Private Limited Company, the most popular legal structure for businesses, should be chosen by anyone looking to build a scalable business. It is one of the most popular legal structure options for businesses in India. A Private limited company has a minimum of two members and a maximum of fifty members.

Private limited company is considered one of the most popular corporate entity amongst the small, medium and the large businesses in India due to its various advantages.

Start-ups and growing businesses choose to register a company in India because it allows outside funding to be raised easily, limits the liabilities of its shareholders and enables them to offer employee stock options to attract top talent. As these entities must hold board meetings and file annual returns with the Ministry of Corporate Affairs (MCA), they tend also to be viewed with more credibility than a Limited Liability Partnership (LLP), One Person Company (OPC), or General Partnership

The process for registration of a company is governed by the Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014. A natural person can be a director and as well as shareholder, where a corporate legal entity can only be a shareholder. In addition to that, foreign nationals, foreign corporate entities or NRIs are also allowed to be the Directors and/or Shareholders of a Company with Foreign Direct Investment, making it the preferred choice of entity for foreign promoters.

Some of the unique features of a private limited company like the limited liability protection to shareholders, the ability to raise the equity funds, separate legal entity status and the perpetual existence make it one of the most recommended type of business entity for the millions of small and medium-sized businesses that are owned by families or professionally managed.

Advantages of forming a Private Limited Company

Legal Entity

A company is a legal entity and a juristic person. It has wide legal capacity and can own property.

Limited Liability

The Directors or Shareholders of the company have no personal liabilities.

Easy Funding

Banks and VCs prefer to render large financial assistance to a company.

Business Continuity

Private limited companies enjoy perpetual succession because the company is its own legal entity.

Tax Advantages

A company opens the door to more tax-deductible costs and allowances redeemable against profits.

Easy Transferability

Shares of a Company are easily and freely transferable.

Dual Relationship

A person can at the same time be a shareholder, director, creditor and employee of the company.

Capacity to sue and be sued

A company in India being an independent legal entity can sue and also be sued in its own name.

Reasons to opt for a Private Limited Company

  • Build a Great Team
  • Attract Funding
  • Going International
  • Improve Business Credibility
  • Pursue Multiple Opportunities
  • An Exit Plan

Documents required for company registration

Identity and address proof

Identity and the address proof will be needed for all the directors and the shareholders of the company to be incorporated. In case of an Indian national, PAN card is mandatory. For the foreign nationals, apostilled or notarised copy of the passport has to be submitted mandatorily. All documents submitted should be valid. The residence proof documents like the bank statement or the electricity bill must be less than 2 months old.

Registered office proof

All companies should have a registered office in India. To prove admittance to the registered office, a recent copy of electricity bill or the property tax receipt or water bill must be submitted. Along with the rental agreement, utility bill or the sale deed and a letter from the landlord with her/ his consent to use the office as a registered office of the company should be submitted.

List of documents to be submitted by the director and the shareholders

  • Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
  • Scanned copy of Voter’s ID/Passport/Driver’s License
  • Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
  • Scanned passport-sized photograph
  • Specimen signature (blank document with signature [directors only])
Note: Any one of the directors must self-attest the first three documents. In case of foreign nationals and NRIs, all the documents must be notarised (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).

 

For the registered office

  • Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
  • Scanned copy of Notarized Rental Agreement in English
  • Scanned copy of No-objection Certificate from the property owner
  • Scanned copy of Sale Deed/Property Deed in English (in case of owned property)
Note: Your registered office need not be a commercial space; it can be your residence, too.

Reasons not to form a Private Limited Company:-

  • The statutory compliance is high.
  • Requires a high setup cost as compare to others.
  • The involvement of other Directors in the decision making.
  • The restriction to transfer shares to others without an agreement.

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Subrato Mukherjee

I am Professional CA with experience of more than 10+ years. My aim is to help startups and companies to help in various financial needs which is needed to expand the business.

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Subrato Mukherjee

I am Professional CA with experience of more than 10+ years. My aim is to help startups and companies to help in various financial needs which is needed to expand the business.

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