of the members is limited to the shares they hold. This means that personal assets are not at risk in the event of business failure.

2. Separate Legal Entity
The company acts as a separate legal entity distinct from its owners, capable of owning assets, incurring debts, and entering into contracts.

3. Ease of Funding
Private Limited Companies find it easier to raise capital through the private placement of shares, venture capital, and other avenues. They can even accept foreign investment easily, subject to compliance with the Foreign Direct Investment (FDI) norms.

4. Longevity
Such companies enjoy perpetual existence, i.e., they continue to exist even if the ownership changes or one of the shareholders dies.

5. Better Governance and Management
The regulatory requirements ensure a certain level of governance and operational disclosure, thereby enhancing the credibility and management of the company.

6. Business Credibility
Customers, vendors, and investors often perceive Private Limited Companies as more credible compared to other business structures like sole proprietorships or partnerships.

7. Tax Benefits
There are numerous tax advantages available exclusively to Private Limited Companies, such as lower corporate tax rates and easier compliance with tax norms.

8. Easy Transferability of Ownership
Shares of a Private Limited Company can be easily sold or transferred to other individuals or entities, making it easier to exit or bring in new owners.

Disadvantages of a Private Limited Company

1. Complex Regulations
The regulatory environment for Private Limited Companies is quite stringent. They need to adhere to several laws and regulations, which could be overwhelming.

2. Cost of Formation
The cost of setting up a Private Limited Company is higher compared to other structures like sole proprietorships or partnerships. There are registration fees, legal fees, and ongoing compliance costs.

3. Limited Scope for Public Investment
Private Limited Companies cannot publicly issue shares through an IPO, which might be a significant constraint for companies looking for public investment.

4. Lack of Anonymity
Details of the company, such as director names, financials, and other sensitive information, are often made publicly accessible, which might not be desirable for all business owners.

5. Slower Decision-making
The necessity for board meetings and shareholder approvals can lead to slower decision-making processes.

6. Exit Strategy
While it’s easier to transfer ownership compared to a partnership or sole proprietorship, the process still involves a fair amount of legal work and costs, which might be cumbersome for some owners.

7. Mandatory Audits
Irrespective of the size or nature of the business, statutory audits are mandatory, adding to the operational cost.

8. Profits Shared Among Many
As there can be multiple shareholders in a Private Limited Company, the profits generated must be shared among all, reducing the percentage of profits for individual shareholders.