A private limited company is the most common type of business in India. It is formed for small business and these type of entities does not trade their share for the public. These companies are owned and operated by private individuals and as the name tells the liability of its members is limited. A private company is regulated by the Companies Act 2013 and administered by the Ministry of corporate affairs. According to the financial year of 2020, there was 120 thousand private limited companies were registered in India. Among many companies, Tata group which is in Mumbai ranks first in the list of top private companies in India.
What are the Advantages of a private limited company
- Here the private individuals can have control over the issue of shares, i.e, they can choose for whom the shares can be sold to the public.
- Setting up a private limited company is easier as it contains fewer legal formalities compared to a public company.
- The minimum number of members required is 2 and the maximum is 200. Here any family person or a friend can be taken as a shareholder for the company.
- There is no minimum paid-up capital. But authorized capital must be 1 lakh.
- Decision-making and managing company affairs are made easier here.
- No mandatory disclosure of financial reports to the public.
- Many start-ups are registered as private companies, which helps them to obtain funds easily.
- Earns credibility.
- Only 2 directors are required. No need to appoint an outsider.
- Every company’s name must end with Pvt Ltd
- In India for new start-ups, there are 3 years of tax less benefit.
- The company’s assets are preserved.
- Can expand its business easily.
- Here the person can control the activities of the company and work as an employee of the company
- Has the capacity to sue and be sued. Here the person can control the activities of the company and
Disadvantages of a private limited company
- Shares are not easily transferable. You must obtain permission from the directors in order to transfer the shares.
- The public is not allowed to purchase a share of a private company. It’s only for members of a private company and for the people whom they choose.
- It is difficult to obtain external financial support.
As there are few disadvantages of Private Limited Company you don’t have to worry if you want to start a private company.Types of Private Limited Company
Limited by shares
Here the liability of members of the company is limited up to unpaid shares of the company.
Limited by guarantee
Here the liability of members is limited to the agreed amount guaranteed by members
The member's liability is unlimited and in case of insolvency, the member's personal assets can be used to repay debts.Features of private company
- Minimum 2 directors and directors can be made from existing employees
- The private company continues existence no matter what happens
- The members enjoy limited liability
- It is also called a small company
- Can obtain funds easily from its family or friends.
- Can easily incorporate
- It has a separate legal entity
- It is suitable for business which has a high turnover
- Legal compliance.
- Members must be minimum of 2 and a maximum is 100
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Registering a private company is hassle-free in India. The registration process can be done anywhere in India and in any state's authority. If you're looking to register your private company you just have to follow these simple ten steps which are briefly explained below such as,
Step 1:- Appointment of CA/CS/Lawyer
Don’t start the registration process by own as it requires a signature from professionals in the middle of the process. Better appoint a CA or CS or Lawyer for the work.
Step 2:- Documents Required for the Registration process of Private Limited Company
Always collect all the necessary documents such as Documents
- Pan card( mandatory)
- ID proof (any 1) such as driving license, voter id, Aadhar card, passport copy
- Address proof ( shareholders and director):- telephone bill or latest bank statement or latest electricity bill or mobile bill.
- Passport size photographs
- Address proof for the company:- property documents or if it is rented land NOC from landlord and electricity or telephone bill which should be of less than 30 days
Step 3:- Selecting a name for the company
Select at least 3 or 4 names for the company and send the same for approval. It can have both brand name and business name. Make sure you select your company name which is not against the law and similar to an existing company
Step 4:- Process for name approval
In order to get your name approved, you must fill SPICE+ form.
Step 5:- Obtain class 3 Digital Signature Certificate ( DSC)
As the registration process is completely online, you must apply for obtaining DSC from a government-recognized certifying authority as it plays a major role in all your future processes.
Step 6:- Obtain Director Identification Number ( DIN)
As the name tells it is useful for the members who want to be directors of the company. In order to apply for it one must fill up SPICE+ and then DIN gets issued.
Step 7:- E-MOA and E-AOA
These forms must be attached along with the SPICE+ form. As it is an online procedure you must make e- MOA and e- AOA which includes the charter of the company and rules and regulations to be followed.
Step 8:- PAN and TAN
Through the SPICE+ form, you can even apply for PAN and TAN for the company. It automatically generates the form and you can apply to it
Step 9:- Incorporation certificate
After all, requirements are fulfilled and satisfied the Ministry of Corporate Affairs(MCA) will issue your Certificate of Incorporation through your email address within 10-15 after submission.
Step 10:- Compliance to be followed by the company
After receiving the incorporation certificate, the company must appoint its auditor within 30 days for its first meeting and conduct 4 meetings in every financial year. Maintain systematic financial reports. Open a minimum of one current account in the nearest bank.
So these were the simple steps that you need to follow to register your private limited company.