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How to Register Private Limited Company in India

How to Register Private Limited Company in India

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A Private Limited Company is a privately held structure most suitable for small businesses. Minimum two members are required for forming a Private limited company who can act as the directors and the shareholders as well. This type of business entity limits owner liability to their shareholdings, the number of shareholders to 50, and restricts shareholders from publicly trading shares. Below we have listed out some of the major benefits associated with the private limited companies-

  1. Separate legal identity- One of the crucial features of this form of company is the distinct legal identity of the company from its members. Companies act 2013 recognizes the private limited company as the separate legal identity from its members. Due to this feature, the private limited company is empowered to own property under its name. Further, the company can sue and also it can be sued under its own name due to this very same feature.
  2. Limit on the liability of members- Unlike many other forms of companies, the liability of members of the private limited company is limited to their only. Thus the personal assets of the members are secured from any charge.
  3. Tax benefits- Private limited company pay taxes on their profits and not on their income. Thus the tax liability is lesser as compared to other forms of companies.
  4. Perpetual Succession- As the legal identity of the private limited company is separate from its members the life of the company does not get affected by the life of members. Thus the death or inability of the members does not end the life of the company.
  5. Ease in Foreign direct investment- The Private limited company is the sole business structure that permits 100% foreign direct investment. This implies that foreign companies can invest in the private limited company without a prior government approval.
  6. Business reliability- The private limited company is registered under the Companies Act 2013 and has a legal structure which creates its credibility amongst the people. Thus the company can expand more easily.
  7. Issuing ESOP and Sweat equity Shares- The private limited company is empowered to issue sweat equity shares and provide employee stock option to their employees. This helps in motivating the employees and increasing their morale.
  8. The requirement of members - In order to incorporate a private limited, only two shareholders and two members are required. This helps the aspiring entrepreneurs to easily set up their business.

Documents required for privately limited company registration in India-

  1. Identity proof (Driving license, Voter id card, passport)
  2. Residence Proof( Electricity bill, Bank statement, Mobile bill)
  3. Registered Office address proof- (Electricity bill, Bank statement, Mobile bill)

Steps to incorporate a private limited company in India

Step-1- Acquiring Digital Signature Certificate (DSC)

In order to validate the documents submitted electronically, it is crucial to place a valid digital signature on. This provision is made in order to ensure safe submission of the required documents electronically. The applicant is required to apply for the Digital signature certificate on the ministry of the corporate website.

Step 3: Creating the new registration account on MCA Portal

To facilitate the procedure of incorporation it is crucial to acquire the registered user account on MCA Portal for filing an e-Form, for online fee payment, for different transactions as registered and business user. Creating an account is totally free of cost.

Step 4: Filing of electronic forms

Through this step the applicant is required to file electronic forms relating to incorporating company name, registering the office address or notice of situation of office and notice for appointment of company directors, manager and secretary also regarding the take and pay for their qualification shares. The forms for these purposes are as follows-

  1. RUN- In case the applicant desires to obtain a prior approval for the desired company name he required to file the Reserve Unique Name (RUN) form with the ministry of corporate affairs. In this form, he can give one name for the proposed company which may be accepted or rejected by the ministry.
  2. Form-32: Through this form notice for appointment of new Directors, Managers and Secretary shall be submitted. Further, if you don’t want to submit the RUN form for the prior approval of the name you can also opt to obtain the approval in this form.

Step-4 -Drafting Memorandum of Association and Article of Association

The MOA and AOA of the proposed company shall be drafted.

Memorandum of Association- Memorandum of association is a document which defines the relationship of the shareholders with the company. It basically contains the objectives and powers of the company.

Articles of association- They are the bye-laws which define the relationship of the company with outsiders. Information such as the total number of members, share capital, rules for a meeting of the company, voting power of members must be included in the Articles of Association.

Step-5- Incorporation certificate

After the careful scrutiny of the application and document submitted the MCA may grant the certificate of incorporation to the proposed company. Further, the applicant will receive a confirmation email regarding the application for incorporation of a new company, and the status of the form will get changed to Approved.



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