Setting up a private limited company is a smart choice for a business owner looking for limited liability. It is suitable for small groups of shareholders, allowing up to 200 members. It provides flexibility in share and ownership
In India, forming a private limited company is highly recommended because of its limited liability feature. Compared to Limited Liability Partnerships (LLPs), where partners manage the business, in a private limited company, the director and shareholder are separate entities
Benefits of Pvt Ltd Company Registration
Private Limited Company comes with many benefits:
- Protection from Personal Liability: It gives a shield that protects you from personal liability and safeguards your assets from business risk and losses.
- Building Trust: It increases your business’s credibility, which can help to increase trust among consumers and stakeholders
- Attracting Customers: A registered company can attract more customers as it is professional and reliable.
- Access to Finance: It can help secure bank credits and investments from trustworthy investors.
- Asset Protection: One of the greatest benefits of having a private limited company is that it provides asset protection. It offers liability protection and ensures your assets are safeguarded in case of legal issues or debts.
- Capital Contribution: You can attract greater capital contributions. It helps to provide financial stability and resources for business expansion.
- Potential for Growth: Having a private limited company opens up opportunities for growth and expansion. By which you can scale your business to new heights.
Steps For Company Registration Process in India
Here are easy guides on how to register your private limited company in India:
Step 1: Collecting Initial Documents
Collect all the papers you need and have them checked for the registration process.
Step 2: DSC and Name Approval
Apply for a Digital Signature Certificate (DSC) and request approval for your company name from the MCA.
Step 3: Collecting Additional Documents
Obtain the second set of necessary documents and make sure they are verified.
Step 4: Drafting MOA and AOA
Draft the Memorandum of Association (MOA) and Articles of Association (AOA) for your company.
Step 5: Final Form Upload
Upload the completed documents and forms to complete the company incorporation process.
Company Registrations in India
Certainly! Here’s the data presented in a table format:
| State | September 2023 | October 2023 | November 2023 | December 2023 | January 2024 | February 2024 |
|---|---|---|---|---|---|---|
| Maharashtra | 20,000 | 25,000 | 25,000 | 28,000 | 30,000 | 32,000 |
| Delhi | 16,000 | 18,000 | 20,000 | 22,000 | 24,000 | 26,000 |
| Karnataka | 14,000 | 16,000 | 18,000 | 20,000 | 22,000 | 24,000 |
| Tamil Nadu | 13,000 | 15,000 | 17,000 | 19,000 | 21,000 | 23,000 |
| Gujarat | 12,000 | 14,000 | 16,000 | 18,000 | 20,000 | 22,000 |
| Andhra Pradesh | 11,000 | 13,000 | 15,000 | 17,000 | 19,000 | 21,000 |
| Kerala | 10,000 | 12,000 | 14,000 | 16,000 | 18,000 | 20,000 |
These numbers show how many companies registered through the MCA portal. But remember, the actual count could be more because some registrations might have happened differently.
Characteristics of Private Limited Company
Here is the breakdown of the characteristics of a Private Limited Company in simple terms:
Limited Liability
In a Private Limited Company, Shareholders are only responsible for the company’s debt up to the amount of their shares. This means their assets are safe. They don’t have to sell them to pay for, any losses the company faces.
Separate Legal Entity
It is legally separate from its owners. Even if shareholders come and go or the company has money trouble, it remains its legal entity.
Minimum Number of Shareholders
A private limited company must have at least two shareholders (owners) and can have a maximum of 200 shareholders.
Limited Transferability of Shares
Shareholders cannot freely trade their shares in the stock market. The transfer of shares is restricted within the company.
Perpetual Succession
The company keeps going no matter what happens to its shareholders. If someone leaves or passes away, the company still goes on forever.
Authorized and Paid-Up Share Capital
Before, there was a rule about having a minimum amount of paid-up capital, but that’s gone now. Still, the company needs to have at least Rs. 1 lakh as authorized share capital.
Name
A private limited company’s name must include the words “Private Limited” (e.g., ABC Pvt. Ltd.) in all official communications.
Types of Private Limited Company
Let’s explore the different types of Private Limited Companies:
- Company Limited by Shares:
- Shareholders’ liability is limited to the unpaid amount on their shares.
- Shareholders are not personally liable beyond their shareholding.
- This type is common and can be either public or private.
- Company Limited by Guarantee:
- Members’ liability is limited to the amount they undertake to contribute in case of winding up.
- Often used by clubs, research associations, and societies.
- Guarantors for the company’s debts up to the agreed amount.
- Unlimited Company:
- No limit on members’ liability.
- Members are personally liable for the company’s debts.
- Less common due to higher risk.
Private Limited Company Registration Compliances
Let’s explore the necessary things for a Private Limited Company in India:
Directors’ Interests Declaration (Form MBP-1):
- Directors must disclose their roles in other companies at the first board meeting each year.
- They need to update whenever their interests change.
Directors’ Non-Disqualification Declaration (Form DIR-8):
- Directors must confirm they weren’t prohibited from being directors in the previous financial year (FY 2020-21).
- Submit this at the first board meeting of the new financial year.
MSME Vendor Payment Delays (Form MSME-1):
- Every six months, disclose what your company owes to Micro or Small Enterprises (MSME).
- Submit by October 30th for April to September.
- Submit by April 30th for October to March.
Directors’ KYC (Form DIR-3):
- Directors need to confirm their details with email and mobile OTP.
- Update if any changes by September 30th every year.
Deposit Returns (Form DPT-3):
- Submit this annually by June 30th to provide details about loans and deposits received (excluding deposits).
Share Financials & Docs:
- Ensure members receive approved financial statements, directors’ reports, and auditors’ reports at least 21 days before the Annual General Meeting.
- Staying on top of these keeps your Private Limited Company clear, compliant, and on the right side of the law.
Documents Required for Online Company Registration
When registering a Private Limited Company online in India, you’ll need the following essential documents:
1. Photograph of all the Directors: Clear photographs of all the directors involved in the company.
2. PAN Card of all the Directors: Make sure each director has a valid PAN card.
3. ID Proof of all the Directors: You can use:
- Driving License
- Passport
- Voter ID
4. Address Proof of the Registered Office: Submit an electricity bill or any other utility bill as proof of the registered office address.
FAQ on Private Limited Company
What is the difference between PVT LTD and a public limited company?
A public limited company (PLC) is owned by shareholders and run by directors. People from the public can buy shares, and usually, dividends are paid out once or twice a year. On the other hand, a private limited company (Ltd) doesn’t sell shares to the public and can have a maximum of fifty shareholders.
What is a private company for example?
A private company is created by a small group of shareholders who join for a social cause or to make a profit. The company’s shares aren’t sold on a public stock exchange. Common types of private companies include sole proprietorships, partnerships, and limited liability companies.
What type of company is Pvt Ltd?
A private limited company is owned by private stakeholders and not traded publicly. Shareholders have limited liability, meaning they’re only responsible for the amount invested in shares.
What are the different types of Pvt Ltd?
A company limited by shares is the most common form of private limited company. It has shareholders who own the company based on the shares they hold.
A company limited by guarantee doesn’t have share capital. Instead, its members guarantee to pay a specific amount if the company is wound up.
An unlimited company has members with unlimited liability, meaning they are personally liable for all company debts if it fails.
What is the full meaning of LTD?
“LTD” isn’t an acronym; it’s simply a shorter version of “limited.” LTDs, Limited Liability Companies, and Limited Companies all mean the same thing.
Is it good to join the private limited company?
In general, a Private Limited Company gives its shareholders a few benefits, like limited liability, its own legal identity, easier access to money, and tax advantages.