Companify is here to help you with the online registration process by charging a reasonable price and making your process simple and reducing your time wastage. We help you with all the steps involved in process of company registration. Read our blog to know more about the private companies and their registration before you apply for incorporation.
Private companies are those types of companies that are privately owned and managed by private individuals. These companies operate within their members, shareholders, and the shares of these companies are not traded publicly. So this type of company is called a private company. Private companies are governed and regarded by the Companies Act 2013.
There are some of the features of the private company described below,
- The minimum paid-up capital for private was 1 lakh rupees. In 2005 the new amendment was introduced and now the minimum paid-up capital can be any amount.
- In order to start a private company, you must require at least 2 persons and the maximum number is persons can be up to 200 members to manage the private company.
- After incorporating the private companies, these companies should add 'private limited' at the end of the names of the company and it is mandatory.
- Private companies are restricted from the transfer of shares publically like government companies. These companies are also not listed on stock exchanges as they cannot be publicly traded.
- The liability of members of private companies is limited up to the shares held by them and if any case the company faces losses, it can be paid off up to the contribution of members and not from personal assets of the members of the company.
- The private company has an existence forever in the eyes of law even when it is members change or die or retire or even in case of insolvency.
- The directors of a private company at least one should be Indian citizens or residents of India. Others can be foreign residents.
- The minimum shareholder must be two and they can be a natural or artificial person.
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Private companies are formed in order to earn maximum profits and it is one of its main objectives, let’s see what are the other objectives of a private company.
- Private sectors play a major role in contributing to the budgeting of India along with public companies.
- The private company aims at providing accurate information about their financial and balance sheet statements to their users such as creditors, shareholders, and investors of the company, and not to the public.
- It is also important for private companies to choose a correct organizational structure in order to minimize the losses and maximize its gains. By choosing the appropriate structure, helps in the smooth functioning of the business.
- These companies like to have their company policies out of the public eye. They secure the information and strategies of the company so that it is not leaked to others which might affect their work and be weak in the market.
So these are the main objectives of a private limited company
What are the advantages and disadvantages of a Private Limited Company
- In order to start a private company, there is no prescribed paid-up capital mentioned in the law. The company can be started with minimum capital for example 10,000 rupees.
- The private limited company enjoys separate legal existence in the eyes of law, meaning the company can enter into contracts, and own property in the name of the company and not its directors. If the company does any fraudulent activity, the outsiders can sue the company, not the directors.
- The members of the company enjoy limited liability status, if it undergoes any losses, the member's personal assets are not held liable to pay off debts.
- Private companies can raise their funds from venture capital or angel investors just like public companies.
- The shares of these companies can be easily transferred to other shareholders and not publically.
- The private company has uninterrupted existence which can only be ended by law. Whether any partner retirers or dissolve, the company continues to exist as it has a separate legal entity.
- Private companies allow complete foreign investment, so any foreign business can easily invest in private companies.
- The private company through its information provided to the public can help to build credibility.
Disadvantages of a Private Company
- The main disadvantage of a private company is that the maximum number of shareholders should be 50, and the limit for maximum members is up to 200.
- The shares of private companies are restricted to the public and these shares are not quoted in stock exchanges.
- The private company does not issue shares to the public, so it cannot also issue prospectus to the public.
So before incorporating as a private company, make sure you understand the advantages and disadvantages of this kind of company.
How Many Types of Private Companies in India
Private companies are one of the leading types of businesses in India. Private companies can be started in various types such as sole proprietorship, partnership, one-person company, and corporation. Let’s see each one in detail.
A sole proprietorship consists of only one member who plays all the roles of the company such as owner, employer, director, and shareholders. If the company undergoes any losses the owner has to bear and pay his debts from his personal assets.
It is as same as a sole proprietorship but here the company is managed by 2 or more members not by a single person. Two or more persons come together to run the business and their goal is to earn maximum profits. Generally, the partner's liability is unlimited, the limited liability partnerships can also be formed.
The corporation includes every kind of company even not-for-profit organizations. Even these types of companies work as normal companies such as it has separate legal status, can sue and be sued by other companies or individuals, their liability is limited, and are also eligible for paying taxes.
It is as same as a sole proprietorship, here every responsibility falls under a single member who plays multiple roles such as owner, shareholder, director and employer. He must nominate any person like his family or anyone as a nominee in order to continue the business in case of his death or retirement.
