About Private Limited Company

A Private limited company is typically a small business establishment or entity that is owned privately. Since these private companies are owned by a stipulated number of investors are known to be ‘Limited Companies’. While private companies may be large or small, they are generally small businesses that are often owned by a closed group consisting of family, friends or angel investors. Some of the biggest private limited companies include Facebook, Reliance, Infosys, TCS, Wipro and many more.

(For such a company to come into existence, a legal document or a legal license to operate is mandated.)

Checklist for Registering a Private Limited Company

• Two Directors: A private limited company must have at least two directors, with a maximum of fifteen. A minimum of one of the company's directors must be a resident of India.
• Unique Name: The name of your business must be unique. The suggested name should not match with any existing companies or trademarks in India.
• Minimum Capital Contribution: There is no minimum capital amount for a company. A company should have an authorized capital of at least 1 lakh.
• Registered Office: The registered office of a company does not have to be a commercial space. Even a rented home can be the registered office, so long as an NOC is obtained from the landlord.

Documents Required For Private Limited Company Registration

• PAN Card of all the directors.
• Passport size photographs of the same must be shown.
• Either the “Aadhaar Card or the Voter identity card”, has to be presented during the process.
• If the company property is on rent then the rent agreement is to be shown.
• One of these two:- Electricity/ Water bill but any of them must be of the business place only.
• Property papers (owned).
• Landlord NOC (Format will be provided).

Procedure to register as a Private Limited Company

1. DSN and DPIN Application: Applicant needs to apply for a Digital Signature Certificate (DSC) and Director’s Pin (DPIN), where the DSC is essentially an online signature that can be used for form filling. DPIN is issued by the Ministry of Corporate Affairs (MCA).
2. Approval of Name: To set up a private limited, applicant will need to provide at least 3 optional names that are clearly descriptive about the company’s business.
3. MOA and AOA: One of the important steps towards creating one’s company is the drafting of a Memorandum of Association (MOA) and Articles of Associate (AOA).
4. Incorporation Certificate: Private limited company is officially set up for business in a span of about a month where the incorporation certificate confirms it and also includes the crucial Corporate Identity Number (CIN) number.
5. Applying for the PAN and bank account: After receiving the incorporation certificate, applicant will get his/her PAN and TAN card within a week, after which he/she can submit PAN, AOA and MOA to the bank to open bank account.

Additionally, there is another online feature initiated by Ministry of Corporate Affairs known as Simplified Proforma for Incorporating Company electronically (SPICe). SPICe is a fast track registration process that enables a one form application process of company registration. With its quick process the online registration can be done within 7 days as compared to a month in the normal process.

Advantages of Private Limited Company

• No Minimum Capital: No minimum capital is required to form a Private Limited Company. A Private Limited Company can be registered with a mere sum of Rs. 10,000 as total Authorized Share capital.
• Separate Legal Entity: A Private Limited Company is a separate legal identity in the court of the law, meaning assets and liabilities of the business are not the same as the assets and liabilities of the Directors.
• Limited Liability: If the company undergoes financial distress because of whatsoever reasons, the personal assets of members will not be used to pay the debts of the Company as the liability of the person is limited.
• Fund Raising: A Private Limited Company in India is the only form of business except for Public Limited Companies that can raise funds from Venture Capitalists or Angel investors.
• Free & Easy transfer of shares: Shares of a company limited by shares are transferable by a shareholder to any other person.
• Uninterrupted existence: A Private Limited Company has ‘Perpetual Succession’, which is continued or uninterrupted existence until it is legally dissolved.
• FDI Allowed: In a Private Limited Company, 100% Foreign Direct Investment is allowed.
• Builds Credibility: The particulars of the company are available on a public database.

Disadvantages of a Private Limited Company

• Restrictions on transferability of shares.
• Limit on number of shareholders (maximum 200).
• Cannot issue prospectus to the public.
• Shares cannot be quoted on the stock exchange.

Features of Private Limited Company

• A private limited company needs a minimum of 2 members and can have a maximum of 200 members according to the Companies Act of 2013.
• One of the defining features of a private limited company is that the liabilities of its members are limited.
• Any private limited company exists for perpetuity.
• A private limited company needs only two directors to begin operations.
• Since 2015, there is no requirement for a minimum paid-up capital.
• For setting up a private limited company, there are a variety of business loans that one can avail on submission of basic KYC documents.
• With the exception of an IPO event, private limited companies are not required to issue a prospectus or statement of the affairs of the company to the public.
• Every Private Limited Company needs to have the phrase “private limited” after its name.