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Private Limited Company Registration in India

A Comprehensive Guide to Private Limited Company Registration and Incorporation in India! Features, Cost, Documents, Process etc – Everything Explained

Private Limited Company is the most preferred and popular type of corporate legal entity by entrepreneurs in India. Private Limited Company registration is governed by the Ministry of Corporate Affairs (mca.gov.in), Companies Act, 2013 and the Companies Incorporation Rules, 2014.

What is a Private Limited Company? – It’s Meaning

A Private Limited Company, or PVT LTD, is a type of “Privately Held Independent Legal Business Entity” which Limits the Liability of the owners up to the extent of the shares they have subscribed. It means that the liability of the shareholders to Creditors or Lenders of the company is limited to the capital originally invested (or Shares).

Hence, the shareholder’s personal assets are thus protected in the event of the company’s insolvency. The Creditors or Lenders cannot sue the owner’s personal assets in case of any shortfall.

The minimum number of members (Shareholders) required to form a Pvt. Ltd. company is two and the maximum number of members is limited to 200 (in most of the cases the directors themselves would be the major shareholders).

Private company shareholders cannot trade their shares publicly or in stock exchanges.

A private limited company cannot raise capital from the general public. Hence, Private limited companies cannot offer/issue shares to the public for subscription.

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Characteristics or Features of Private Limited Company

Restricted rights to transfer of shares

Companies Act, 2013 expressly restricts the transfer of shares of a Pvt. Ltd. Company. Though restricted, the shares can be legally transferred by fulfilling few legal compliances, as laid by the Companies Act, 2013.

Limited Liability

Private limited company protects your personal assets with the “Limited Liability” feature. Maximum Liability of the shareholders is limited to the extent of the shares they hold.

Independent / Separate Legal Entity

A Pvt. Ltd. Company is an artificial and Independent Legal Person, established under provisions of the Companies Act 2013. This means the company would be treated as a separate legal person.

Minimum of two & Maximum of 200 shareholders / members

There must be a minimum of two members to incorporate or register a Pvt. Ltd. Company and the Maximun number cannot exceed 200.

Uninterrupted Existence or Perpetual Succession

A Pvt. Ltd. company has perpetual existence. Which means, they continue to do business even if the partners / directors changed or died (which is not the case of Sole Proprietorship or Partnership Firms).

No minimum paid-up capital requirement

There is no minimum Capital required to start a Private Limited Company. Earlier there was a minimum requirement of Rs. 1,00,000, but the new Companies (Amendment) Act, 2015 has removed that requirement.

External funding possibility

Private Limited Company is best for any startup or business that is hunting for external funds. It is the only form of business entity (excepting to public limited company) which can raise funds from the Venture Capitalist or Angel investors.

Minimum of two (2) Directors

As per the Companies Act of 2013, a Private Limited Company needs to have at least two (2) directors. However, they are not required to appoint any independent directors. (Generally, in most of the cases, the shareholders themselves act as directors).

When to consider Registering a Private Limited Company?

Firstly understand that, it is NOT at all mandatory to register a Pvt. Ltd. Company for starting a business in India. There are many other ways to start a business. So, consider the below points before deciding to choose the Private Limited Company as your choice of entity to do business.

Opt for a Private Limited Company only: 

  • If you are planning to get investments or funding from Angel, Seed or Venture Capital Investors
  • If you want to Limit your Liability
  • If you have or are considering Expansion Plans for your business
  • If you are considering for Employee Stock Options or ESOPs
  • When you need a separate “Legal Identity” for your business
  • Where you don’t want to use your personal assets as collateral

Note: Do not get carried away by several online low-cost offers for registration of a company. Private Limited Company form is not a one-time-affair. There is a significant recurring costs involved and several Legal Compliances need to be fulfilled regularly (regular Board Meetings, AGM, Compulsory Audit, RoC filing, etc). Failing / delay to meet the legal compliances will attract additional penalty.

Also, understand that all those Legal Compliances are a bit complex for common people and hence you would need the help of company registration consultant.

If you are unsure of choosing the right form of entity for your business, feel free to get in touch with us. Our Business Expert will guide you with the proper form of entity, suitable for your needs.

