What is a Private Limited Company?

As India is rapidly emerging as a birthplace of various Startups, the number of people planning to start their Businesses is rising exponentially. Under these circumstances, it becomes vital to understand multiple business registration types if you, too, are planning to do the same.

 Out of various options, Private Ltd company is one of the most well-known types of business registration preferred by the small and medium businesses in India. Multiple reasons make a Private ltd company a primary choice of these businesses. 

In this piece of information, I will be discussing the Private ltd Company registration process in this blog. I will be explaining what a Private Ltd company, the minimum requirement, and the documents for registering a Private Ltd Company is. 

Let’s not waste further time and get started.

What is a Private Ltd company?

It is a type of business registration where the Business is privately owned by individuals and/or any other business entity. Here the owners or shareholders of the Company manage the business operations. There is also a provision of a director appointed by the shareholders and manages the business operations.

Due to its simplicity and lesser compliances, it is one of India’s most preferred forms of Business registration.

Some distinctive features of a Private Ltd Company

Now let’s take a look at some distinctive features of a Private Ltd Company.

  • Members:

As per the Company’s Act 2013, the minimum number of members in a Private Limited Company should be 2. The maximum number of members in a Private Ltd Company is 200. Apart from the members, at least two directors should run a Private Ltd Company.

  • A separate legal Status

Being a registered company, your Business will enjoy a separate legal status. This separate legal status ensures that even in the case of death or a member’s inability to discharge his/her duty, the Company will exist perpetually.

But in case if the shareholders do not want to continue the Business, it can be dissolved through a uniform resolution.

  • Name of a Private Ltd Company

Every Private Ltd Company should have a legal name as per the norms in the Company’s Act 2013. The law states that the name of any Private Ltd Company cannot be the same or similar to any registered company under the law.

  • Prospectus

Although not a mandatory step for a Private Ltd Company like a Public Company, many Private Ltd Company publishes the Company Operations’ detailed information. This detailed information is known as the Prospectus.

  • Registered Address of the Office

Once your Company is registered, you will have to submit the registered address to the Registrar of the Company from where all the company operations will be managed.

  • Minimum Paid-up capital

For every Private Ltd Company, the minimum Paid-up capital should be one lakh.

What are the minimum requirements to register a Private Ltd Company?

Following is the list of minimum require Private Ltd Company

  1. At least two shareholders are required for a Private Ltd Company.
  2. At least two members are required for a Private Ltd Company.
  3. At least two directors are required for a Private Ltd Company, and one of them can be NRI or Foreign National.
  4. DIN (Director Identification Number) is mandatory for each Director
  5. DSC (Digital Signature Certificate) for a registered Private Ltd Company

What are the advantages of a Private Limited Company?

  • Perpetual existence

This is a significant benefit of a Private Ltd Company. As per the law, the Company exists perpetually or forever, until and unless it is closed by a resolution, even in case of the death of any member or his/her inability to discharge the duties.

  • Only Two shareholders are necessary.

Unlike a Public Ltd Company where a minimum of seven Shareholders is required, only two Shareholders are required to establish a Private Ltd Company. This reduces the complexity and boosts the decision-making process.

What is the disadvantage of a Private Ltd Company?

Apart from the various advantages listed above, there are some disadvantages too of a Private Ltd Company. Let’s take a look at them.

  1. The maximum number of Shareholders in a Private Ltd Company cannot be more than 50. This restriction on the number of shareholders reduces the inflow of necessary funds.
  2. Unlike a Public Ltd Company, a Private Ltd Company cannot release a Public issue. In layman’s terms, the shares of a Private Limited Company cannot be traded on the Stock Exchange.
  3. Another major disadvantage of a Private Ltd Company is a restriction on the transferability of shares.

What is the process of registering a Private Ltd Company?

The process of registering a Private Ltd Company is as follows:

  1. The first step for the registration is to make an application for obtaining the DSC (Digital Signature Certificate). It is a Digital identity of any individual or a business entity that has to be used for signing any Government documents in the Digital form.
  2. The second step is to obtain a DIN (Director’s Identification Number). DIN is a unique identification number allotted to every Director of the Company.
  3. The third step is the application to the ROC (Registrar of the Company) for obtaining the legal name of the Company.
  4. The fourth step is to file the eMOA (Memorandum of Agreement) & eAOA to register a Private Ltd Company.
  5. The fifth step is to obtain the PAN (Permanent Account Number) and TAN (Tax Account Number) and obtain a Certificate of Incorporation from the Registrar of the Company (RoC).

Final thoughts

Private Ltd Company is an excellent option for many Small and Medium businesses due to its higher flexibility than a Proprietorship firm and lesser compliances. But ultimately, every Business is unique in itself. So before choosing the right Business Structure for your Business, it’s vital to consult an expert.

If you are feeling confused about the same, our experts can surely help you out.

All you have to do is give us a call and we will be happy to help!

Probal Consulting Group is a leading Taxation, Accounting, and Compliance firm that helps individuals, MSMEs, and other businesses manage their accounting, taxation regulatory compliance affordably.

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