Register Your Company With Legal Expert Help
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Private Limited Company can be formed with a minimum of two members and a maximum of 200 members. Private limited must also have minimum of 2 directors which can extend up to 15.
Private Limited Company, the most popular legal structure for businesses, should be chosen by anyone looking to build a scalable business. 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. At MS Legal Associates, we are continuously available to help you understand how to register a private limited company. All such businesses must have at least two directors and shareholders on inception.
Why should you start a Private Limited Company?
Here are some of the advantages of registering your business as a private limited company.
One of the main advantages of starting a private limited company is limited liability. Limited liability means limited exposure to financial risk by investors of a company. Limited liability means the shareholders liability in the company is limited to the capital amount invested in the company.
For example, if Sam invested Rs 100,000 to start a private limited company. Sam's liability is the investment of Rs 100,000. In other words, the potential loss cannot be beyond Rs 100,000. Sam won't be liable for any liability beyond this Rs 100,000.
Private companies enjoy perpetual succession. What does perpetual succession mean? Shareholders may come and go, but the company still continues to be in existence. The company is unaffected by the death of any of its shareholders or the transfer of its shares to another person.
For example, in a partnership firm, a change in the membership leads to dissolution of the existing partnership whereas in a private limited company, one shareholder may transfer his shares to another, but the company still continues to operate.
Financial institutions such as banks and private equity funds lend their resources more willingly to companies that to other forms of business organizations.
Banks are more likely to lend to limited companies because they can use the assets of the company as security for the loan. Private equity firms take stake in the company while investing; this cannot be achieved in a partnership firm.
Transfer and Exits
Limited companies are easier to sell as compared to partnership firms. Ownership is represented by equity or preference shares and these can be easily sold without affecting the activities of the company.
Salaries to directors
There is no maximum limit on the salary being paid to directors; whereas there is a ceiling limit on the salary paid to partners of a partnership firm as per Income Tax Act, 1961.
Some Essential Facts on Company Registration
What if I am a single founder?
A private limited company is an entity with two directors and two shareholders at the minimum. If you are a single shareholder, you can also bring in your mother, father or any other relative to be part of the limited company with just one single share.
Why do startups prefer private limited companies?
Simple. Startups set-up private limited companies so that they can raise venture capital funding and offer their best employees stock options. Without funding and stock options, it's almost impossible to build and scale a large business. Banks and other lenders would also much rather lend to private limited companies, as compared to sole proprietors.
What is the procedure to register one?
Initially, we help you get a digital signature certificate (also known as DSC), which is nothing but an e-signature to help you complete the registration online. It usually takes two days to get the DSC from the time you submit the documents. Next, we apply for the Director Identification Number (also called a DIN). This typically takes one day. The third phase involves selection of a name for your company. Now, do remember that your company name need not be your brand name. For example, Naukri.com has been incorporated as InfoEdge Technologies. Once done, we will prepare the Memorandum and Articles of Association and apply for the Certificate of Incorporation.
How many shareholders can there be in a private limited company?
A private limited company must have at least two directors and shareholders, and can have a maximum of 15 directors and 50 shareholders.
How much do you need to invest?
Good news. You don't need to invest any money upfront. Most entrepreneurs do bring computers and other necessities at the very beginning. These can be the assets of the company. Private limited companies in India do not need to have any paid-up capital (that is, they do not need to introduce any money into the company).
What regulatory requirements are placed on private limited company?
As private limited companies are not traded publicly, regulatory requirements placed on them are fewer than on public companies. For example, they need not disclose their books of accounts. Because of this advantage, they need only worry about the long term rather than face the music from their shareholders in case their results in a particular quarter are poor.
ADVANTAGES OF PRIVATE LIMITED COMPANY
- Preferred by banks, VCs & investors
- Easy to allocate and redistribute shares to investors or other directors
- Separate legal entity which limits your liability
- Offers the flexibility of a partnership firm and the advantages of a Public Ltd Company
- Easy to register, manage & run
- Easy to dissolve or wind-up.
STEPS FOR COMPANY REGISTRATION
1. Application of DSC & DPIN:
First of all, the partners have to apply for Digital signature and DPIN. Digital signature is an online signature used for filing and DPIN refer to Directors PIN number issued by MCA. If the directors already have DSC and DPIN, then this step can be skipped.
2. Name approval:
You need to provide 3 different options for your company name to MCA of which one will be selected. Names provided should ideally be unique and suggestive of company business
3. MOA & AOA submission:
Once name is approved, one needs to draft Memorandum of association and Articles of Associate. Both MOA and AOA are filed with the MCA with the subscription statement and
4. Get incorporation certificate:
It typically takes 15- 25 days to form a Private limited company and get the incorporation certificate. Incorporation certification is a proof that company has been created. It also includes your CIN number.
5. Apply for PAN, TAN and Bank account:
Then you need to apply for PAN and TAN. PAN and TAN are received in 7 working days. Post this, you can submit the Incorporation certificate, MOA, AOA and PAN with a bank to open your bank account.
MINIMUM REQUIREMENTS FOR COMPANY REGISTRATION
- Minimum 2 Shareholders
- Minimum 2 Directors
- Minimum 1 Lac Share Capital
- DPIN for all Directors
- Atleast one Designated partner should be an Indian Resident
Documents Required For Company Registration
- Pan copy is mandatory
- ID Proof - Aadhar Card/Driver's License/Passport/Voter's ID - Any one
- Address Proof - Bank Statement/Telephone/Mobile Bill/Electricity Bill - Any one
[all the above documents needs to be self attested and by Gazetted Officer]
- Passport Size photographs (4 each)
- Address Proof of place of business (Electricity Bill/Tax Paid receipt) and no Objection letter from owner of the premise
- Submission of documents,
- Obtaining certificate.
Mail your requirements to - firstname.lastname@example.org