What is a private limited company?
A private limited company is a legal entity that has its own legal personality which is distinct from its owners (called shareholders) and the individuals who manage and run its affairs and business (called directors and officers). The creation of a private limited company occurs following the proper filing of Articles of Association and Memorandum of Association with the Registrar of Companies (ROC)
What are the advantages and benefits of a private limited company registration?
- Liability Protection –As a sole proprietor, your exposure to business debt is high, with personal assets such as your home, personal bank accounts and other valued assets facing risk. Forming a Private Limited Company or an LLP keeps your personal assets secure.
- Establishing a Professional Identity – Many small businesses choose to incorporate or form an LLP to prove their legitimacy to both customers and suppliers. Including the “Private Limited.” or “LLP” at the end of your business name in all marketing and communications can help to separate you from the competition
- Raising Capital – If you are looking to raise capital, incorporating or forming an LLP also increases the legitimacy of your company from an investor’s standpoint. Investors are interested in making sure they are investing in a sound business – one that has adhered to the proper formalities (whether you’ve formed a private limited company or an LLP).
- Tax Savings – Sole traders and partnerships pay income tax. Companies pay corporate tax on their taxable profits. There is a wider range of allowances and tax deductible costs that can be offset against a company’s profits.
- Brand protection – In most states, other businesses may not file your exact private limited company or LLP name in the same state. From a branding standpoint, this not only helps protect your company’s reputation from being diminished by or confused with another company bearing a similar sounding name, but strengthens your businesses in terms of brand identity and marketing efforts.
- Deductible expense – Private Limited Companies and LLP’s may deduct normal business expenses, including salaries, before they allocate income to owners. This means that the money you put towards growing your business can be deducted from your business income in determining your actual taxable income.
What are the minimum requirements?
The Companies Act 2013 specifies the minimum requirements for a private limited company.
- There should be minimum 2 Directors
- There should be minimum 2 Shareholders
- The directors and shareholders can be the same person
- Minimum Share Capital shall be Rs. 100,000 (INR One Lac)
- Application of allotment Director Identification Number (DIN) for all the Directors
- Digital Signature Certificate (DSC) for all the directors.
Frequently asked questions
There are many questions in the mind when one is supposed to start a business, we’ve answered them all.
1) How many people are required to form a private limited company?
It is a legal requirement to have at least two shareholders and two directors. Both roles can be filled by the same person. There is a maximum limit of 200 members.
2) Who can be a company director?
The Director needs to be over 18 years of age and must be a natural person
3) Who is a shareholder?
A shareholder is the owner of a company limited by shares. According to the companies act 2013 there must be two shareholders both own a stake in the company. Shareholders are entitled to receive a share of any profits that are made by the company
4) Can I appoint a new director after company formation?
Shareholders can add a new director at any time after formation. This can be done by availing our services, we fill up the necessary forms and the information is sent to Registrar of companies for approval.
5) How long does it take to form a company?
Our core mission is to incorporate a company at the earliest. However due to the procedure being approval based, the formation should be done in 10 – 21 days.
6) How and when do I receive my new company documents?
As soon as Registrar of Companies approves your company registration you will receive electronic copies of your Certificate of Incorporation, Memorandum and Articles of Association, and Share Certificates for all shareholders. Printed and bound copies of these documents will be posted to you within 3 working days.
7) What happens if my application is rejected by Registrar of Companies?
Occasionally this may happen and it is typically due to an unsuitable company name or due to technical mistakes. Don’t worry, these issues can be easily resolved and you will be given the opportunity to re-submit your online application with the correct details or upload supporting documents and evidence.
8) Do I need a registered office address?
All private limited companies are legally required to have a registered office address. All statutory mail will be sent here and the address details will be displayed on public record.
9) What are the documents required for incorporation?
In case of Indian National
- Identity Proof: Copy of PAN Card
- Address Proof: Copy of Any two of the following documents, Passport/Election/Voter ID/Ration Card /Driving license
- Passport Size Photograph
In case of Foreign National
- Identity Proof: Copy of Passport
- Address Proof: Any two copies of Passport/Election/Voter ID/Ration Card /Driving license and proof should not be older than 3 months
- Passport Size Photograph
10) How much will it cost to form a company?
The total cost for formation of the company is 11999 i.e. including ROC filing fees and Stamp duty for which receipts will be provided. The government filing fees depends on capital and state.