A Private Limited Company is a privately run business that is one of the most popular ways to start a business in India. Private limited company registration in India is governed by the Companies Act 2013.
As per Section 2(68) of the Act of 2013, a private company is one that has a minimum paid-up capital and an article that restricts the right to transfer its shares, except in the case of a One Person Company. Reach Today!
According to the 2013 Act, a private company must have a minimum of two members and a maximum of 200 members. If a private limited company faces financial difficulties, its shareholders are not required to sell their personal assets, implying that they should have limited liability. A private limited company exists indefinitely. A private limited company continues to exist even if its members die or go bankrupt.
A minimum of two directors are required for online company registration, with a maximum of 15 directors appointed in a company. The proposed director must be at least 18 years old. A foreign national can also become a director of an Indian private limited company. There is no minimum paid-up capital required for the formation of a private limited company. Every private limited company must end their name with “Pvt.Ltd.”
The private limited company has no relationship with the public; they are not permitted to request collateral from the public or public sectors. Individuals are not obligated to transfer shares in a private limited company, which protects private limited company takeovers from large corporations.
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Borrowing money and purchasing items on credit are common necessities for new businesses. If a typical partnership were to fail, the partners' personal assets and savings would be at risk. Directors' personal assets are protected in a limited liability company, while only business investments are at risk.
When compared to LLPs and OPCs, a Pvt. Ltd. company has a greater number of opportunities to raise capital, including through bank loans, angel investors, and venture capitalists.Pvt. Ltd. companies have a number of options for raising funds, including issuing shares, taking out loans, and using crowdfunding platforms.
The limited liability company is a common and well-known business structure. Corporate Customers, Vendors, and Government Agencies prefer to conduct business with Private Limited Companies over sole proprietorships and standard partnerships.
Due to the confidence attached to a private limited structure, it is easy to hire people and motivate them with corporate titles and stock options, which is a challenge for startups when assembling a team and retaining them over time.
Investors prefer to put their money into Private Limited companies because these businesses are more easily structured and have fewer restrictions. Most importantly, leaving a private limited company is a very simple and straightforward process.
Selling a company that is structured as a Pvt. Ltd. is a straightforward process that requires very little in the way of paperwork and financial investment.
Recently, the Government of India has simplified the process of registering a Private Limited Company online. There must be a minimum of two directors and shareholders. A single individual may serve as both a director and a shareholder. However, a corporation can only become a shareholder.
Step 1 : Obtain Digital Signature Certificate or DSC
Directors, shareholders, and witnesses of the Memorandum and Articles of Association are required to possess a valid Digital Signature Certificate (DSC). The registration procedure is conducted online, and the forms must be electronically signed with a digital signature. Digital Signature Certificates (DSC) may only be obtained from certifying agencies recognised by the government.
Step 2 : Request a Director Identification Number or DIN
Director Identification Number (DIN) is a unique Identification Number assigned to a person who is appointed (or seeks appointment) as a Director of a corporation. Form DIR-3 must be submitted through the MCA website in order to apply for a DIN (Ministry Of Corporate Affairs).
A person can only apply for a DIN once, but the same DIN is sufficient to become a Director in any number of companies.
Step 3 : Approval / Reservation of the Name
In order to register or incorporate a Private Limited Company in India, the MCA Authorities must approve the proposed company’s name. Therefore, it is obligatory to apply for the Name Reservation prior to the incorporation application.
The proposed Company Name must be distinctive and unavailable to any other business. The name’s availability can be checked at http://www.mca.gov.in/mcafoportal/
Additionally, the proposed company name must not be Trademarked by another party. Check the availability of a trademark at https://ipindiaonline.gov.in/.
Step 4 : Request for Certificate of Incorporation
Once the name has been reserved and approved, it will only be valid for twenty days. The MCA must receive a request for a Certificate of Incorporation using SPICe forms within the applicable time frame.
Creating Articles of Association (MoA)
The Memorandum of Association is a legal document that outlines the primary goals of a limited liability company. It must also include information regarding the promoters’ shareholding structure, etc.
Developing Articles of Incorporation (AoA)
The Articles of Association is a legal document containing the rules and regulations for the general management of a limited liability company. In addition to defining the rights, responsibilities, and powers of a company’s management, they also stipulate how operations and administration should be conducted.
SPICe Type (Simplified Proforma for Incorporating Company Electronically)
The Ministry of Corporate Affairs (MCA) has recently introduced the “Simplified Proforma for Incorporating Company Electronically” SPICe Form INC-32 (company registration form). Form INC-32 must be accompanied by supporting documents, such as Details of Directors & Subscribers, Affidavits, Declarations, Proof of Identity, Proof of Address, Memorandum of Association, and Articles of Association, etc.
The eForm will be processed by the MCA’s Central Processing Centre once it has been submitted. If found complete, the company would be registered and a Corporate Identification Number (CIN) and Certificate of Incorporation would be issued.
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If everything is in order, registering a private limited company usually takes between 8 and 12 business days. The timeline for registering a Private Limited Company in Bangalore is broken down below:
Formalities After Formalization of a Private Limited Company
Choosing the right business structure for your company is important. You can choose between the different types of structures such as Sole Proprietorship, Partnership, Limited Liability Partnership, Public Limited Company and LLP. Each of these has its own compliances and tax implications. You should always reach a good Company Consultant or Company Secretary to guide the right platform.
In the context of private limited company registration, a CS can play a valuable role by providing guidance and assistance on the process of registering a private limited company in India. This may include advising on the required documents and procedures, preparing and filing the necessary paperwork, and ensuring that the business is in compliance with relevant laws and regulations.
The private limited company is a popular business structure in India, as it offers the benefits of limited liability and the ability to raise capital through the issuance of shares. Private limited companies can also be more attractive to potential investors, as they offer greater legal protection to shareholders compared to other business structures such as partnership firms.
Private limited companies can be particularly useful for businesses that are looking to expand, as they offer the flexibility to raise capital and bring in additional shareholders as needed. This can be especially important for businesses that are looking to grow quickly or enter new markets, as it allows them to access the resources and expertise of additional investors.
Overall, a CS can play a valuable role in helping businesses to navigate the process of private limited company registration, and private limited companies can be a useful structure for businesses looking to expand and grow.
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