Private Limited Company

Table of Contents:

  1. Private Limited Company Definition

  2. Private Limited Company Characteristics

  3. Requirements for Establishing a Private Limited Company

  4. Advantages of Private Limited Companies

  5. Disadvantages of Private Limited Companies

  6. List of Documents Needed for Private Limited Company Registration

  7. Steps for Registering a Private Limited Company

  8. Frequently Asked Questions

Private Limited Company Definition: A private limited company is a business entity owned by private stakeholders. In this structure, the liability of shareholders is limited to the extent of their shareholding.

Private Limited Company Characteristics:

  • Membership: A minimum of two shareholders and two directors is required to establish a private limited company, with a maximum limit of 200 members.

  • Limited Liability: Shareholders have limited liability, protecting their personal assets in case of company losses.

  • Separate Legal Entity: The company exists as a separate legal entity, with perpetual succession.

  • Minimum Paid-Up Capital: A minimum paid-up capital of Rs. 1 lakh is necessary.

  • Name Selection: The company's name must adhere to specific guidelines, including indicating the main name, intended activity, and the inclusion of "Private Limited Company" at the end.

Requirements for Establishing a Private Limited Company:

  1. Members and Directors: At least two members and two directors are needed. One director must be a resident of India.

  2. Company Name: The company must choose a unique name and submit several name options for approval.

  3. Registered Office Address: The registered office address must be declared.

  4. Digital Signature Certificate: Obtain a digital signature certificate for electronic document submission.

Advantages of Private Limited Companies:

  • Limited Liability: Shareholders are not personally liable for the company's debts.

  • Fewer Shareholders: Only two shareholders are required to establish a private limited company.

  • Ownership Transfer: Shares can be easily transferred and sold.

  • Continuity: The company continues to exist even after changes in ownership or the death of shareholders.

Disadvantages of Private Limited Companies:

  • Complex Closure: Closing a private limited company involves complex and time-consuming compliance procedures.

List of Documents Needed for Private Limited Company Registration:

  • ID proof (PAN card for Indian directors, passport for foreign directors)

  • Address proofs (e.g., ration card, Aadhar card, driver's license, voter ID)

  • Residence proofs (bank statements, electricity bills)

  • Notarized rental agreement

  • NOC from the property owner

  • Copy of sale deed or property deed (if owned)

Steps for Registering a Private Limited Company:

  1. Apply for a Digital Signature Certificate (DSC).

  2. Apply for Director Identification Number (DIN).

  3. Check name availability and submit name choices to the Registrar of Company (ROC).

  4. File the eMoA (e-Memorandum of Association) and eAoA (e-Articles of Association) to register the private limited company.

  5. Apply for PAN and TAN for the company.

  6. Receive the Certificate of Incorporation from ROC with PAN and TAN.

  7. Open a current bank account in the company's name.

Frequently Asked Questions:

  1. What are the disadvantages of a private company?

    • Restrictions on share transferability

    • Inability to quote on the stock exchange

    • Limit on the number of shareholders

    • Complex compliance processes

  2. Is a private company better than a public company?

    • Private companies offer advantages like flexibility, confidentiality, and control over shares and financial data.

  3. How many people can form a private company?

    • A minimum of 2 directors and 2 members is required, with a maximum of 200 members.

  4. How much does it cost to form a private limited company?

    • The cost typically ranges from INR 6,000 to INR 30,000, depending on various factors.

  5. What is compulsory for a private limited company?

    • Holding an annual general meeting within six months from the end of the financial year is mandatory.

  6. What are the rules for a Private Limited Company?

    • It must have at least 2 directors and 2 members, hold annual general meetings, and cannot exceed 200 members.