Private Limited Company Registration Process

Recently, the Government has made the Registration of a Private Limited Company an easy online process. A minimum of two directors and shareholders are required. A natural person can be a director as well as a shareholder. However, a body corporate can become only a shareholder.

Steps for Registering / Incorporating a Private Limited Company

Step 1: Obtain Digital Signature Certificate or DSC

It is mandatory for all the Directors, Shareholders and witnesses of the Memorandum and Articles of Association to have a valid Digital Signature Certificate (DSC). The registration process is online and the forms need to be signed electronically with the digital signature.  The Digital Signature Certificates (DSC) must be obtained only from government recognized certifying agencies.

Step 2: Apply for Director Identification Number or DIN

Director Identification Number (DIN) is a unique Identification Number allotted to an individual who is appointed (or wants to be appointed) as a Director of a company. In order to apply for DIN, an application using Form DIR-3 needs to be made at the MCA website (Ministry Of Corporate Affairs).

A person can apply for DIN only once and the same DIN would be enough to become a Director in any number of companies.

Step 3: Name Approval / Reservation

In order to register or incorporate a Private Limited Company in India, the name for the proposed company should be approved by the MCA Authorities. Hence, it is mandatory to apply for the Name Reservation before applying for incorporation.

The proposed Company Name has to be unique and should not have been taken by any other business. Availability of the name can be searched on http://www.mca.gov.in/mcafoportal/showCheckCompanyName.do

Also, the proposed company name should not be already Trademarked by anyone else. You can check the Trademark availability here https://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx

Few General Guidelines for Name Approval / Reservation:

  • The Proposed Name should be easy to spell and remember
  • The proposed name should provide a distinct identity to the company
  • To the extent possible, the proposed name should be short & simple
  • The proposed name should not contain any word opposed to Public Policy or should not be Prohibited by Law
  • Proposed Name should not infringe any Trademark registered and should not be similar or identical to any existing Company / LLP

Step 4: Application for issuance of Certificate of Incorporation

Once the name is reserved and approved, the same shall be valid for only next 20 days. Within the valid time, an application for obtaining the Certificate of Incorporation using SPICe forms has to be filed with the MCA.

Drafting Memorandum of Association (MoA)

Memorandum of Association is a legal document which showcases the Main Objectives of a private limited company. It also must contain the information on the Promoters Shareholding Pattern, etc.

Drafting Articles of Association (AoA)

Articles of Association is a legal document which has the rules and regulations for the general management of a private limited company. They define the rights, duties, powers of the management of a company and also provides the manner in which the operations and administration should be carried on.

SPICe Form (Simplified Proforma for Incorporating Company Electronically)

Ministry of Corporate Affairs (MCA) has recently introduced the SPICe Form INC-32 where the full form translates to “Simplified Proforma for Incorporating Company Electronically” (company registration form). Form INC-32 must be accompanied by supporting documents including Details of Directors & Subscribers, Affidavits, Declarations, Identity Proof, Address Proof, MoA, and AoA etc.

Once the eForm is filed, it shall be processed by the MCA’s Central Processing Centre. If found complete, the company would be registered and Corporate Identification Number (CIN) would be allocated along with a Certificate of Incorporation.

List of Documents Required for the Registration of a Private Limited Company

Directors/Shareholders Documents:

  1. PAN Card of the Shareholders / Directors  
  2. ID Proof – Voter’s ID / Passport / Driving License / Aadhaar
  3. Address Proof –  Latest Bank statement with transactions / Telephone bill / Mobile Bill not older than 60 days
  4. Passport Size Photograph

Registered Office Documents:

  1. Address Proof of the Premises:
    • Rental agreement or Lease agreement if the premise is rented / leased
    • Latest tax paid receipt / Sale deed if the premise is owned by any of the Directors
  2. Latest Electricity bill / Telephone bill / Gas bill
  3. NOC from the owner of the premise

Timeline – How long does it take to register a Private Limited Company in India

Normally, if everything is in order, it may take anywhere between 8 to 12 business days for registering a private limited company. Below, breakup depicts the approximate timeline for registering a Private Limited Company in India:

  • Getting a DSC (Digital Signature Certificate) – 2 Days
  • Getting a DIN (Director Identification Number) – 1 Day
  • Name Approval – 2 to 3 Days
  • Getting Certificate of Incorporation – 3 to 5 Days

This timeline is further subject to Government processing, approval time, public holidays, etc.

