Private Limited Company

Private Limited Company
Online Registration In India

Private Limited Company is one of the most stable and much used business structure in India owing to its stability and availability of limited liability protection. Registration is to be done with Ministry of Corporate Affairs (MCA).

There should be minimum two shareholders and 2 directors and the maximum number of share holders can be 200. Registration process is online and each of the Directors should have a Director Identification Number (DIN) and subscribers have to procure a Digital Signature for registration. Process of incorporation is online and it takes 10-15working days from the date you give your complete documents to us and subject to availability of the proposed name.

The Key Advantages of Incorporating a Private Limited Company are listed below

Easy to Form

Incorporating a Private Limited Company is quite simple. Two people can form a private limited company in 10-15 days.

Limited Liability

Shareholders would be liable to any financial risks only to the extent of capital invested by them in the company.

Easy Access to Funds

Private Limited Companies can receive funds and issue share or debt instrument to the investor. It is the most preferred form of entity for Venture Capital investments.

Easy to expand

Private companies can be converted into public companies. This gives it the flexibility to expand and even go for Initial Public offerings in the long run.

Elevated Legal Status

Private Limited Companies’ artificial person status allows it to enter into a contract, sue and also be sued without holding the members or directors liable.

Share Valuation

Since Private Limited companies have the concept of shareholding, it can be valued to show company’s financial strength and makes it easy for allotting shares to investors and employees.

Enhanced Brand value

Private Companies benefit from better brand exposure compared to One Person Company or Limited Liability Partnership.

Easy to Exit

If  for some reason a company is not doing well, the promoter has the option to exit the business. Fast Track Exit (FTE) is one of the main highlights of a Private Company that allows winding up in 3 months time.

Continuity of Business

The private limited company can be closed only by a formal winding up the process; This ensures continuity of business and there is no question of renewals.

The Incorporation Process For Private Limited Company Are As Follows:

You need to have the following set of documents before proceeding for registration:

  • Self-attested PAN card copy
  • Self-attested Govt Address proof (Passport or Driving Licence or Voters ID or Aadhar Card)
  • Self-attested Latest Bank Statement or Mobile Bill or Gas (Not older than 2 months)
  • Proof of Registered Office (electricity bill or landline bill or Mobile Bill or Gas Bill not older than 2 months)
  • Rent agreement between the proposed director and landlord and No Objection  (NOC) from the person who owns the property mentioned above.

Other details required:

  • Main Objective of the Company- Proposed activities of the company
  • Proposed names for your company

Its hard to digest all if it is at one stretch. So an introduction about a business or start up formation options is vital for deciding the right form of business registration. The Companies Act, 2013 and Limited Liability Partnership Act, 2008 have brought more business formation choices for entrepreneurs. The key factors that influence the legal form of a business are nature of your business, customer’s profile (corporate, small businesses or individuals ), expected business turnover, scalability  of your business idea and future funding prospectus.

 

Every entrepreneur/promoter should take the pain to know about the pros and cons of these legal forms.

 

Formation

Do I need a Registration?

What type of business names can I keep?

How risky is it for me?

To what extent is each member of the business liable?

Tell me the minimum membership limit.

Is foreign ownership allowed?

How much will I get taxed?

What are my annual tax filing norms?

Is Annual Audit Required?

Can I convert my business into any other legal form??

Compulsory Conversion to Private Limited Company Applicable?

Private Limited Company

Yes, Ministry of Corporate Affairs registers Private limited company under the Companies Act, 2013

Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies

Private Limited Company is a separate legal person in the eyes of law, registered under Companies Act 2013. So, the shareholders are not responsible for business liabilities.

Liability is limited to his/her share capital contribution.

2 People

Yes

Profits get taxed at 25% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Every financial year Private Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately.

Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs

Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.

NO

Limited Liability Partnership

Ministry of Corporate Affairs registers an LLP business under the Limited Liability Partnership Act, 2008.

Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies.

“LLP” is a separate legal person in the eyes of law, registered under LLP Act 2008. So, the partners are not responsible for business’ liabilities.

Liable to the extent of their contribution (in money, in kind or in services extended) to the LLP.

2 People

Yes

Profits get taxed at 30% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Every financial year Annual Statement of Accounts & Solvency and Annual Return with the Registrar.Plus, Income Tax must be filed separately.

Statutory audit is to be conducted if partners contribution exceeds 25 lakhs or turnover exceeds 40 lakhs. Income tax audit is applicable if turnover exceeds 2 Crs

Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.

