Introduction
What is a Private Limited Company?
A Private Limited Company is a widely recognized business structure form, especially appealing to small to medium-sized businesses. This type of company is characterized by having its own legal identity, separate from its owners and managers, which allows for a clear distinction between personal and business assets and liabilities. In essence, it offers the benefit of limited liability to its shareholders, meaning that their assets are protected in the event of the company’s financial failure, with their liability limited to the amount they’ve invested.
In terms of ownership, a Private Limited Company by shares is typically owned by a group of private individuals who share the capital and profits. The shares of a Private Limited Company cannot be publicly traded, which contrasts with public limited companies whose shares can be bought and sold on the stock market by the general public. This ensures privacy and control over who becomes a shareholder, making it a preferred choice for many business owners who wish to keep their company’s affairs relatively private.
Benefits
What are the Benefits of a Private Limited Company?
Limited Liability Protection
Shareholders of a private limited company in India enjoy limited liability. This means that the shareholder’s personal assets are not at risk in case of any financial losses or legal issues.
Perpetual Succession
The existence of a private limited company does not depend on the life of its shareholders or directors. It enjoys perpetual succession, meaning the company continues to exist even if the ownership or management changes.
Tax Advantages
Private limited companies in India may enjoy various tax advantages, such as lower corporate tax rates than other business structures. They also have the opportunity to take advantage of certain exemptions and deductions that can reduce their tax liability.
Management and Decision-making
Being a private limited company allows for a clear division between the owners and management, leading to more professional and focused decision-making. Shareholders can appoint directors to manage the operations while they concentrate on strategic direction.
Separate Legal Entity
A private limited company is recognized as a separate legal entity. This allows the company to own property, incur debts, enter into contracts, and sue or be sued in its own name, independent of its owners.
Raising Capital
Private limited companies can more easily raise capital by selling shares to investors than sole proprietorships or partnerships. This flexibility helps in financing projects and expansion activities.
Credibility and Trust
Registering as a private limited company enhances the credibility and trustworthiness of the business. Banks, suppliers, and potential clients often perceive private limited companies as more stable and reliable than unregistered businesses.
Ownership and Share Transferability
Shares of a private limited company can be easily transferred among existing shareholders or to new investors. This provides a clear mechanism for bringing in new investors or allowing existing shareholders to exit without disrupting the business operations.
Checklists
Required Documents For Private Limited Company
Aadhar Card
Pan Card
Digital Signature
Bank Account Details
Address Proof
Other KYC Documents of Directors
Time Frame
Time For Incorporate Private Limited Company
Documentation
On the first day, the promoters will gather to complete essential documentation required for the directors and shareholders.
Digital Signature
Once documentation is complete, the next step is obtaining a digital signature certificate (DSC). This process can be completed online within hours, with video verification subject to promoter availability.
Name Reservation Name (RUN)
The company must have a unique name, which needs to be reserved with the Registrar of Companies (ROC). This process can take 2-3 days. Company name registration is usually completed by day four.
Filing of Spice & Others
Once all required documents are prepared, the certificate of incorporation application is submitted to the Registrar of Companies (ROC) through the Spice Plus form. This comprehensive form includes sections like Agile Pro, e-MOA, e-AOA, and INC-9. Typically, the ROC processes this application within 2-3 days, enabling the completion of the incorporation process in under seven days.
PROCESS
Process of Incorporate Private Limited Company
Obtaining Digital Signature & DIN
The initial step in registering a private limited company involves creating digital signatures for the directors/shareholders. Additionally, up to three new directors are assigned a Director Identification Number (DIN) during the incorporation phase.
Selecting unique Name
Select a unique and new name for your company, ensuring it adheres to name availability guidelines and does not overlap with the names of existing companies, LLPs, or registered trademarks.
Draft MOA, AOA & Others
Prepare the Memorandum of Association (MOA) and the Articles of Association (AOA) to outline legal and internal guidelines and create several declarations by the Companies Act. Accounting Guru is ready to offer assistance.
Submission of Spice+ Form
To complete the process, submit the SPICe Plus Form to the Registrar of Companies, including the Digital Signature Certificates (DSC) of the directors & shareholders, the promoter’s documents, and evidence of the registered address intended for company incorporation.
Get In Touch