Starting your very own business is the realisation of a dream for many business people in and around India. There are a multitude of different structures that you could use to set up your business and a Private Limited Company (Pvt Ltd Company) is one of the most common structures for starting and growing business. There are numerous advantages to registering a Pvt Ltd company including limited liability protection, a degree of credibility, and avenues for raising funds. For many people it can be a great option.
What is a Private Limited Company?
Private limited companies must have at least 2 members and no more than 200 members. The company cannot sell its shares publicly and cannot issue securities to any company or resident outside of India.
Private Limited Company Benefits Every Entrepreneur Should Know
Before going into particulars, it’s worth noting the benefits of this structure:
Limited Liability: If the company makes a loss or incurs debt, the personal assets of shareholders are safe.
Separate Legal Entity: A company is a separate legal identity, independent of its owners.
Perpetual Existence: The company is able to exist even when the owners change.
Credibility: Pvt Ltd is more credible to investors, banks and suppliers when compared to an unregistered company.
Easier to raise fund: It is easier to raise fund from angel investors and venture capitalists.
Step by Step Process to Register a Private Limited Company
Since the Ministry of Corporate Affairs (MCA) is providing online services, registering a Pvt Ltd Company in India is now much easier. Below is an outline of the process to become a incorporated Comparison Ltd Company:
Apply for Digital Signature Certificate (DSC)
The first step is to apply for Digital Signature Certificates (DSCs) for all the proposed directors and the subscribers of the Memorandum of Association (MoA) and Articles of Association (AoA). A DSC is needed because all forms to be submitted for company registration will be submitted online and will require a digital signature.
How to Apply for DSC:
Go to a Registrar of Certifying Authorities (like eMudhra, Sify, NSDL). Present the set of documents – PAN card, Aadhaar card, and pictures.
Apply for DIN:
A Director Identification Number is needed for everyone wanting to become a company director. A DIN can either be requested when completing the SPICe+ (INC-32) application or separately through DIR-3 form if no DIN exists.
Company Name (Reserve your company name):
You must have a company name reserved and the name needs to comply with Companies Act requirements. You can secure a name reservation using the Reserve Unique Name (RUN) service provided through the MCA, or have those completing the SPICe+ Part A application form apply for a reservation. Whenever you apply for a name, you must take into consideration that the name does not interfere with previously existing company name or trademark.
Pro Tip: It is a good idea to have prepared two alternate names if your chosen name is rejected.
Compile the Required Documentation
Documents you will need to prepare and order include:
Memorandum of Association (MoA)
Articles of Association (AoA)
Directors and Subscribers Declaration (Form INC-9)
Proof of registered office address (latest Not-Utillity Bill, NOC from owner)
Identity and address proof of all directors and owners
PAN and Aadhaar cards
Passport size photographs
File the SPICe+ Form (INC-32)
The SPICe+ form is a unified web form which enables the following:
Name reservation
Incorporation
DIN allotment
PAN and TAN Application
EPFO & ESIC registration
GSTIN (Applicable)
Fill in all details accurately and upload the supporting documents. Once completed, submit the form with the prescribed fee on the MCA portal.
Payment of Stamp Duty and Fees
The stamp duty (payable as applicable per state) will depend on your company’s authorized capital. Your registration fee will also depend on your company’s capital structure.
Certificate of Incorporation (COI)
The Registrar of Companies (ROC) will authenticate your application, once approved they will email you your Certificate of Incorporation. Your COI states your firm is legally incorporated, it will also contain your Corporate Identification Number (CIN).
Apply for PAN, TAN & Company Current Bank Account
Once your company is incorporated, your company will also get a PAN and TAN automatically from the Income Tax Department. The next step after this will be to open a current bank account for your company. The current bank account documents would be the COI, MoA, AoA, PAN, and KYC documents.
Cost of Incorporating a Private Limited Company
The cost of incorporating a Private Limited Company can vary based on the amount of professional fee you pay and your authorized capital. Government fees are generally around ₹7,000–₹10,000 and depending upon the professional (CA, CS, or legal consultant) the professional fee for registering your Private Limited Company would cost around ₹15,000–₹30,000 for the entire process of that Professional.
Important Points to Note
There needs to be a minimum of 2 directors & a minimum of 2 shareholders.
At least one director must be an Indian resident.
You will have to provide a registered office address within 30 days of incorporation.
Your company will need to keep up with annual compliance and filings for it to remain operational.
Conclusion
Registering a Private Limited Company in India now is much faster and easier thanks to the civil service experiencing a digital transformation, but we still encourage you to get professional advice to avoid mistakes and ensure that you are compliant! If you have a Pvt Ltd Company registered correctly you will be able to add credibility to your company, safeguard your assets and set yourself up for future expansion.
Whether you are a founder who is just starting on your first startup, or a freelancer, or even a small business owner, this structure will help you scale you legitimate dreams!