How to Start a Private Limited Comapny in India

OVERVIEW
Are you planning to be an entrepreneur but don’t know the business structure which is to be established for conducting your business? Starting your own venture is exciting and full of adventures but at the same time very confusing to the sense that people hardly have knowledge about what kind of business entity is to be set-up?

What are the ins and outs of such business entity?

In this write up we will study in detail about the Private Limited Company Registration and all the compliances related there to.

PRIVATE LIMITED COMPANY REGISTRATION

In general sense, Private Limited Company Registration refers to registration of such a company which is mostly closely held.
According to Companies Act, 2013, Private Limited company is defined under Section 2 (68) according to which Private Limited Company means:

A company having a minimum paid-up share capital as may be prescribed, and which by its articles, —

(i) Restricts the right to transfer its shares;
(ii) Except in case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

Provided further that—

(A) Persons who are in the employment of the company; and
(B) Persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased,
shall not be included in the number of members; and
(iii) Prohibits any invitation to the public to subscribe for any securities of the company.

PRIVATE LIMITED COMPANY TYPES OR ITS CATAGORIES FOR REGISTRATION

In India there are mainly two types of Private Limited Company Registrations which are as follows:

• Private Company Limited by shares- In this type of private limited company, liability of its members is limited to the extent of unpaid amount on the share capital of the company which is held by its members.
• Private Company Limited by guarantee- These types of companies can be further divided into two categories:-

 Private Company Limited by guarantee having share capital- In this type of company the liability of its members is limited to the extent of guarantee undertaken by the members, but they are also liable for the unpaid amount on the share capital held by them.

 Private Company Limited by guarantee not having share capital- In this type of company liability of its members is limited to the extent of guarantee undertaken by them only.

BENEFITS OF PRIVATE LIMITED COMPANY REGISTRATION IN INDIA:

As compared to other business entities including Public Limited Companies, Private Limited Company has the following benefits or advantages:

1. Limited risk: the liability of its members is limited to the extent of either the share capital held by them or guarantee amount undertaken by them as the case may be.
2. Separate legal entity: Company registration including the Private Limited Company Registration provides a separate legal entity to the business, this feature is not available in case of sole proprietorship or Partnership firm registration.
3. Business continuity: Due to its feature of separate legal entity and perpetual succession private limited company has the ever-ending continuity regardless of the death or incapacity of its members or directors, unless and until it has been legally dissolved or wound up.
4. Modes of raising funds: Company Registration including the Private Limited Company Registration provides a variety of modes of raising funds such issuance of shares, debentures, acceptance of deposits, commercial papers, share warrants. Also, it is to be noted that private limited company registration is the most considered form of business entity when it comes to loans to be obtained from the banks or financial institution.
5. Tax advantages: Company form of business has various advantages but the most important advantage are the tax benefits which are available to company form of business entities.
6. Beneficial for small business entities: Private Limited Company Registration is the most preferred form of business entity when it comes to small start-ups, which has small funds requirements. As it is closely held company, ownership and management is not widely scattered.

PROCESS OF PRIVATE LIMITED COMPANY REGISTRATION IN INDIA:
The step wise procedure for Registration of Private Limited Company is as follows:

Step-1: Searching the proposed name of the company/ checking company’s name availability

The first step in registration of private limited company is checking the name availability of the proposed company. For this you can visit the MCA portal i.e.

https://www.mca.gov.in/mcafoportal/showCheckCompanyName.do and public search of trademark portal i.e.

https://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx.

Step-2: Filing name reservation application to CRC, a wing of Ministry of corporate affairs (Ministry of Corporate Affairs)

Once it has been made sure that the proposed name of the company is available, application can be made for reservation of such name. Application can be made by two ways either by filing SPICe Plus Part- A separately or in integrated incorporation form SPICe Plus.

Step-3: Obtaining Name Approval Letter

On receipt of application CRC will review the application and accordingly approve the application or calls for re-submission. On approval of application, CRC will issue name approval letter on the registered mail id of applicant and name of the company stands reserved for 20 days. In those 20 days, application for incorporation of the company is to be filed to Registrar of companies.

If applicant intends to increase the reservation period he may do so by filing application for extension of reservation period. Such application can be made two times for maximum 60 days subject to payment of additional fees.

**Step-4: **Obtaining DSCs of promoters

The next step is to obtain the Digital Signature Certificates (DSCs) of all subscribers cum directors of the company which are commonly known as the promoters of the company because all forms at MCA will be filed digitally.

Step-5: Application for incorporation of the company

The next step is to file application for incorporation of the company in form SPICe plus Part-B along with AGILE-PRO-S and form INC-9. It is to be noted that along with the incorporation application e-MOA and e-AOA are to be attached in form SPICe- MOA and SPICe- AOA.

Step-6: Application for Director Identification Number (DIN)

Application of DIN up to 3 directors can be made in integrated form SPICe plus itself. For more than 3 directors after Incorporation Company can make an application for the applicant Director in form DIR-3 along with prescribed fees.

Step-7: payment of stamp duty and other government fees

After uploading form SPICe Plus for incorporation, payment of stamp duty is to be made along with other government fees. It is to be noted that stamp duty is to be paid according to the authorised share capital of the company and the state in which registered office of the company is situated.

Step-8: Obtaining Certificate of incorporation along with PAN, TAN, ESIC etc of the company

Once application for incorporation of the company is approved by the Registrar of companies it will issue certificate of incorporation under his hand along with PAN, TAN, ESIC registration number, Professional tax registration number if any, GSTIN if any, for the company for which application is made in form AGILE-PRO-S.

Hope you liked this write up, if you still have any queries regarding private limited company registration in India, then you can connect to our team of experts at [e-mail] or 9988424211.