Private Limited Company Registration Fees / Cost

The basic Government fee starts from as low as Rs.3000. Please note that the general fee includes the actual charges of all general formalities such as DSC, DIN, Form Filing, Name Approval, etc and stamp duty charges as well.

Also, keep in mind that Stamp Duty charges vary from one state to another. Eg: If you are registering your company in Bangalore, the Stamp Duty Charges levied by Karnataka State Govt are applicable. Therefore the government fee will change depending on the state you are in.

The Charges will also change as per the amount of share capital of your company and the number of Directors you wish to appoint. This is because you would need separate DIN and DSC for each individual director.

Other important things to consider – Post Incorporation Compliance Requirements of a Private Limited Company

After incorporation / registration of a company, certain additional compliances needs to be performed. Though the requirements differ from company to company, we have listed a few important Post Incorporation Compliance which should be complied by a company in general.

1 Convening of First Board meeting Mandatory
2 Maintenance of Statutory Registers Mandatory
3 Maintenance of Books of Accounts / Accounting Mandatory
4 Opening of Bank Account for the Company Mandatory
5 Applying for PAN and TAN for the Company Mandatory
6 Appointment of Statutory Auditor (within 30 Days of Incorporation) Mandatory
7 Issue of Share Certificate (within 60 Days) Mandatory
8 Payment of Stamp Duty on Share Certificate Mandatory
9 Registration under Shops and Establishment Act As Applicable
10 Professional Tax (PT) Registration (Within 30 Days) Mandatory
11 GST Registration As Applicable
12 Trademark, Copyright, Patent Registrations Optional
13 PF and ESI Registration As Applicable
14 Trade License As Applicable
15 Annual / Regular ROC Filing Mandatory
16 Annual General Meeting Mandatory

FAQs for Private Limited Company Registration in India

Is it mandatory to register a company before starting a business in India?

No, there are other business entities as well. Eg: Sole Proprietorship, Partnership, One Person Company (OPC) and Limited Liability Partnership (LLP).

What are the advantages of a Private limited company?
  • A Private limited company is universally recognized as a stable and credible entity, vis a vis, the other forms of business entities.
  • The liability of the promoters is restricted to the extent of shares held by them and they have no personal liability to the creditors of a company for company’s debts.
  • A private limited company can have up to 200 shareholders, and 15 directors.
  • Angels, VCs, and Private Equity firms invest only in a private limited company.
  • The most preferred or recognized form of legal business entity.
  • Banks prefer to offer loans to a private limited company than other forms of business entities.
  • A Private Limited Company has ‘Perpetual Succession’. Which means, a company is a separate legal person, it is unaffected by death or retirement of any member and it continues to be in existence irrespective of the change in ownership.
  • Ownership of business can be transferred conveniently by way of share transfers.
What are the disadvantages of a Private limited company?
  • Mandatory Post-Incorporation compliances for a private limited company is on a higher side compared to any other entity such as LLP, OPC, Partnership or Proprietorship.
  • Winding up a private limited company is a tedious and lengthy process.
  • Maintenance of Books of Accounts in the prescribed format is mandatory.
  • Statutory Audit by a qualified Chartered Accountant is mandatory.
  • A Private Limited Company cannot accept deposits from the general public.
Do I have to be physically present for registration of a Private limited company?

No, private limited company registration is a completely online process. As all forms need to be filed electronically, you would not need to be physically present. You may just need to send us scanned copies of all the required documents.

How much does it cost to run a Private limited company?

The cost of running a Private Limited company can be bifurcated into:

  1. Tax compliance – GST, Professional tax etc
  2. Secretarial compliance
  3. Audit and ITR filing
  4. Other incidental expenses

An approximately cost would come to around Rs. 30,000 – Rs. 40,000 in the first year. This may significantly vary based on the nature of the business, number of transactions, turnover etc.

