Private Limited Company Incorporation
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How to Register a Private Limited Company in India?
Registering a private limited company in India is a crucial step towards establishing a legally recognized business entity. It provides various benefits and ensures compliance with the Companies Act, 2013. This article serves as a comprehensive guide, outlining the process and requirements for company registration in India.
Online Company Registration in India
The Company Registration process is through online mode in India and it is done through the V-3 Portal of Ministry of Corporate Affairs (MCA) which gives ease in the formation and registration of company.
What is a Private Limited Company?
A private limited company is a popular form of business organization characterized by limited liability and restrictions on share transfers. It is commonly chosen by entrepreneurs and SMEs due to its legal structure and benefits.
List of Documents Required for Company Registration.
Gathering the necessary documents is an essential part of the registration process. These include:
- Identity and address proof of directors with passport-sized photographs.
- Identity and address proof of subscribers.
- Sale deed of office premises (if owned) or rental agreement (if rented), along with a No Objection Certificate (NOC) from the owner.
- Utility bill (electricity/gas/mobile bill) for the office premises, not older than two months.
- Signature of the authorized signatory on a plain page.
Gathering the necessary documents is an essential part of the registration process. These include:
- Identity and address proof of directors with passport-sized photographs.
- Identity and address proof of subscribers.
- Sale deed of office premises (if owned) or rental agreement (if rented), along with a No Objection Certificate (NOC) from the owner.
- Utility bill (electricity/gas/mobile bill) for the office premises, not older than two months.
- Signature of the authorized signatory on a plain page.
Whether Capital Required to Start a Company?
While there is no minimum capital requirement according to the Companies Act, 2013, starting a company does require some capital. The investment amount depends on various factors such as the nature of the business, industry, location, and scale of operations.
Face Value of Shares:
The face value, also known as the nominal value or par value, represents the initial value assigned to each share issued by a company. It establishes the minimum price at which shares can be issued or sold. The company determines the face value and specifies it in the Memorandum of Association (MOA) and Articles of Association (AOA).
Minimum Authorized Capital:
The authorized share capital refers to the maximum amount of share capital a company can issue to its shareholders. There is no minimum authorized capital requirement for registering a private limited company.
Minimum Paid-up Capital:
The Companies Act, 2013 does not specify a minimum paid-up capital requirement for private limited companies. The previous requirement of INR 1,00,000 has been abolished.
Company Registration Process:
The process of company registration involves several steps to legally incorporate the business entity. Here is a step-by-step breakdown:
Step 1: Reservation of Unique Name (RUN Name Approval):
Select two preferred names for the company and apply for name reservation through the Ministry of Corporate Affairs (MCA) portal. This can be done online after creating login credentials with the MCA portal. Make sure that the proposed name is not already registered and does not infringes upon existing trademarks or violate any legal restrictions.
If the proposed name meets the requirements and is available, it will be approved, and you will receive a Name Approval Letter or Certificate. This confirms that the desired name is reserved for your company for a specific period, usually ranging from 20 to 60 days, depending on the jurisdiction.
Step 2: Obtaining Digital Signatures for Directors and Shareholders:
Obtain a Class -II or above category signing Digital Signature Certificates (DSC) for all directors and shareholders from Certifying Authorities and register the same with the V-3 portal of MCA.
How to Register DSC with V-3 portal?
- Register as Business user ID (if not registered already) by visiting on MCA V3 portal and clicking on Register tab.
- After registering, Login to MCA V3 Portal using the credentials mentioned while registering as Business user.
- Click on the service of “Associate DSC” available on MCA portal under the MCA Services > FO LLP Service > Associate DSC.
- Click on Associate DSC tab and a pop up will appear, select the DSC token in first field. The name will be auto-fill in the second field ‘Certificate Details’
- Please enter the PIN of the DSC Token in the third field ‘Password
- After entering all the details, click on ‘Register’ for successfully registering the DSC.
Step 3: Incorporation Application Submission (Spice+ Form):
Prepare and submit the Spice+ forms, including Spice Part-B, MOA, AOA, Agile form, and INC-9, along with necessary attachments. The MCA will verify the submitted documents, and upon approval, issue the Certificate of Incorporation (COI) as proof of company registration.
