The Prerequisites to Register a Private Limited Company in India

Establishing a business in India often involves selecting a private limited company as the preferred structure. This setup offers shareholders limited liability protection while imposing specific ownership constraints. Unlike an LLP, where partners manage the business, a private limited company registration allows a clear distinction between directors and shareholders.

Here at LegalRaasta, we offer reasonably priced services to make the process of registering a private limited company in India easy. We manage all legal formalities and ensure full adherence to the Ministry of Corporate Affairs (MCA) standards.

What is a Private Limited Company?

A private limited company in India is a privately held entity with limited liability, ranking among the nation’s most favoured business structures due to its numerous advantages. These include limited liability protection, ease of formation and maintenance, and a distinct legal identity. A private limited company operates separately from its owners and requires a minimum of two members and two directors. Here are the key characteristics:

• Limited Liability Protection: Shareholders are liable only to the extent of their shareholding, safeguarding their assets even in financial setbacks.
• Separate Legal Entity: The company can own property, engage in contracts, and initiate or defend legal actions under its unique name.
• Minimum Number of Shareholders: At least two shareholders are required, with a maximum of 200.
• Minimum Number of Directors: To Register a Pvt Limited Company, a minimum of two directors is necessary, with at least one being an Indian citizen.
• Minimum Share Capital: The firm must have a minimum paid-up capital of Rs. 1 lakh, or a larger sum as stated.
• Name of the Firm: The company’s name must conclude with “Private Limited.”
• Restrictions on Share Transfer: Shares can only be transferred with the Board of Directors’ approval or as per the Articles of Association.
• Prohibition on Public Invitation: The company cannot invite the public to subscribe to its shares or debentures.
• Compliance Requirements: It must adhere to various legal and regulatory obligations, such as maintaining financial records, conducting annual general meetings, and filing annual returns with the ROC.

These features make private limited company registration a favoured choice among entrepreneurs for its advantageous and straightforward structure.

Types of Private Limited Companies:

• Company Limited by Shares: The nominal share amount specified in the Memorandum of Association is the maximum amount that shareholders may be held liable for.
• Company Limited by Guarantee: Member liability is limited to the guarantee amount specified in the Memorandum of Association, invoked only during winding up.
• Unlimited Companies: Members have unlimited personal liability for the company’s debts and liabilities, yet it remains a separate legal entity.

Advantages of a Private Limited Company:

Registering a private limited company in India is popular due to several benefits:

• Limited Liability: Shareholders’ responsibility is restricted to their capital contribution, protecting personal assets from company obligations.
• Distinct Legal Identity: The company has an independent legal identity, allowing it to own assets, engage in contracts, and initiate or defend legal actions.
• Continuous Existence: The company’s existence persists despite changes in shareholders or directors.
• Ease of Funding: Raising capital for pvt ltd company registration by issuing shares to investors is easier, attracting external investment.
• Tax Benefits: Private limited companies may qualify for various tax benefits and exemptions.
• Credibility and Trust: The “Pvt. Ltd.” mark frequently instills greater trust in customers, suppliers, and partners.

Disadvantages of a Private Limited Company:

Despite its benefits, there are some disadvantages:

• Compliance Burden: Significant regulatory demands, including financial reporting, filings, and audits.
• Complex Setup: The process and cost of setting up and registering a private limited company are higher compared to simpler structures.
• Share Limits: There are restricted share transfers and a maximum of 200 shareholders.
• Public Disclosure: Financial information is publicly viewable, affecting privacy.
• Exit Complexity: Selling or exiting a private limited company is more complicated.
• Slower Decisions: Shareholders and directors’ involvement may slow down decision-making processes.

Prerequisites to Register a Company in India:

Directors and Members:

• Minimum of two directors and a maximum of 200 members are required, as per the Companies Act of 2013.
• Directors must have a Director Identification Number (DIN) issued by the MCA.
• A minimum of one director needs to be a resident of India and have travelled there for 182 days in the preceding year.

Company Name:

When selecting a name for private limited company registration, consider:

• The name should reflect the principal business activity.
• Its name needs to conclude with “Private Limited.”

Address of the Registered Office:

After the company registration process, provide the permanent address of the registered office to the company registrar. This office is where business operations occur and relevant documentation is maintained.

Company Registration Process:

The Private Limited Company Registration in India Involves Four Steps:

Step 1: Get a Digital Signature Certificate (DSC)

Every director and shareholder must secure a DSC issued by the Controller of Certification Agencies (CCA), providing essential details like passport-sized photos, PAN, Aadhaar Card, phone number, and email address. Foreign nationals should provide notarized and apostilled documents if applicable.

Step 2: Director Identification Number (DIN)

For pvt ltd company registration, obtain a DIN for directors, essential for the registration form.

Step 3: Name Reservation for the Company (SPICe+ Part A)

Complete the SPICe+ Part A form to secure a unique company name, selecting the company type, class, category, and sub-category, specifying the primary division of industrial activity, and offering a business description. Propose two names for approval.

Step 4: Submission of Company Details (SPICe+ Part B)

Provide comprehensive details on capital, registered office address, subscribers and directors’ information, stamp duty, PAN and TAN application, and necessary attachments. Ensure compliance with the Companies Act of 2013 by obtaining digital signatures by aiding professionals.

Step 5: Preparation and Submission of Incorporation Forms (SPICe+ MOA and AOA)

Before sending these documents to the MCA for approval, prepare the Memorandum of Association (MOA) and Articles of Association (AOA) with the required company information. Collect digital signatures from professionals and subscribers. In addition, complete the AGILE-PRO-S form for GST, EPFO, ESIC, a bank account, and a store and business license (state-dependent).

Certificate of Incorporation

Following a successful verification of paperwork procedure, the MCA will grant the Certificate of Incorporation (COI) with the Company Identification Number (CIN), PAN, and TAN.

Document Checklist:

• For Indian Citizens: A self-attested copy of PAN card, passport-sized photo, Aadhaar card, proof of identification, and proof of address.
• For Foreign Nationals: Notarized documents, passport-sized photo, passport, and address proof.
• Registered Office Documents: Provide proof of business address, a copy of the lease agreement (if applicable), and the owner’s approval certificate.

Post-Registration Compliance:

Following incorporation, adhering to post-registration company compliances is essential to streamline operations and define directors and shareholders’ roles and responsibilities.

Register Your Company through LegalRaasta

LegalRaasta specializes in private limited company registration services, providing comprehensive guidance and support throughout the registration process. Our professionals offer expert consultation tailored to your requirements and business goals.

Selecting the appropriate name for your company registration is critical, and LegalRaasta’s experts will help you choose a unique and fitting name that aligns with ROC guidelines.We’ll check for name availability and help you reserve the name of your choice.

It can be difficult to gather the paperwork needed for a company registration, but our professionals will accomplish it quickly and accurately, guaranteeing compliance.

To register a private limited company, directors must get a Director Identification Number and a Digital Signature Certificate. We will guide you through this process to ensure you possess the necessary certifications for seamless registration.

By choosing LegalRaasta for your company registration needs, you can be confident that the process will be managed professionally and effectively. We aim to simplify the process, allowing you to focus on your business objectives while we address the legal requirements. Embark on your entrepreneurial journey with assurance by registering your company through LegalRaasta.

In conclusion, the process of private limited company registration in India offers numerous benefits, making it an attractive option for entrepreneurs. From limited liability protection to ease of funding and tax benefits, a private limited company structure provides a solid foundation for business growth. While the registration process involves various steps and compliance requirements, partnering with LegalRaasta ensures a smooth and efficient experience, allowing you to focus on your business’s success.