Guide to Setting Up Private Limited Company in India

Introduction

Setting-up a Private Limited Company is a crucial process, it includes gathering multiple documents. A Private Limited Company is one of the most favourable options among SMEs in India. Private Limited Company is governed under Companies Act, 2013. In order to set up a Private Limited Company certain eligibility criteria should be followed. In this blog you’ll get complete information related to Private Limited Company Setup including its Eligibility Criteria, Documents Required, Registration Process, Advantages, etc. 

What is a Private Limited Company? 

A Private Limited Company is a business structure in which a company is owned privately. A Private Limited Company is a separate legal entity and offers limited liability. Private Limited Company is considered as the most suitable structure specially for small and medium sized enterprises (SMEs) in India. It is the most used business structure as it protects the owner’s assets while enjoying the benefits of the company. Private Limited Company is governed by Companies Act, 2013 and administered by MCA (Ministry of Corporate Affairs). 

Eligibility Criteria for Private Limited Company 

To start a private limited company in India, there is some eligibility criteria that should be fulfilled. This Eligibility Criteria is as follow:

• Number of Members: To start a private limited company there should be a minimum of 2 members (Shareholders) required and maximum it can go up to 200 members. 
• Directors: There should be at least 2 directors required to start a private limited company and one of them must be an Indian Resident (must stay 182 days in India in previous year calendar). 
• Company’s Name: The name of the company should be unique and easy to recognize. Also it should include ‘Private Limited’ or ‘Pvt Ltd’ at the end of the name. 
• Office Address: To start a Private Limited Company, registered office address is required.This office address will be used to send the official communications and notices. 
• Authorised Capital: To start a private limited company, there is no minimum authorised capital is required. However, individuals can start their private limited company with just ₹1,00,000/- of authorised capital as well.

Documents Required for Private Limited Company Registration 

To start a Private Limited Company, you need to gather documents as listed below: 

• Passport Size Photograph is required of Directors and shareholders. 
• Identity Proof such as PAN Card, Aadhaar Card, Driving License, etc is required. In case of foreign nationals, a passport is mandatory. 
• Address Proof of Director & Shareholder is required. It can be a Voter ID card or Driving License or Aadhaar Card. 
• Email ID & Mobile Number of the Director/Shareholder is required for the completion of the Incorporation Form. 
• Registered Office Address Proof is required. It can be any utility bill such as electricity bill, telephone bill, water bill, etc not more than 2 months older. 
• In case of rented Property, Proof of ownership or rented agreement and NOC from the owner is required for the declaration of use of his/her property.

Private Limited Company Registration Procedure 

In order to register a Private Limited Company, follow these steps as given below: 

Step 01: Obtain DSC & DIN: To start a private limited company first obtain Digital Signature Certificate for all directors and Directors Identification Number for all proposed directors. 

Step 02: Name Reservation: Once you obtain DSC & DIN, apply for a unique name for your private limited company using SPICE+ Part A (Reserve Unique Name) Form.

Step 03: Prepare MoA & AoA: After reserving the name, prepare Memorandum of Association (MoA) and Article of Association (AoA) containing the company's objective, rules & regulations. 

Step 04: File Incorporation Form: Next, all you need to do is file the Incorporation Form i.e, SPICe+ Form (INC-32) to the Registrar of Companies (ROC). 

Step 05: Fee Payment & Incorporation Certificate: Once you file the Incorporation form, pay the required fee and after successful verification you’ll get your Incorporation Certificate

Advantages of Private Limited Company Registration 

Registering a Private Limited Company offers major benefits and they are as follow:

• Tax Benefits: Private Limited Company offers corporate tax rates which are comparatively lower than individual income tax rates. Also, it might qualify for various tax incentives and deductions. 

• Limited Liability: Private Limited Company is a separate legal entity and offers limited liability to its owner which means their personal assets are protected from unexpected debts. 

• No-Minimum Paid-up Capital: To start a Private Limited Company, there is no minimum paid-up capital required which makes it easy for an individual to start their private limited company. 

• Separate Legal Entity: Private Limited Company is a separate legal entity which provides a unique identity to the company. Also, the name works as a real identity of the company. 

• Foreign Direct Investment: In Private Limited Company, FDI (Foreign Direct Investment) is completely allowed offering the foreigners to invest in their company. 

Conclusion 

In India, Private Limited Company is gaining popularity. This business structure offers multiple benefits such as limited liability, separate legal entity, Foreign Direct Investment, Tax Benefits, etc. To register a Private Limited Company, documents such as DSC, DIN, MoA, AoA, etc are required. The registration of Private Limited Company is regulated by the MCA (Ministry of Corporate Affairs). Once your Private Limited Company is registered certain annual and monthly compliances should be completed. It is advised to complete these compliances to avoid penalties and legal actions. 

Frequently Asked Questions (FAQs)

1) What is the minimum capital required to start a Private Limited Company in India? 

There is no minimum capital required to start a Private Limited Company in India. 

2) What are the documents required to set up a Private Limited Company? 

Documents such as Identity Proof, Address Proof, Photograph, Rent Agreement or NOC (if needed), etc are required to set up a Private Limited Company in India. 

3) How much does it cost to register a Private Limited Company? 

The cost to register a Private Limited Company can range between 

4) What is the minimum number of members required to start a Private Limited Company? 

To start a Private Limited Company minimum 2 members (Shareholders) are required.