What is the minimum capital needed to incorporate a Private limited company?

As per Law, there is no minimum capital required for starting a private limited company. However, We recommend at least Rs.10,000 to meet the mandatory Govt. compliances.

What are the fees to incorporate a Private limited company?

MCA fees depend on the state of registration and the Authorized Capital. For e.g, Company registration in Bangalore, the RoC fees comes to around Rs. 2,020. Similarly, Company registration in Chennai, the RoC fees costs around Rs. 520 (for up to 10 lakh authorized capital).

Our consulting fees will depend on the number of directors and whether they already have a DIN and DSC.

Is it Necessary To Register Company under MCA In India?

Yes, if you are willing to incorporate or register either a “Private Limited Company (Pvt Ltd)” or “One Person Company (OPC)” or “Limited Liability Partnership (LLP)” the governing body is Ministry of Corporate Affairs (MCA).

What is the minimum age to register a company in India?

As per the prevailing laws, the minimum age to become a director / shareholder in a company in India is 18 years. Accordingly, the minimum age to register a company in India is 18 years.

Can I register a company in India in just one day?

No. There are multiple steps involved like getting Digital Signature (DSC) for the Directors, Reserving the Name and filing of SPICe and other forms, etc. Hence it will usually take at least 8 to 12 business days (or more) to register a company in India.

How to start a Single / One Person Company (OPC) in India?

The procedure to start a Single / One Person Company significantly differs from that of Pvt. Ltd. You can find detailed information about One Person company here.

What is the procedure for registering US / Foreign company in India?

An Indian business entity can be a subsidiary or a wholly owned subsidiary of a US / Foreign company. The process is similar to incorporating a Private Limited Company in India but the paperwork involved is a bit high. We recommend you to get in touch with our team who can personally guide you completely on this.

Can there be only one Director in a Pvt Ltd Indian company?

No, a Private Limited company should have at least two (2) Directors. You can add a family member or a friend as another director and give them a minority stake in the company. They can hold a minimum stake, even as low a just one share. Alternatively, you can go for a One person company whose details are fully described here.

Which is better, LLP or Pvt Ltd?

The answer to this depends on the subsequent decisions you make. If you are likely to go for external fundraising from investors like angel / seed / venture capital then Private limited company is suitable.

When it comes to post incorporation compliance and audit, the compliance regulations for LLP (Limited Liability Partnership) is more relaxed and simple. You need not conduct board meetings regularly and statutory audit is not mandatory until the annual turnover exceeds a certain turnover threshold, etc. Cost for maintaining an LLP is also less compared to Pvt Ltd.

Can I register a company in India without a physical address?

Registered office address is a mandatory requirement. However, you can use your Residential Address or an address of a business center or a co-work space, etc. for registration. Provided that you may have to submit an agreement, NoC, etc from the respective owner of the premises and the applicable utility bill is submitted for proof.

Can we register a company Pvt. Ltd. through Udyog Aadhaar?

No, Udyog Aadhar is a Government Registration Scheme that is provided along with a recognition certificate and a unique number in order to certify an MSME / SME. You have to register the private limited with Ministry of Corporate Affairs (MCA), which is the governing body for companies in India.

How Partnership Deed differs from company registration?

Partnership Deed / Partnership Agreement is a document for starting a partnership firm entered by the respective partners of a business between themselves. This agreement contains the details with respect to the Partners, Nature of the Business, Address of the Firm, Profit and Loss Sharing Ratio, Capital Contribution of Each Partner etc. This is needed to start a partnership firm, not a company.

How to close or wind-up a Pvt Ltd company?

An application has to be made by the promoters to ROC / MCA for striking off the company’s name from MCA records. If a company has failed to commence its business within one year of incorporation, or if the company is not carrying out any business activity for preceding 2 financial years, then the company’s name can be removed from MCA. However, in order to close down or wind up a company voluntarily, a long procedural compliance needs to be followed.

Can you use your residential address to register a Private limited company?

Yes, you can register the company using your residential address.

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