Private Limited Company
A
private limited company is a best known business format in India which provides the advantages of limited liability and separate legal authority. The registration process and advantages of a private limited company are as follows:-
Advantages of a Private Limited Company
- Limited Liability : It Safeguards shareholders' personal assets and decreases financial risk.
- Separate Legal Entity : The Private limited company is a distinct legal organization from the shareholders and directors.
- Tax Benefits : The Private limited companies are taxed at a lower rate than individuals.
- Credibility : The Private limited company is found to be more credible and profitable than any other form of business structure.
- Access to Funding : The Private limited companies are able to access funds from investors and financial institutions.
Private Limited Company Registration Process:-
The registration procedure of a private limited company consists of the following:
1. Obtain Digital Signature Certificate (DSC) : Filing DSC for directors and authorizing signatories is an important part of registration.
2. Apply for Director Identification Number (DIN) : Filing DIN for directors is also a part of registration.
3. Reserve a Unique Company Name : Reserving a unique company name using the RUN facility on the MCA portal is also an important procedure.
4. Prepare and File Necessary Documents : Collect the required documents, such as MoA and AoA, and present them to the ROC.
5. File SPICe+ Form : Filing for the SPICe+ form along with the necessary documents and fees on the MCA portal.
6. Get Certificate of Incorporation : After the application verification, the ROC issues a Certificate of Incorporation.
Documents Needed for Private Limite Company Registration
The following documents need to be submitted for private limited company registration:
- PAN Card : Director's and shareholder's Permanent Account Number card is required.
- Aadhaar Card : Directors' and shareholders' Aadhaar card is also required.
- Address Proof : Rental agreement or utility bill for the registered office is required to submit.
- Digital Signature Certificate (DSC) : It is Applicable for directors and authorized signatories.
- Director Identification Number (DIN) :It is Applicable for directors.
- Memorandum of Association (MoA) : It states the company's motive and organization.
- Articles of Association (AoA) : It gives the rules of the company, rights of the shareholders, and management positions.
Cost of Registration of Private Limited Company
The registration cost of a private limited company depends on the authorized capital and other conditions. Here's an approximate estimate:
The Government Fees is from ₹1,010 to ₹63,410, based on the authorized capital.
The Professional Fees is from ₹5,000 to ₹20,000, based on the complexity of the registration.
The DSC and DIN applications may cost around 1500 each .
Tips for choosing a company name :-
1. The relevance of the name of the company should match the nature of the business.
2. There must be uniqueness in the company's name and it must be not a existing company's name .
3. The name should comply and go with the naming guidelines given my the MCA portal.
Timeline
The registration process usually takes 7-15 working days, assuming all documents are in order and there are no corrections .
Post-Registration Compliance
Following registration, a private limited company must meet many regulatory compliances, including:
- Annual Filing is the Filing of annual returns and accounts with the ROC. The company must file an annual return by the best of 60 days from the end of financial year.
It is required to submit the financial statements that are audited with annual return.
- GST Registration is the Registeration for GST in case of an excessive turnover of ₹40 lakhs.
- Other Compliance includes Fulfiling other regulatory compliances, such as keeping proper books of accounts and conducting annual general meetings.
Other regulatory requirements:-
1. Companies are required to hold annual general meetings each year .
2. Companies must keep the records of members, directors, employees and other required documents.
Comparison of private limited company with other businesses:-
1. Private limited company has limited liability while sole properietorship has unlimited and partnership company has both limited and unlimited liability.
2. Private limited company has minimum of two members sole properietorship has minimum of one member and partnership company has minimum of two members.
3. Private limited company has maximum of 200 members and partnership company has maximum of 50 members.
4. Private limited company is a separate legal organization while sole properietorship and partnership company is not a separate legal organization.
5. Fund raising in private limited company is easier compared to both of the others.
6. Fund raising in sole proprietorship is more difficult than the other two.
7. Fundraising in partnership company is moderate than the other two.
Challenges in the registration process:-
While registering the private limited company there are many challenges faced by a particular organization.
Some of them are as follows:-
1. There can be delay in the document verification process as in accurate documents can delay the process.
2. Maintaining the expectation of compliance or directors can be challenging for the new enterpreneurs.
3. High professional fees can be taken for a small business due to this it can result to the shortage of their investment.
Conclusion:-
The private limited company is a very popular business structure in India as it offers limited liability, separate legal organization and various tax benefits. Understanding a private limited company is very important as it plays a very important role in an enterpreneur's life as by understanding features, benefits and requirements an entrepreneur or a company or a business can take right decisions and establish a successful business in India .
Frequently asked questions:-
Some frequently asked questions are as follows:-
1. What is a private limited company?
Apparently limited company is a type of business structure which offers limited liability and accepted legal organization. Most of the enterpreneurs and businesses choose private limited company as their future career.
2. What are the benefits of a private limited company?
There are many benefits of a private limited company . The benefits includes limited liability, separate organization, tax benefits and full access to funding.
3. How do I register a private limited company?
For registering a private limited company one has to apply for a digital signature certificate and then apply for identification number.
Then they have to choose a unique name for the company , prepare the necessary documents and files and submit to the ROC portal.
4. What documents are required for private limited company registration?
The documents required for private limited company registration PAN card, aadhar card , address proof , digital signature certificate , director identification number, memorandum of association and articles of association.
5. What is the minimum number of directors and shareholders required for a private company?
A private limited company requires at least two directors and two share holders.
6. What is the process for changing the name of a private limited company?
For changing the name of a private limited company one need to pass a special request then obtain approval from the ROC and update the company's documents.
7. Can a private limited company be converted to a public limited company?
Yes a private limited company can be converted to a public limited company by following the required rules and obtaining the necessary approvals.
8. What are the compliance requirements for private limited companies?
A private limited company need to follow with various regulatory requirements including annual filing, GST registration and other compliances.
9. Can a foreigner be a director or share holder of a private limited company?
Yes a foreigner can be a director or share holder of a private limited company in India with certain rules, regulations and requirements.
10. What is the difference between a private limited company and a sole properietorship ?
A private limited company requires and offers limited liability and a separate legal organization while a sole properietorship neither offer limited liability nor a separate legal organization.
11. What is the difference between private limited company and a partnership firm ?
A private limited company offers limited liability and a separate legal organization while a partnership from does not offer a limited liability and is not a separate legal organization.
12. Can a private limited company be dissolved or wound up?
Yes up private limited company can be dissolved or wound up by complying with certain rules and requirements and by obtaining necessary approvals