Common MCA Errors in V-3 Portal:
Non-Receipt of Certificate of Incorporation: This error occurs when the applicant does not receive the Certificate of Incorporation after the company’s registration process is completed even when the form’s status is changed to “Approved”.
Improper Corporate Identification Number: The other common issue being faced is that the Certificate of Incorporation is being issued but the Corporate Identification Number (CIN) is not proper due to non-tagging of the activity code or registration code with CIN.
Non- Updation of the Master Data: The Master data is not being updated properly after the incorporation of the company. The common mistakes include missing signatory details or email id of the company.
To address the above errors you can reach out to the MCA helpdesk at 0120-4832500 or you can write at appl.helpdesk@mca.gov.in for assistance. They can provide guidance on the next steps to resolve the issue and may be able to resend the certificate if necessary.
Compliances required by a Private Limited Company
When operating a private limited company in India, it is essential to comply with various legal and regulatory requirements. These compliance obligations ensure that the company functions within the framework of the Companies Act, 2013, and maintains transparency and accountability. Here are some key compliance requirements for a private limited company:
Appointment of Auditor (ADT-1 Form): The first auditor of the company should be appointed within 30 days of its incorporation. Form ADT-1 must be filed with the Registrar of Companies (ROC) to inform them about the appointment.
Director DIN KYC (DIR-3 KYC Form): Directors’ KYC (Know Your Customer) details should be updated annually by filing DIR-3 KYC form before September 30th. This ensures that the directors’ information is accurate and up to date.
Commencement of Business (INC-20A Form): Within 180 days from the date of incorporation, Form INC-20A should be filed to declare that the company has received the subscription amount mentioned in the Memorandum of Association (MOA).
MCA Annual Filings: Income Tax Filing (ITR 6 form filing): Companies are required to file various forms and returns with the Ministry of Corporate Affairs (MCA) on an annual basis. Form AOC-4 is used for filing financial statements, and Form MGT-7 is used for filing the annual return. These forms should be filed within 30 and 60 days from the date of the Annual General Meeting (AGM), respectively. Additionally, the company needs to file ITR-6 for income tax return purposes.
Registered Office of Company (Registered Address)
The registered office address of the company should be reported to the ROC within 30 days of incorporation using Form INC-22.
GST Registration after Company Registration – Process
GST registration can be done online through the official GST portal provided by the tax authorities. Register as a new user on the portal and complete the GST registration application form. Provide accurate details and upload the required documents as per the portal’s guidelines.
The tax authorities will review your application and documents. They may conduct verification checks and may seek additional information or clarification if required. Once the application is approved, you will receive a GST registration certificate.
Advantages of a Private Limited Company:
Separate Legal Entity: A private limited company is treated as a distinct legal entity separate from its owners or shareholders. It has its own rights, obligations, and liabilities.
Limited Liability: The liability of the owners or shareholders is limited to the extent of their shareholding. Personal assets are generally protected, and the shareholders are not personally liable for the company’s debts or obligations.
Uninterrupted Existence: A private limited company can continue to exist and operate even if there are changes in ownership or management. The entity’s existence is not dependent on the life or involvement of its individual owners or shareholders.
Fundraising: Although private limited companies cannot raise funds from the general public, they can raise capital through private placements from angel investors or strategic investors.
Disadvantages of a Private Limited Company:
Compliance Requirements: Private limited companies have certain reporting and disclosure obligations that require maintaining proper accounting records, filing annual financial statements, and complying with tax and regulatory requirements. These obligations can involve time, effort, and expenses.
Proprietorship vs Limited Liability
Proprietorship and limited liability are two different forms of business ownership with distinct characteristics:
Ownership: A proprietorship is owned and operated by a single individual, known as the proprietor, who has full control and decision-making authority. On the other hand, a limited liability company (LLC) is owned by multiple individuals or entities, allowing for shared ownership and decision-making.
