Understanding a Private Limited Company

Incorporating a company marks the initial stride towards launching a business in India. For startups harboring ambitious growth goals, opting for a Private Limited Company is advisable. This structure facilitates the ease of raising external funding, mitigates shareholders’ liabilities, and empowers founders to offer employee stock options, thereby enhancing the allure for top talent.

A Private Limited Company, established under the purview of the Companies Act of 2013 and overseen by the Ministry of Corporate Affairs (MCA), offers distinct advantages. It mandates a minimum of two members and caps the maximum at two hundred. Directors of a private limited company benefit from limited liability in case of creditor claims. In the event of default, creditors are restricted to liquidating the company’s assets without encroaching upon the personal assets of directors.

Advantages of Registering a Private Limited Company

Benefits of Registering a Private Limited Company.

1. Separate Legal Existence: A Private Limited Company is recognized as a distinct legal entity, separate from its owners, enabling it to enter into contracts, own assets, and engage in legal proceedings in its own name.
2. Management and Ownership Separation: The structure of a Private Limited Company allows for a clear distinction between ownership (shareholders) and management (directors), facilitating efficient decision-making and operational management.
3. Limited Liability of Shareholders: Shareholders’ liability is limited to the extent of their investment in the company, protecting personal assets against business debts and obligations.
4. Easy Fund Raising: Private Limited Companies have easier access to external funding from investors, banks, and financial institutions due to their structured setup and legal recognition.
5. Transferability of Shares: Shares of a Private Limited Company can be easily transferred between shareholders, providing flexibility in ownership and investment.
6. Improves Credibility and Trust and attracts good talent: The Private Limited Company structure enhances credibility and trust among stakeholders, including customers, suppliers, and investors. Additionally, it attracts top talent by offering employee stock options and a structured organizational setup.

Prerequisites for Registering a Private Limited Company

Requirements for Registering a Private Limited Company

Minimum Two Directors: A Private Limited Company must have at least two directors. However, a maximum of 200 individuals can become shareholders in the private limited company.

One Resident Director: Among the two directors, at least one director must be a resident Indian for Private Limited Company Registration. A resident Indian is defined as a person who has spent at least 182 days or more in a financial year in India.

No Minimum Capital: There is no minimum capital required for Private Limited Company Registration. However, a Private Limited Company should have a minimum authorized share capital of Rs. 1 lakh.

Unique Name: The proposed name of the private limited company should be unique and should not resemble any existing company name or trademark.

Step-by-Step Guide to Registering a Private Limited Company

The Ministry of Corporate Affairs governs the company registration process. The below registration process is basis the governing laws of MCA:

• Step 1 Application for DSC (Digital Signature Certificate): Apply for Digital Signature Certificate (DSC) for the proposed directors and shareholders through authorized agencies.
• Step 2 Apply for DIN (Director Identification Number): Apply for Director Identification Number (DIN) for the proposed directors through the MCA portal.
• Step 3 Application Filing for Name Availability: Submit an application for the availability of the proposed company name through the MCA portal. Ensure the name complies with naming guidelines.
• Step 4 Drafting and Filing of eMoA and eAoA: Prepare and file the electronic Memorandum of Association (eMoA) and Articles of Association (eAoA) incorporating necessary clauses and details of the company.
• Step 5 Apply for PAN and TAN of the Company: Apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the company through the NSDL portal.
• Step 6 Certificate of Incorporation Issued by RoC along with PAN and TAN: Once all documents are verified and approved, the Registrar of Companies (RoC) issues the Certificate of Incorporation along with PAN and TAN.
• Step 7 Open a Current Bank Account in the Company Name: Utilize the Certificate of Incorporation and other relevant documents to open a current bank account in the name of the company.

Documents Needed for Private Limited Company Registration

Documents Required for Private Limited Company Registration in India:

Identity & Address Proof:

1. Copy of Pan Card of Directors (mandatory)
2. Voter ID Card, Driving License, or Passport
3. Any one of: Bank Statement, Electricity Bill, or Mobile Bill (not older than 2 months)
4. Passport Size Photograph of Directors

Proof of Registered Office:

1. Conveyance/Lease Deed/Rent Agreement, etc., along with rent receipts (any one)
2. Copy of utility bills (Telephone/Gas/Electricity bill) (not older than two months) (any one)
3. No Objection Certificate (NOC) from Landlord

Deliverables from MyLawPoint for Private Limited Company Registration

1. Digital Signature Certificate (DSC) for Directors
2. Director Identification Number (DIN) for Directors
3. Company Name Approval
4. Memorandum of Association (MOA) and Articles of Association (AOA)
5. Certificate of Incorporation
6. Company PAN Card
7. Company TAN Number
8. Assistance with Bank Account Opening