NO

Partnership

Yes. Register with Registration of Firms

Firm can use any name that he likes, but avoiding names already trademarked is advisable.

Partners will stand liable for the liabilities of the business.

Unlimited liability.

2 People

No

Profits get taxed at 30% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Only Income Tax must be filed for the income of firm and partners.

Only income tax audit is applicable if the turnover exceeds limit of 2 Cr

Yes, Partnership can be converted into a Private Limited Company or LLP.

NO

One Person Company (OPC)

Yes, Ministry of Corporate Affairs registers One Person Companies under the Companies Act, 2013

Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies

OPC is a separate legal person in the eyes of law. So, the share holder is not responsible for business liabilities.

Liability is limited to his/her share capital contribution.

1 People

NA

Profits get taxed at 25% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Every financial year OPC must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately.

Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs

OPC could be converted into any legal form. But, it depends on the number of promoters, business operations, funding requirements and other factors. Limited Liability Partnership or Private Company is preferred by promoters when seeking expansion of their OPC

NO

Sole Proprietorship

No legal requirement to do-so.

Promoter can use any name that he likes, but avoiding names already trademarked is advisable.

Promoter will stand liable for the liabilities of the business. Because the business is not considered as a separate legal person/entity.

Unlimited liability.

1 People

NA

Individual income tax slab of proprietor is the basis of taxation.

Only Income Tax must be filed on the basis on proprietor’s income.

Only income tax audit is applicable if the turnover exceeds limit of 2 Cr

NO

Yes. If turnover exceeds 2 cr

What is a Private Limited Company?

It is a privately held business entity incorporated under the Companies Act, limits owner liability to their shares and limits the number of shareholders to 50.

How is it different from a Public Limited Company?

A public limited company can offer its shares to the public and owner liability subject to their shares.

What are the members of a company called?

Members of a company are called Shareholders

How much time is required to incorporate a company?

Incorporation process is fully online now. After submission of scanned documents and approval of the name of the company, incorporation will take about 15 working days.

Is it difficult to get a name of my choice for my company?

Getting a name of your choice is easy if you follow few basic guidelines such as similar names of existing companies or similar sounding names or those containing prohibited words such as Government, Bank, Exchange etc unless otherwise approved by the respective authorities.

Is it necessary for me to obtain a digital certificate?

Since documents are filed electronically, Digital Certificate (DSC) is mandatory. Once obtained, you can use this DSC for various other purposes where a digital signature is required.

Is it necessary to audit the books of accounts of a company?

It is necessary to appoint an Auditor within 30 days of incorporation of a company. Non-appointment can also attract heavy penalty.

Why Do I need a registration for my business?

Ministry of Corporate Affairs registers a Private limited company under the Companies Act 2013. This is beneficial for business to register as Private Company

What type of business names can I keep?

Firstly submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted need to be in-offensive, legal and not similar to any registered LLP’s or companies.

What are the suffixes that apply to my business name?

“Private Limited Company” (PVT LTD). This suffix should be at the end of the company name.

How risky is it for me?

Private Limited Company is a separate legal person in the eyes of law, registered under Companies Act 2013. So, the Directors or Shareholders are not responsible for business’s liabilities.

To what extent is each member of the business liable?

Director is liable only to the extent of their share capital contribution.

What is the minimum membership limit for a company?

Person 200 shareholders or members

Is foreign ownership allowed?

Foreigners are allowed to invest via automatic approval route (without red tape) in many of the sectors

Can the business ownership be transferred?

Yes

What factors influence the existence or continuance of the business?

Discontinuance of a Private company could happen voluntarily or by regulatory action. Private company has to follow a due process and wait a certain span of time to dissolve. The will of Directors or Shareholders can’t assure fast dissolution.

What are articles of association and memorandum of association?

Article of association contain the purpose of the business and it also lay out duties and right of its members. Memorandum of Association defines the company’s relationship with shareholders and others

What are the company taxation norms that I need to know now?

Profits get taxed at 30% plus surcharge and cess is also applicable.

How many board meetings should I be conducting?

All companies must hold a board meeting once every 3 months. Annual general meetings are expected to be conducted periodically on an annual basis.

What are my Annual tax filing norms?

Every financial year Private companies must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed with Income Tax department.

Can I convert my business into any other legal form?

Yes. Private Limited Company can be converted into a Public company. Even, Public Limited Company can be converted into a Private Limited company.

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