Liability: In a proprietorship, the proprietor has unlimited personal liability for the business’s debts and legal liabilities. In an LLC, the members or partners have limited personal liability, and their personal assets are generally protected.
Legal Entity: A proprietorship is not considered a separate legal entity, while an LLC is a distinct legal entity from its members or partners, with its own legal rights, obligations, and liabilities.
Public Limited Company vs Private Limited Company
Public Limited Company and Private Limited Company are two distinct forms of business entities, each with its own characteristics and requirements. Here’s a comparison between the two:
Ownership: A public limited company is owned by shareholders who can be the general public. The shares of a public limited company can be traded on a stock exchange. While, a private limited company is owned by a small group of shareholders, often family members, friends, or closely related individuals. The shares of a private limited company cannot be freely traded or transferred.
Minimum Shareholders: A public limited company requires a minimum of seven shareholders. While, a minimum of two shareholders are required to form a Private Limited Company.
Minimum Directors: A minimum of three directors are required in public limited company while only two directors for registering a private limited company
Public Offerings: A public limited company can issue shares to the public and raise capital through public offerings but on the other hand, a private limited company is prohibited from inviting the public to subscribe to its shares or debentures. It cannot raise capital through public offerings.
Transfer of Shares: The shares of a Public Limited Company can be freely traded or transferred but transfer of shares in Private Limited Company usually requires the approval of existing shareholders or may be subject to specific clauses mentioned in the Articles of Association.
FAQs
The following steps are involved in Incorporating a private company:
- Choose a name for your company and apply for RUN (Reserve Unique Name) with the the Ministry of Corporate Affairs.
- Once the name gets approved, file the requisite forms like Spice+, MOA, AOA, INC-9 and Agile Pro and pay the applicable government fees.
- If the MCA finds the documents to be appropriate, the Company incorporation will be granted within 5-7 working days
- Applicant will receive the Certificate of Incorporation, PAN, TAN and other details of the Company on the registered email.
The cost of Incorporation of a private limited company in India can vary depending on several factors including the authorized capital, state of registered office address, government fees, and other incidental expenses. Incorporating a company with a 10 Lakh as the authorized capital should have a cost of upto Rs. 6,000 for government fees except for the state of Punjab, Kerala and Madhya Pradesh where Stamp duty charges on authorised capital are higher.
The term “private limited” is often used interchangeably with “incorporated” when referring to a specific type of business entity. In this context, “private limited” and “incorporated” essentially mean the same thing.
A private limited company is a legally recognized business structure where the liability of its shareholders is limited to their unpaid share capital. It is considered a separate legal entity from its owners. The term “private” indicates that the shares of the company are privately held, and there are restrictions on the transferability of shares.
On the other hand, “incorporated” refers to the process of legally forming a company by registering it with the relevant government authority, such as the Registrar of Companies. During the incorporation process, the necessary documents, including the Memorandum of Association and Articles of Association, are filed, and the company becomes a distinct legal entity.
Therefore, when someone says a company is “private limited” or “incorporated,” they are typically referring to the same type of business entity—a private limited company that has gone through the process of incorporation and has the characteristics of limited liability and separate legal existence.
“Pvt Ltd” and “Private Limited Company” are essentially the same and are both used to denote the legal structure of a private limited company. The term “Pvt Ltd” is an abbreviation of “Private Limited Company” and it is commonly used in India to indicate that a company is privately held and has the characteristics of limited liability.
Therefore, there is no difference between “Pvt Ltd” and “Private Limited Company” in the context of a company’s legal structure.
Registering a Private Limited Company is same as Incorporating a private company, which involves the same procedure:
- Choose a name for your company and apply for RUN (Reserve Unique Name) with the the Ministry of Corporate Affairs.
- Once the name gets approved, file the requisite forms like Spice+, MOA, AOA, INC-9 and Agile Pro and pay the applicable government fees.
- If the MCA finds the documents to be appropriate, the Company incorporation will be granted within 5-7 working days
- Applicant will receive the Certificate of Incorporation, PAN, TAN and other details of the Company on the registered email.