So these are the types of private company which explains different types of business which can be selected by individuals if they wish to start a business.
Registration Process for a Private Company
The registration process for private companies can be done online mode. It should be done with the Registrar of Companies [ROC] with MCA. ROC has 22 branches all over India. It should be registered under the Companies Act 2013.
Which are the documents required for the registration of a private company?
These are the documents you must possess for the registration process,
- Proof of identity of at least 2 directors must be submitted such as identity card, passport, Aadhar card, and driving license.
- Copy of pan card of the directors of the company should be submitted.
- Address proof copy of the proposed director should be submitted.
- You must submit a company’s address proof copy which can be either a registered property copy it is owned by the owner of the company or if it is rented NOC letter from the landlord and any latest utility bill such as electricity bill or water bill etc. which should be scanned
- Passport size photograph of directors with specimen signature.
- Scanned copy of bank statements.
- Affidavit scanned and signed by the Directors.
So these are documents you must attach along with the application form.
Points to be kept in mind before registering a private company. Before your start to register your company these are a few points to be considered,
- You must select the name of your company which should be unique and not similar to the existing names. The names should not be against law.
- Private companies should have a minimum of 2 directors.
- The minimum paid-up capital is not prescribed by the law.
So these are the few things to be kept in mind before starting the registration process.
What is the Registration Process for a Private Company?
The registration of the company is made easier by our team Companify. Let’s see what are the step involved in the process of incorporation.
- The first step is to obtain DSC which is a Digital Signature certificate in the class 3 category. It is mandatory for all the subscribers to apply for the digital signature certificate and we will provide you with DSC within a few days.
- After that, you must obtain DIN Directors Identification Number. This is for directors and anyone who wants to be a director should apply for it. It can be done either applying for DIR – 3 form which is for an existing company. By filling up the basic details such as pan card number, Aadhar card number, etc. Also, you can get DIN in the SPICE+ form along with the application you can apply for it minimum of 3 members can apply through the SPICE+ form.
- You must fill up the SPICE+ form on the MCA website which includes 2 parts,
- In part 1 you should apply for name approval for your company and in the 2nd part, you can apply for incorporation. Both the parts can be done simultaneously.
- Make sure you draft E-AOA and e-MOA and attach with along with other documents with the application form.
- Sign the application form with DSC and submit it.
- After application, a minimum of 10 days is required for obtaining an incorporation certificate from the MCA website.
- The cost for private company registration may be charged from ₹6000 to ₹30000 depending upon the size and complexity of the company.
- After that, you must do GST Registration if necessary, an open bank account in the name of the company, an application for EFPO and EFIC, and AGILE PRO 9 should be made.
Compliance for Private Limited Company
- The company should conduct an annual general meeting with AGM every year in order to discuss the financial position, accounts, auditor, remuneration to the directors, and so on.
- After incorporation, the company first appoints an auditor shout to be done once in 5 years by filing ADT – 1 within 15 days of incorporation.
- The directors should file form MBP – 1 which is regarding disclosure of interests which should be done every financial year at the annual general meeting.
- The books of accounts of the company should be audited by appointing a statutory auditor for the business.
- The form MGT – 7 should be filed within 60 days of incorporation which includes,
- Directors name.
- Shareholders lists.
- Details about board meetings.
- Details about legal matters of the company.
- Details about debenture holder's name.
- Penalties if paid.
- Certificate of compliance matter.
- Remuneration of directors.
- AOC – 4 form should be filed with the ROC regarding the financial statement of the company at the end of every financial year.
- The company should maintain statutory registers, resolutions passed in board meetings, and minutes of the meeting and this should be preserved in a good way so that it may act as evidence in the future.
- The company’s accounts should be audited every year by appointing a chartered accountant and these audit reports and financial statements should be filed with ROC.
- The company should also file other noncompliance which occurs once in a while and is not mandatory such as,
- Payment of TDS.
- GST filing and GST payment.
- Any other payments as per due date.
- Advance tax payments.
- Income tax returns filing.
- Audit tax report filing.
- Tax audits.
And so on
So these are the private company compliance to be followed after the incorporation stage is done. It is mandatory for every company to fulfill these compliances in order to save from penalties imposed by MCA and also it builds a good reputation in the eyes of investors and customers who decide to invest in us.