Suppose you are registering your PVT. Limited Company is a vital first step to becoming an entrepreneur, and it's not as difficult as you may believe. There are procedures to follow and paperwork to provide, but they will be quite simple and quick to complete if you understand how to do these.
Did you know?
Over 123 thousand private limited companies are registered in India with a total capital contribution of over ₹2.2 trillion.
Also Read: Difference Between Company vs Partnership Firm vs LLP
What Is a Private Limited Company?
A private limited company is a commercial entity owned by private investors. In this scenario, the accountability framework is like that of a limited partner, in which an investor's responsibility is restricted to the number of shares they own.
With the start-up environment flourishing nationwide, many people wish to establish their own companies. It's important to understand the many company registration options, such as sole ownership, limited liability partnership and private limited company.
Private enterprises have an advantage over public corporations in terms of long-term strategic investments, preserving the share price and budgetary statistics hidden, autonomy and versatility of operations.
Characteristics of a Pvt. Ltd. Company
Now that you've learned what exactly a private limited corporation is, it's time to learn about its characteristics:
Membership
To establish such a corporation, you'll need at least two investors, just like any other business. However, because it is still a young organisation, the maximum number of participants is capped at 200. It requires a minimum of two directors to govern the business.
Limited Liability Structure
Each participant or shareholder's responsibility is restricted in a private limited corporation. As a result, the stakeholders are obligated to liquidate their possessions to satisfy the debt even in a loss. The stockholders' personal and private assets, on the other hand, are not in jeopardy.
Separate Legal Entity
This is a distinct legal entity that will exist in perpetuity. This implies that the corporation will continue to exist legally even if all of the shareholders expire or the firm goes insolvent or bankrupt. Unless the agreement dissolves the company, the corporation's lifespan will be eternal, unaffected by the lifespan of its shareholders or members.
Minimum Paid-Up Capital
A private limited company requires a minimal paid-up investment of ₹1 lakh, and it might go much more, as MCA may order occasionally.
How to Register a Private Limited Company?
Ensure a smooth foundation for your company with no bureaucratic hassles by incorporating your company online in just four steps.
1. Procure Digital Signature Certificate
The first and perhaps the most important stage is to get the DSCs of all individuals participating in the formation of a private company in India. The need for DSCs originates from the authority's demand for completing e-forms on the MCA's web platform since the government has mandated an online registration method for business registration and other activities. The Certifying Authority grants the Digital Signature Certificate or DSCs in symbolic style and is usable for one or two years.
2. Obtain Director Identification Number
Subscribers, and the Directors of the prospective firm, are engaged in the organisation registration process in India. The subscriber is the firm's sponsor and one of the potential shareholders. The mentioned shareholders must complete e-MOA and e-AOA by attaching DSCs, and suggested directors must receive DIN by applying online.
Also Read: What is a Small Company - Definition, Criteria, Examples
3. Reservation of Name
You must register the prospective company's name before submitting applications to establish and register a Pvt Ltd Company. An organisation must submit an e-Form to allocate a private limited company's name together with the required costs. You could submit a maximum of 6 choices in a single application, in order of preference, together with the relevance of the suggested name for the proposal. Before completing the paperwork, the authorised professional must make a name availability inquiry so that the petitioner may apply for the names appropriately. When it comes to approving name applications, the Registrar has complete discretion.
The individual must file a request for name approval by the Act's requirements. Furthermore, the following typical practice is followed while selecting a name:
- The name must be easy to pronounce and recall.
- It must be competent to provide the organisation with a unique identity.
- It should be brief and straightforward.
- There should be no words in the name against government policy or forbidden.
- It must not trespass any trademarks that have been registered, nor must it be similar to or duplicate any company/LLP that has already been registered.
As previously indicated, a name allocation request can include up to six names, with the Registrar having the option to approve one of them or request more names with comments.
The Registrar will register the same name for 60 days after authorising the registration. In consultation with the specialist, the promoters must file a petition for company set up within the necessary 60-day period, failing which the name reservation will expire, and the individual must file a new application for name registration for another 60-day term.
4. Certificate of Incorporation
The organisation must file the request for the issue of a certificate of incorporation after the prospective company's name has been reserved by completing form INC – 1. They should also submit the petition for online business registration using the Simplified Proforma for Incorporating Company Electronically (SPICe) forms.
Drafting MOA & AOA
The Memorandum of Agreement (MOA) and the Articles of Association (AOA) are charter documents for a Private Limited Company.
The Memorandum of Association defines the corporation's spectrum of activities, which lists the company's principal aim and services. The Articles of Association, on the other hand, specify how the association conducts its activities and management. After consulting with a professional, you should carefully prepare both papers of critical importance.
The organisation must provide together with the petition for company establishment and registration, the firm's memorandum and articles in SPICe forms. You can do the subscriptions to MOA and AOA electronically by attaching participants' DSCs.
On the platform, the application is filed after paying the required Ministry Fess and Stamp Duty, as required in the relevant state. PAN and TAN applications and allotments are also executed using the same registration.
The Registrar may grant the Certificate of Incorporation bearing his seal and signature in digital form after reviewing and verifying the request for a certificate of incorporation submitted in SPICe forms. The Registrar would include the date of establishment and the company's Permanent Account Number (PAN) on the Certificate of Incorporation.
Advantages of Private Limited Companies Registration
Limited Liability
The private limited company shareholders have liability protection, ensuring they are not in danger of losing their assets. If a business fails, it might compel the shareholders to liquidate their holdings to make a profit.
Less Number of Shareholders
Unlike a public corporation, which takes seven stakeholders, a private limited company can begin operations with only two owners.
Ownership
Because investors, founders and executives control the shares of a company, they have the freedom to transfer and sell their shares to anyone else.
Uninterrupted Existence
As previously stated, the corporation remains a legal construct until it is lawfully closed down and continues to operate even after the demise or resignation of any of its members.
Conclusion
With the help of a practising expert, you can complete the registration of a Pvt Ltd company in India quickly. Furthermore, after forming a digital limited liability company, the founders and directors must preserve the corporation's operational existence by complying with the firm's regulations and completing yearly reports and paperwork as mandated by the Indian Companies Act, 2013.
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