No, a single person cannot incorporate a private limited company because as per the requirement of Section 149 (1)(a) of the Companies Act, 2013, minimum two persons are required to incorporate a private limited company. However, a single person can incorporate an OPC (One Person Company).
There is no minimum requirement of turnover for a private limited company. The Companies Act, 2013, which governs the formation and operation of companies in India, does not specify any minimum turnover criteria for private limited companies.
- Private limited companies in India are governed by the Companies Act, 2013, and the rules and regulations prescribed by the Ministry of Corporate Affairs (MCA). Here are some key rules applicable to private limited companies:
- Minimum and Maximum Members: A private limited company must have a minimum of two members and a maximum of 200 members, excluding certain categories of employees and ex-employees.
- Directors: A private limited company must have a minimum of two directors, and at least one of them must be a resident of India. Directors are responsible for managing the company’s affairs and making decisions on behalf of the company.
- Share Capital: A private limited company can be incorporated with any amount of authorized and paid-up capital. The capital is divided into shares, and shareholders’ liability is limited to the unpaid amount on their shares.
- Name and Registration: The company’s name must be unique and should end with the words “Private Limited” or “Pvt. Ltd.”
- Articles of Association (AoA) and Memorandum of Association (MoA): These are important constitutional documents that outline the company’s objectives, rules, and regulations. The AoA and MoA must be filed with the ROC during the registration process.
- Statutory Compliance: Private limited companies are required to comply with various statutory obligations, such as maintaining proper books of accounts, conducting annual general meetings, filing annual financial statements, and tax returns with the ROC and Income Tax Department.
- Shareholders and Share Transfers: Private limited companies can issue shares to its members, and share transfers are generally restricted as per the company’s AoA. Shares of a private limited company cannot be freely traded on a stock exchange.
- Board Meetings and Resolutions: Private limited companies must hold regular board meetings, and important decisions are made through resolutions passed by the board of directors or shareholders.
- Audit and Financial Statements: Private limited companies are required to prepare and file audited financial statements, including the balance sheet, profit and loss account, and cash flow statement, with the ROC.
These are some general rules applicable to private limited companies in India.
- Private limited companies are incorporated for several reasons including
- limited liability,
- separate legal entity,
- perpetual existence,
- ease of operations etc.
These reasons, among others, make private limited companies an attractive choice for entrepreneurs and businesses looking to establish a separate legal entity with limited liability and growth potential.
The minimum number of directors required to incorporate a private company is 2 (two) and a company can have a maximum of 15 directors. A company can appoint more than 15 directors also subject to passing of special resolution.
The Three basic types of incorporated companies are:
Private limited companies: A Private Limited Company is the most common type of incorporated company in India. It is governed by the Companies Act, 2013, and requires a minimum of two shareholders and two directors. The liability of shareholders is limited to their shareholding in the company. A private limited company is prohibited from inviting the public to subscribe to its shares or debentures, and it cannot freely transfer its shares. It is often suitable for small to medium-sized businesses.
Public limited companies: A Public Limited Company is a company that is allowed to offer its shares to the public. It requires a minimum of seven shareholders and three directors.
One Person Company (OPC): The concept of One Person Company was introduced in the Companies Act, 2013 to provide a structure for single entrepreneurs to operate as a company. An OPC can have only one shareholder and one director, who can be the same person. The liability of the shareholder is limited to the extent of their shareholding. OPCs provide limited liability protection and separate legal entity status to the sole proprietor.
- Yes, you can register a Private Limited Company (Pvt Ltd) yourself in India. The process of registering a company has been simplified and made more accessible through the Ministry of Corporate Affairs’ online portal called “MCA21.”
However, forms for registering a company require CA/CS Certification and it is important to note that the registration process may require careful attention to legal and regulatory requirements. Therefore, it is advisable to seek professional assistance or consult with a company secretary or chartered accountant to ensure compliance with all the necessary procedures and legal obligations.
The minimum capital requirement for a Private Limited Company (Pvt Ltd) in India was removed in 2015. As per the Companies Act, 2013, there is no specific minimum capital requirement for registering a Pvt Ltd company. You can start a Pvt Ltd company with any amount of capital that suits your business needs.
