November 7, 2019
5 min read
This is a comprehensive guide on the meaning, process and benefits of Private Limited Company registration in India.
The first step in structuring any business is to decide the kind of business entity as which the business will be registered. The business structure not only decides the formalities involved in starting a business but also its rights, liabilities, and the compliance requirements that will be applied over the business post-incorporation. One of the most preferred forms of business structures in India is the Private Limited Company. This is a comprehensive guide on the meaning, process and benefits of Private Limited Company registration in India.
Private Limited Company is a type of business entity governed under the Companies Act, 2013 and the Companies Incorporation Rules, 2014. In a Private Limited Company, the members have limited liability up to their share and the company gets a separate legal entity from its members, giving it the rights to sue, enter into a contract and own property in its name.
A Private Limited Company is most suitable for medium-sized to large businesses, wherein there is a large number of members or shareholders. A Private Limited Company works as per the company’s Articles of Association and Memorandum of Association which act as the constitution and governing rules for the business.
The most prominent benefits of Private Limited Company registration in India are as follows:
Ease of formation
Easier to attract funds and expand the business internationally.
Separate legal identity of the business.
Limited risk and liability to members.
Easy transfer of shares.
Perpetual succession beyond its members.
To register a private limited company, there are certain requirements, and it is advised to consult a business consultant in India to know if the business is adhering to these requirements. The following requirements must be fulfilled:
A minimum of 2 shareholders and 2 directors.
A maximum of 200 members and 15 directors.
One of the Director of a private limited company has to be an Indian Citizen and Indian Resident.
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The first step is to get the company name approved for the Private Limited Company. It is important to perform a thorough company name search or consult a business consultant to know the process of performing a name search in India. The recently launched Reserve Unique Name (RUN) system allows easy company name approval of a Private Limited Company.
The process of filing the application includes passing a resolution for the decided names and filing the application along with the resolution with the MCA.
A digital signature certificate (DSC) is an electronic form of a director’s signature. It is a form of the electronic and encrypted version of a director’s identity and is required to attest all incorporation documents.
All directors of the company are required to obtain a DSC for all documentation, compliance filing and other requirements notified by the MCA.
A Director Identification Number (DIN) is an eight-digit unique number assigned to each director in India. An individual is allowed to possess only one DIN, even if he/she is a director in multiple entities. It is mandatory for every director to obtain a DIN from the MCA. Once acquired, a DIN does not expire, except in the cases when the DIN is cancelled by the MCA for non-compliance by the director.
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The SPICe Form consists of INC-32, INC-33, and INC-34. INC-32 is an all-in-one form for DIN, reservation of company name, and incorporation of a company. Form No. INC-33 provides the electronic format of the Memorandum of Association which outlines the charter of a company. Form No. INC-34 provides the electronic format wherein applicants input their Articles of Association.
The SPICe Form can be filed along with numerous documents. Business consultants in India can guide in ensuring that all the documents are in place while filing the complicated form. The
Memorandum of Association and Articles of Association.
Copy of utility bills.
Proof of office address
Proof of identity and address of all directors.
Once the forms and documents are verified, the Registrar of Companies (RoC) assigns a company with a 21 digit Corporate Identity Number (CIN) and the Private Limited Company is registered in the MCA database.
Private Limited Companies are preferred by most startups because of the various protections and freedoms granted to the members, that allow easy growth of a new business. When the startup founders are protected from the liabilities of the business, they are able to take the needed risks to scale the business and get the funds and loans required for its expansion.
Perpetual existence allows the business to continue without any hiccups in case any founder decides to leave the business or a new founder is added to the mix.
Although the process for registering a Private Limited Company in India has been simplified by the MCA considerably in the past few years, it still takes time to secure all the required approvals from regulatory authorities. Getting guidance from an experienced professional about structuring the business as a Private Limited Company can help the business owners in complying with the numerous formalities and legal processes.
SeekWiser makes it easier for startups to get connected with the best startup consultants in India who can guide the business owners in understanding and following the Private Limited Company registration process. Give us a call at +91-7827886239 or send us an email at [email protected] to get started.
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