A Private Limited Company is a type of business entity that offers liability protection to its shareholders, has a minimum of 2 and a maximum of 200 shareholders, and restricts share transfer.
WHAT IS PRIVATE LIMITED COMPANY?
A Private Limited Company is a suitable business structure for small to medium-sized businesses that want to limit their liability, raise capital, and maintain a professional image.
Characteristics of a Private Limited Company
- Limited liability: Shareholders' personal assets are protected in case the company incurs debts or liabilities.
- Separate legal entity: A Private Limited Company is a separate entity from its owners, with its own rights and obligations.
- Private ownership: Shares are not publicly traded and ownership is typically restricted to a small group of individuals or entities.
- Limited share transferability: Shareholders may face restrictions on transferring their shares to others.
- Minimum and maximum number of shareholders: Typically, a Private Limited Company must have at least two shareholders (minimum) and no more than two hundred (maximum).
- Board of directors: Minimum 2 (two) Directors.
- Name of Company: The private limited company's name must conclude with the words "Private Limited."
- Annual compliance requirements: Private Limited Company must file annual financial statements and other documents with regulatory authorities.
ADVANTAGES OF PRIVATE LIMITED COMPANY
- Limited Liability: Shareholders' personal assets are protected.
- Separate Legal Entity: A Private Limited Company can own assets, enter contracts, and sue or be sued in its own name.
- Flexibility in Ownership: Shares can be transferred and new shareholders can be added.
- Ability to Raise Capital: Private Limited Company can issue shares to raise capital from investors.
DISADVANTAGES OF PRIVATE LIMITED COMPANY
- Limited Share Transferability: Shareholders may face restrictions on transferring their shares.
- Compliance Burden: Must comply with various regulations and filings.
- Disclosure Requirements: Financial information is publicly viewable, affecting privacy.
PROCESS OF REGISTERING PRIVATE LIMITED COMPANY
- Reservation of name by filing SPICe+ Part A form: SPICe+ Part A form is an online application for registering a new company in India. Ensure that the selected name is unique and must ends with the words "PRIVATE LIMITED" or "Pvt. Ltd"
- Director Identification Numbers (DIN): Obtain a DIN for all proposed directors.
- Obtain DSC (Digital Signature Certificate): Obtain a DSC for all proposed directors, which is required for filing and signing documents electronically.
- PAN and TAN: Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
- Bank Account: Open a current bank account in the company's name.
- Filing SPICe+ forms: Spice+ form is an online application for incorporation, which is to be filed after name approval and it is consists of SPICe+ Part B, INC-33 (e-MOA), INC- 34 (e-AOA), Agile pro and INC-9, along with necessary attachments.
The entire process usually takes 10-15 working days, subject to ROC processing times and document accuracy.
- Certificate of incorporation: Upon successful verification, the ROC issues the Certificate of Incorporation.
Documents required for incorporating:
- ID proof (Aadhaar, PAN, etc.)
- Address proof (utility bills, etc.)
- Passport-sized photographs
- Rent agreement or property documents (for registered office)
- NOC (No Objection Certificate) from the landlord (if applicable)
FREQUENTLY ASKED QUESTIONS (FAQ's):
1. What is a Private Limited company?
A Private Limited company is a type of business entity that offers liability protection to its shareholders, has a minimum of 2 and a maximum of 200 shareholders, and restricts share transfer.
2. What are the advantages of a Private Limited company?
Advantages include limited liability, ability to raise capital, tax benefits, and enhanced credibility.
3. What are the documents required to register a Private Limited company?
Documents include PAN and Aadhaar of directors, address proof, rental agreement or property papers, and Form DIR-2.
4. How much time does it take to register a Private Limited company?
Registration typically takes 10–15 working days.
5. Can a Private Limited company raise funds from the public?
No, Private Limited companies cannot raise funds from the public. They can raise funds through private placement, venture capital, or loans.
6. Can a Private Limited company be converted into a Public Limited company?
Yes, a Private Limited company can be converted into a Public Limited company with the necessary procedures and approvals.
7. What are the compliance requirements for a Private Limited company?
Compliance requirements include annual filing with ROC, income tax filing, GST registration, and audits.
8. Can a foreign national be a director in a Private Limited company?
Yes, a foreign national can be a director, but they need to obtain a DIN and meet other requirements.
9. Can a Private Limited company have a single shareholder?
No, a Private Limited company must have at least two shareholders.
10. When is the statutory auditor to be appointed?
The Board of Directors is required to appoint a Statutory Auditor within 30 days of incorporating a Private Limited Company.