A private limited company is a “Privately” owned company that is held by the people. Private Limited companies are the most popular legal structure of the business.

Private Limited Company

Outline

Don’t you think there must be some “Better than I thought of” kind of benefits why so many people choose Private Limited Company over so many other types of registrations out there?
While neither choice is better or worse than the other, you will need to assess what kind of freedom you want with your company along with other elements.
A private limited company is a “Privately” owned company that is held by the people. Private Limited companies are the most popular legal structure of the business.
Generally, Start-ups and businesses with bigger growth aspirations choose to start a private limited company.

Advantages of a Private Limited Company Registration

  • Easy transferability of shares – Shares of a company limited by shares are transferable by a shareholder to any other person. The transfer is easy as compared to the transfer of an interest in a business run as a proprietary concern or a partnership.  

 

  • Eligible to apply for Start-up India and take benefits from the Start-up India registration.

 

  • Borrowing Capacity – A company enjoys better avenues for borrowing funds. It can issue debentures, secured as well as unsecured, and can also accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.

 

  • Limited Liability Exposure – This type of limited liability refers to the liability for directors and officers of the company to only lose up to the amount that they invested in the company. Limited liability protects the personal wealth of a private company’s shareholders and does not put personal assets at risk.

 

  • Capital Requirement – Whatever amount the founder members deposit from their OWN POCKET is called CAPITAL. It could be the amount that you need to start the business. There’s no minimum or maximum limit to this.

 

  • Use of PRIVATE LIMITED– the name of the company you choose should be catchy, unique, and never heard of. The name is available for Only 20 days, and within those 20 days, we need to file the incorporation form. We can also extend the name availability up to 60 days by paying extra fees.

Steps for Incorporation of a Company

Step 1 : Ascertaining the name

               The first step is to select a suitable name for the company. Further, the form Spice Part A shall be filed for name approval. The name you select for your business entity is not just a business name but an Identity of your Company.

 

Step 2 : Digital Signature Certificate (DSC)

               The Directors of a Public Limited Company must have a Class III digital signature and therefore, the signature will  be used to file the registration, ROC  compliance form, and the Income-tax returns (ITR).

 

Step 3 : Drafting of MOA and AOA

                Once the name is approved, the next step is the preparation of Spice Part B, the drafting of MOA and AOA.
                MOA is considered a sphere in which the company can perform its business, objectives of the company.
    It’s divided into 5 clauses:
  • Name Clause
  • Registered office Clause
  • Object Clause
  • Liability Clause
  • Capital Clause
     AOA are documents that state rules and regulations that the inner management will follow. AOA creates a contract between the company and the members which states the terms and conditions, duties, rights, and liabilities of the members.

 

Step 4 : Introduction of SPICE FOMRS

                 With the introduction of SPICE FOMRS, we can now apply for GST, EPF, and ESIC   in Agile Form which is submitted along with incorporation forms.

 

Step 5 : Pay Stamp duty and PAN and TAN fees

                Once the Forms are ready, downloaded, and signed, we need to pay Stamp  duty and PAN and TAN fees.Click here to know the State-wise stamp duty

 

Step 6 : Incorporation Certificate

                 After the registration fees are paid and all the documents are verified, the Registrar will issue the Incorporation Certificate.
The date mentioned in the certificate will be the date of incorporation of the company.
Scanned copies of:
  • PAN card & Aadhaar Card of the Directors & Shareholders
  • ID proof (Voter ID, Driving license, passport)
  • Address proof of directors (Utility Bills like telephone, Wi-fi, electricity, etc.) (Shouldn’t be before 2 months)
  • Address proof of Company (Utility Bills like telephone, Wi-fi, electricity, etc.) (Shouldn’t be before 2 months)
  • Passport Size Photograph, mobile number, and email address.
Note : All documents shall be self-certified. There is no requirement for submitting physical documents. 

Difference Between Public Limited & Private Limited Company

Feature

Public Limited Company

Private Limited Company

Ownership Shares offered to the general public; traded on a stock exchange. Shares are held privately; not traded on a stock exchange.
Minimum Number of Shareholders At least 7 shareholders. At least 2 shareholders.
Maximum Number of Shareholders Unlimited. Maximum of 200 shareholders.
Capital Generally higher; significant capital required. Generally lower; no minimum capital requirement.
Disclosure and Reporting Extensive disclosure and reporting requirements; must publish annual reports. Less stringent disclosure and reporting requirements.
Transfer of Shares Shares are freely transferable on the stock exchange. Transfer of shares is restricted by consent of other shareholders.
Legal Status Legal Status Separate legal entity.
Regulatory Compliance Must comply with stringent regulatory frameworks and stock exchange rules. Less regulatory burden; not subject to stock exchange rules.
Fundraising  Can raise capital by issuing shares to the public. Raises capital through private means (e.g., family, friends, venture capital).
The whole procedure for the incorporation of a company might take 7-10 working days post receiving all the documents from the client.

Conclusion

The incorporation of a company thus has its own pros and cons. Incorporation greatly depends on the needs of the business, if the members perceive the business as scalable then the high incorporation costs are completely justified.
I think now you have enough reasons to believe that registering a Business as a Private Limited Company is a way better deal than being a Proprietorship entity or a Partnership firm. Because, if you are a dreamer, you have gotta go a long way…and if you are thinking Big you need to play safe..!
Udyog Buddy is a team of experienced professionals, our end-to-end service model, combined with personalized support, makes the incorporation journey straightforward and stress-free. Additionally, our commitment to cost-effective solutions and time efficiency allows businesses to focus on growth and operations without unnecessary delays or financial strain. Choosing Udyog Buddy means partnering with a trusted expert dedicated to helping your business succeed from the very start.
Connect with us for any queries
Call/WhatsApp +919301789019 or E-mail at [email protected]
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Questions that may arise ?
To register a company, you may be wondering whether you need a professional service firm or not. The answer is definitely yes. Udyog buddy is in the business of helping early-stage start-ups to register their companies and then to assist them in managing tax and regulatory compliances. To register a company in India begins with the analysis of the requirements to register the company.
Following is the list of the requirements-
Two Shareholders of Company
Two Directors
Unique Name
Registered Office Address & NOC from Owner
Requirement of Capital (Authorized Capital Vs Paid-up Capital)
Documentation for company registration.
If you have all the documents ready and are in order than it will take no longer than 7 to 10 working days. However, it is depend upon the Registrar of the Company.
Minimum 2 Directors are required in case of Private Limited and Minimum 3 Directors in case of Public Limited.
Yes, the same person can acts as shareholder and director of the company.
Yes, a company can register for multiple businesses, but it depends on whether the activities are related or not. However, all the activities which are listed should pertain to the main business of the company.
Yes, However, it should be ensured by the applicant that the first word used in the company name shall be unique and not generic.
Yes, the company can be registered at the owner’s residential address. A copy of the utility bill along with NOC from owner is required to be submitted.
 
Yes, a NRI or a foreign national can become a director of a private limited company. He or she must obtain a DIN from the Indian ROC. They can also hold a controlling stake in the company. As long as at least one director on the board of directors is an Indian resident.

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Disclamer: The article provided here is solely for information purposes. This is prepared based on information provided on various forums and the same has been utilized only for information of the readers. The information presented in this article does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice. In case of necessity, consult with professionals.