Previously, the Companies Act, 1956, had a minimum authorized share capital requirement of INR 1 lakh for a Pvt Ltd company. However, this requirement was removed to promote ease of doing business and facilitate the registration of small and medium-sized enterprises.
Now, when registering a Pvt Ltd company, you are free to decide the authorized share capital based on your business requirements.
No, a private Limited company cannot have only one director because as per the requirement of Companies Act, 2013 there should be at least two directors in a Private Limited company.
Yes, as per Companies Act, 2013, a Private Company should have at least 2 directors.
Yes, a private limited company can have 3 directors. The minimum number of directors should be 2 and a company can have a maximum of 15 directors. A company can appoint more than 15 directors also subject to passing of special resolution.
The main types of company registrations in India are private limited companies, public limited companies, and one-person companies (OPCs). Each type has its own requirements and characteristics as discussed below.
Private limited companies: A Private Limited Company is the most common type of incorporated company in India. It is governed by the Companies Act, 2013, and requires a minimum of two shareholders and two directors. The liability of shareholders is limited to their shareholding in the company. A private limited company is prohibited from inviting the public to subscribe to its shares or debentures, and it cannot freely transfer its shares. It is often suitable for small to medium-sized businesses.
Public limited companies: A Public Limited Company is a company that is allowed to offer its shares to the public. It requires a minimum of seven shareholders and three directors.
One Person Company (OPC): The concept of One Person Company was introduced in the Companies Act, 2013 to provide a structure for single entrepreneurs to operate as a company. An OPC can have only one shareholder and one director, who can be the same person. The liability of the shareholder is limited to the extent of their shareholding. OPCs provide limited liability protection and separate legal entity status to the sole proprietor.
Yes, Non-Resident Indians (NRIs), foreign nationals, and foreign entities can register a company in India. However, at least one director should be a resident of India.
You can check the availability of a company name by using the “Check Company Name” option under the MCA services tab.
Yes, GST (Goods and Services Tax) registration is mandatory for a private limited company in India if its annual turnover exceeds the prescribed threshold.
Compliance requirements for a private limited company include filing forms like INC-22, INC-20A, ADT-1, ITR-6, DIR-3KYC, AOC-4, and MGT-7A. These forms cover aspects such as the registered office address verification, commencement of business, appointment of auditors, income tax return filing, director verification, financial statements, and annual returns.
The first statutory auditor of the company should be appointed within 30 days of its incorporation, and Form ADT-1 should be filed with the Registrar of Companies (ROC) to inform them about the appointment.
ITR-6 form should be filed for the income tax return of a Private Limited Company.
MGT-7 form should be filed within 60 days of the Annual General Meeting (AGM) for the annual returns of a company.
A minimum of two shareholders is required to start a Private Limited Company.
In a Private Limited Company, there are restrictions on the transfer of ownership. However, shares can be transferred to legal heirs or relatives if permitted by the company’s Articles of Association by executing a share transfer deed (SH-4).
Companies are subject to income tax under the Income Tax Act, 1961. The tax rates for companies vary based on their income and other factors defined by the tax laws.
The functioning of a Private Limited Company is governed and controlled by the Registrar of Companies (ROC), which regulates the activities of the company.
Registering a Private Limited Company provides benefits such as limited liability protection for shareholders, a separate legal entity status, perpetual existence, ease of operations, and more.
Authorized capital refers to the maximum amount of share capital that a company is authorized to issue to its shareholders. Paid-up capital is a portion of the authorized capital that has been subscribed and paid by the shareholders.
Limited liability protection means that the owners or shareholders of the company are not personally liable for the debts, obligations, or legal liabilities of the company. Their liability is limited to the amount they have invested in the company or their shareholding.
To open a current account for the company, you need to visit the nearest bank along with necessary documents such as the Memorandum of Association (MOA), Articles of Association (AOA), Certificate of Incorporation, identity and address proofs of directors, and a board resolution authorizing directors to open a bank account.