The Private Limited Company is a separate legal entity held by a group of people. It is registered with the Ministry of Corporate Affairs (MCA) in India. Benefits of registering the company include independent existence, ease in raising the funds for company growth, and limited liability of owners. Keeping the above in mind, new-edge entrepreneurs prefer a Private Limited Company structure. Normally it takes around 10-12 working days to register a company. Let’s dig into it in detail:
Types of Private Limited Company
Private Limited Company registration in India has 3 major types:
Company Limited by shares: When shareholders are liable to pay only their share of capital in the company is known as a company limited by shares. It is suitable for all types of businesses such as manufacturing, trading, service providers, and hence it is the most preferred type of Private Limited Company.
Company Limited by Guarantee: When the members are not liable for any amount higher than the amount undertaken as the guarantee is the company limited by guarantee. Further, the members are only called at the time of winding up of the company. It is suitable for clubs, trade associations, and societies that require very minimal capital.
Unlimited Company: The members have unlimited liability, hence, they are liable for the debts that occur during the insolvency and winding up of the company. It is suitable for businesses that do not want limitation on minimum capital required and wants to carry out business easily.
Minimum Requirements for Private Limited Company Registration
Here are the 4 basic requirements to keep in mind:
Minimum 2 directors: As per the Companies Act, 2013, one director must be an Indian resident who has continuously stayed in India at least for 12 months (as recently amended). Another one can be a foreign or Indian resident.
Minimum 2 shareholders: Shareholders can be a person or corporate entity. In the case of a corporate entity, a person is authorized to represent the company as a shareholder.
Registered office address in India: The Registered Office (RO) of the company must be in India. And, the company can choose a commercial or residential property as their RO Address.
Unique business name: Entrepreneurs are very particular about the name of their company. However, they need to make sure that it is unique enough. The name should also have a suffix that talks about the business of the company for example- Mother Dairy Fruit & Vegetable Pvt Ltd. The name itself determines that the company deals with dairy products, fruits, and vegetables.
Registration Process of the company
Under the Companies Act, 2013, the Ministry of Corporate Affairs (MCA) governs the registration of a Private Limited Company. It is concerned with the proper functioning of rules and regulations as per the law. MCA Registration forms fees depend upon two factors i.e, Stamp Duty and Normal Form filing fees. Since Stamp Duty differs according to authorized capital and state in which the company is incorporated, the minimum form fees of Private Limited Company registration start from INR 10000. We at iconnectfinance.com help entrepreneurs to set up Private Limited Company in 4 Steps:
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Step 1: Applying for Digital Signature Certificate (DSC)
The first step is to acquire DSC to submit the electronic documents securely. The requisites include the director’s and shareholders’ names, address proof, copies of pan card, identity proof, and passport size photographs. DSC acquires from Controller of Certification Agencies (CCA). The minimum validity is for 1 year. However, one can extend the validity for 2 years.
Step 2: Applying for Name Reservation (SPICe+Part A)
Form SPICe+Part A reserves the unique name of the new company. Before filing the form, one needs to check on the MCA portal for name availability. This form includes information such as types of company, objects, and the main division of industrial activity. Using this form, 2 names can be submitted for the prospective companies.
It takes a minimum of 2-3 business days to get the approval of SPICe+Part A by MCA. In case of an issue with proposed names, one gets another chance for the new name submission. After approval of SPICe+Part A, SPICe+Part B will be available for filing.
Step3: Filing Details for the Proposed Company (SPICe+Part B)
After the approval of the name, the SPICe+Part B form will be available to file. Below is the information that needs to be filed:
Capital details
Registered office address
Subscribers and Directors details
Selection of state or union territory for Stamp duty calculation
Apply for PAN (Permanent Account Number) and TAN (Tax Account Number)
Attachment of necessary documents in a legible format
Declaration and certificate by practicing professionals like CA, CS, or CMA.
Step 4: Drafting and Filing of Incorporation Form
SPICe+MOA (Memorandum of Association): It outlines a few important clauses for a company such as company name, registered office address, the main objective of the company, liability of the member, share capital, and declaration by subscribers. The document needs to be verified and signed before a professional. Due to digitization, the subscribers and professionals are supposed to affix DSC to submit with MCA for approval.
SPICe+AOA (Articles of Association): It specifies the legal name of the company, official address, equity capital, organization activities, financial and managerial actions, and shareholder’s meeting. It is a subsidiary document for MOA. It defines the roles, duties, and powers of the management to grow the organization. Same as MOA, members and practicing professionals will have to affix their DSC before submitting it to MCA for approval.
Agile Pros: This form specifies GST registration number, credentials for EPFO (Employees Provident Fund Organization) and ESIC (Employee State Insurance Corporation). The form also includes a list of banks to select for opening a current account along with Shop and establishment registration, if applicable. After filing the above forms, auto-generated Form INC-9 needs to be filed. It’s a declaration of subscribers and directors.
Once the above process is completed, the challan is paid with Stamp duty and government fees. If there are no issues, MCA grants the Certificate of Incorporation (COI). This certificate carries Company Identification Number (CIN), PAN & TAN along with the registered address of the Pvt Ltd company. COI is the proof of the company’s existence.
Document Checklist
Here is the list of documents for directors/shareholders to register a company in India:
For Indian Nationals
Self-Attested PAN card copy of all the Directors and members
Passport size photograph
Copy of Aadhar Card
Self- Attested Proof of Identity of Directors and members (Voter ID/Passport/Driving License)
Self – Attested Address proof which should be in the name of the Director or shareholder (Mobile Bill/Telephone Bill/Electricity Bill/Latest Bank Account Statement showing name & address along with the last page of transaction with recent activities)
For Foreign Nationals
In the case of a foreign director/shareholder, all the documents should be notarized and apostilled.
Passport size photograph
Foreign national subscribers need to provide a passport as nationality proof
Address proof including, Driving License/Bank Statement/utility bill not older than 2 months
Documents for Registered Office
Business address proof (Electricity Bill/Telephone Bill/Water Bill/Gas Bill) should not be older than 2 months
Copy of Rent Agreement (in case of rented property)
No objection Certificate from the owner of the Property
Advantages of Registering Private Limited Company
Some of the benefits of opening a Private Limited Company in India:
Easy Fund Raising: The company registration process is credible that makes fundraising or borrowing from external sources easy. It itself offers ways to raise funds by private equity, ESOP (Employee stock ownership plan), etc.
Separate Legal existence: After the company registration, owners and managers have a separate identity. The company opens a bank account with its own name to carry the transactions, own assets and enter into a contract with parties. In the case of the defaulter, the company can sue the rights of their parties.
Owner’s Limited Liability: In case of financial distress, the owner of the company is not responsible to bear any loss. Their liability is limited to capital subscribed and paid by them.
Management and Ownership Separation: Management and ownership have separate entities. Hence, managers are responsible to focus on their potential work. The shareholders are responsible to operate and run the company without losing voting control.
Post Registration Compliances
After the incorporation of the company, compliances are one of the areas that need to be done so that entrepreneurs can focus on core activities. Moreover, it helps organizations to make a proper system that defines the roles and duties of directors and shareholders. Professionals and experts at iconnectfinance.com help startups to keep post-registration compliances up-to-date.