An investment company owned by private investors is called a private limited company. Investors in this scenario are held accountable by the number of shares they own, as is the case with limited partners.
Hundreds of thousands of people are interested in forming their own companies due to the flourishing start-up environment across the country. A sole proprietorship, a limited liability partnership, or a private limited company are some of the options for registering a company.
In terms of long-term strategic investments, maintaining the share price and budgetary statistics that are hidden, and maintaining autonomy and versatility, private enterprises have an advantage over public corporations.
Characteristics of a Pvt. Ltd. Company
The next step is to learn more about the characteristics of a private limited company:
Just like any other business, you’ll need at least two investors to form such a corporation. Due to the young age of the organization, the maximum number of participants is limited to 200. The business must be governed by at least two directors.
Limited Liability Structure
A private limited corporation limits the responsibility of its participants or shareholders. Consequently, stakeholder possessions must be liquidated to satisfy the debt, even when losses occur. In contrast, no threat arises to the private and personal assets of stockholders.
Separate Legal Entity
The entity will exist in perpetuity as a distinct legal entity. As a result, even if the company goes insolvent or bankrupt, it will still exist legally. Corporations will last forever, regardless of how long their shareholders or members live, unless the agreement dissolves them.
Minimum Paid-Up Capital
Occasionally, the MCA may order a much higher paid-up investment for a private limited company than the minimum required of *1 lakh.
How to Register a Private Limited Company?
The company incorporation process takes only four steps and ensures a smooth foundation for your business.
1. Procure Digital Signature Certificate
Formalizing a private company in India begins with obtaining the DSCs of all participants. It is necessary to have DSCs since the government mandates an online registration system for business registration and other activities, and the authority requires that e-forms be completed on the MCA’s web platform. Digital Signature Certificates or DSCs are granted by the Certifying Authority in symbolic form and are valid for one or two years.
2. Obtain Director Identification Number
During the organization registration process in India, subscribers and directors engage in the process. A subscriber is a potential shareholder and the firm’s sponsor. In addition to attaching DSCs to e-MOAs and e-AOAs, suggested directors should apply online for DINs.
3. Reservation of Name
In order to establish and register a Pvt Ltd Company, you must register the prospective company’s name first. It is required that an organization submit an e-Form along with the required fees in order to obtain the name of a private limited company. There can be up to six suggestions per application, and they should be listed in order of preference together with the relevance of the suggested name. In order for the petitioner to appropriately apply for the names, the authorised professional must inquire about the names’ availability before completing the paperwork. The Registrar has complete discretion when approving name applications.
In order to receive approval for a name, an individual must submit a request in accordance with the Act’s requirements. Typically, a name is selected based on the following criteria:
- In addition to being easy to pronounce, the name must be memorable as well.
- It must be capable of providing a unique identity to the organization.
- A brief, straightforward statement is best.
- Neither government policy nor forbidden words should appear in the name.
- Trademarks should not be infringed upon, and LLPs should not be similar to or duplicate existing LLPs.
The Registrar can approve one of up to six names in a name allocation request, or he can request more names with comments.
In the 60 days after a registration is authorized, the Registrar will register the same name. A petition for company formation must be filed within 60 days of consulting the specialist. Otherwise, the name reservation will expire and the promoter must reapply for registration of the name.
4. Certificate of Incorporation
Having reserved the name of the prospective company, the organization must complete form INC – 1 to request a certificate of incorporation. It is also recommended that they fill out the SPICe forms, which are simplified forms for incorporating a company electronically.
Drafting MOA & AOA
A Private Limited Company’s charter documents are the Memorandum of Agreement (MOA) and the Articles of Association (AOA).
This document outlines the company’s principal aim and services, as well as its spectrum of activities. On the other hand, the Articles of Association stipulate how the association conducts its operations and management. Both important papers should be carefully prepared after consulting a professional.
In addition to the petition for company establishment and registration, the firm’s articles of incorporation and memorandum must be provided. Participants’ DSCs can be attached to MOAs and AOAs to subscribe electronically.
After paying the required Ministry Fees and Stamp Duty in the appropriate state, the application can be filed on the platform. The same registration is used to apply for and allot TANs and PANs.
If the Registrar reviews and verifies the request for a certificate of incorporation submitted in SPICe forms, he may grant the certificate bearing his seal and signature in digital form. As part of the Certificate of Incorporation, the Registrar will include the company’s Permanent Account Number (PAN) and the date of incorporation.
Advantages of Private Limited Companies Registration
It provides liability protection for shareholders, preventing them from losing their assets if a company is sued. Shareholders might be forced to liquidate their holdings if a business fails.
Less Number of Shareholders
Private limited companies can start operations with only two owners, in contrast to public corporations that require seven shareholders.
An investor, founder, and executive can sell and transfer their shares without any restrictions because they control the shares of the company.
The corporation continues to operate after a member dies or resigns and remains a legal entity until it is lawfully shut down.
In India, you can register a private limited company quickly by hiring an expert. As mandated by the Indian Companies Act, 2013, the founders and directors of a digital limited liability company must comply with the corporation’s regulations and submit yearly reports and paperwork to maintain the corporation’s existence.