Choosing the correct business structure is as crucial as any other business-related task. The proper business structure will enable your company to run smoothly and fulfill its objectives. As part of the legal obligations, every business in India is needed to register. Let’s try to grasp the many forms of business structures in India before we discover how to create a corporation. So, firstly, let us begin by understanding the private limited company definition.
Private Limited Company Registration in India can be done online through the Ministry of Corporate Affairs (MCA) portal. The process involves obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN), filing the company’s Articles of Association and Memorandum of Association, and obtaining a Certificate of Incorporation. Private Limited Companies are preferred by entrepreneurs due to limited liability, ease of raising capital, and better legal status.
The online process for registration is simple and can be done within a few days, provided all the necessary documents are in order. Private Limited Companies are required to have a minimum of two directors and shareholders, and an authorized capital of Rs. 1 lakh. The registration fee varies based on the authorized capital. Registering your Private Limited Company online is a straightforward process that can be completed with the help of professionals for a hassle-free experience.
What types of Business Structures exist in India?
Let us attempt to comprehend the many forms of business structures offered in India. Here is a partial list of some of them:
- One-Person Company (OPC): An OPC, which was launched in 2013, is the easiest approach to starting a corporation if there is only one promoter or owner. It enables a sole owner to keep working while remaining part of the company structure.
- Limited Liability Partnership (LLP): An LLP is a separate legal entity in which partners’ liabilities are restricted to their agreed-upon contribution. Under the Limited Liability Act of 2008, an LLP is formed with the Registrar of Companies (ROC).
- Private Limited Company (PLC): According to the legislation, a PLC is considered a separate legal entity from its founders. It consists of shareholders (investors) and directors (company officers). Every person is considered an employee of the corporation.
- Private Limited Company: A Public Limited Company is a member-led, non-profit organization formed under company law. It has a separate legal existence, and its members’ responsibility is restricted to the number of shares they own.
You can select the finest business structure for your needs and register your company accordingly.
Other firm structures include sole proprietorship, Hindu Undivided Family, and partnership. Please keep in mind that these arrangements are not subject to corporate law.
How to do Private limited Company Registration in India?
In India, forming a business is currently a straightforward four-step process-
Obtain a digital signature certificate (DSC)
Because the company registration process is entirely online, digital signatures are necessary to file the forms on the MCA portal. All possible directors and subscribers to the Memorandum of Association (MoA) and Articles of Association must have DSC (AoA).
DSC is available via government-approved certifying authorities. DSC can also be received in just two days online from this site. Directors and subscribers of MoA and AoA must obtain DSC in the Class 3 category.
Get the Director’s Identification Number (DIN)
The Director Identity Number (DIN) is an identification number for a director that everyone who wishes to be a director in a corporation must get. The DIN of all prospective company directors, as well as evidence of name and address, must be included in the company registration form. DIN can be obtained by completing the SPICe+ form (the business registration form).
SPICe+ is a web-based company registration tool that allows you to obtain DIN for up to three directors. If the company has more directors who do not have a DIN, the company can be incorporated with three directors and must designate new directors after incorporation. Because only proposed directors of an established firm can apply for DIN in the SPICe+ form, the appointed directors can receive DIN by filling out the DIR-3 form.
Create an account on the MCA Portal.
The SPICe+ form must be completed and uploaded on the MCA portal to apply for company registration. The company’s director must first register on the MCA portal before filling out the SPICe+ form and submitting documentation. After registering, the director will be able to log in and gain access to MCA portal features such as filling out e-forms and viewing public documents.
In addition, the corporation must reserve its name by submitting two suggested names in Part-A of the SPICe+ form. The reservation of the name is required since the SPICe+ form will be refused if the company name is identical to the name of an existing/registered company, LLP, or trademark, or contains phrases forbidden under the Companies (Incorporation Rules) 2014.
If the SPICe+ form is refused due to non-approval of the company name, the applicant must refile another SPICe+ form and pay the necessary cost to reserve a new name. However, once the name field in Part-A of the SPICe+ form is approved, it will be reserved for 20 days during which the firm must fill out Part-B of the SPICe+ form and submit it online. The applicant must fill out Part B of the SPICe+ form with firm and director information, attach documents, attach DSC, check the form, and submit it.
The Registrar of Companies will review the application once it has been completed and submitted together with the appropriate documentation. After confirming the application, he will issue the Company’s Certificate of Incorporation.
The Income Tax Department’s PAN and TAN are printed on the Certificate of Incorporation. The applicant will also receive an email including their PAN and TAN, as well as a Certificate of Incorporation.
Required Documents for Company Registration
The following general documents must be supplied for the registration of an LLP, One Person Company, Private Limited Company, or Public Limited Company:
Documents of the company’s directors and shareholders/LLP partners
Identification of all directors and owners of the company (partners in case of LLP). Any of the following documents can be used as identification:
- The pan card
- The Aadhar card
- Driver’s license
All directors and shareholders must provide proof of address (partners in case of LLP). Any of the following papers can be used as address proof:
- The most recent telephone bill (not older than 2 months)
- The most recent electricity bill (not older than 2 months)
- Addressed bank account statement
DIN (DPIN in the case of an LLP) and DSC of each director (partners in the case of an LLP)
Proof of the company’s registered office. The following documents must be supplied as proof of the company’s address:
- The lease agreement between the landlord and the company/LLP
- Letter or NOC from the landlord granting authorization to use the office/premises as the registered office of the LLP/company.
- Company or LLP office premises sale deed in the name of the company or LLP
The Memorandum of Association (MoA) outlines the purposes of the firm for which the company will be incorporated as well as the liabilities of the company’s members.
Private Limited Company Advantages
Now, that we have understood the private limited company definition and its process, let us have a look at the advantages of private limited companies. They are as follows:
- Limited risk to personal assets – A private limited company’s stockholders have limited responsibility. This means that as a shareholder, you will be obligated to pay for the company’s liability only to the degree of your contribution. Because the shareholders have no personal liability, they are not required to pay for the company’s liabilities out of their assets.
- Legal Entity – A PLC is a distinct legal entity from you. This means that the Company is in charge of managing its assets and liabilities, as well as its debtors and creditors. You will not be held liable for the company’s damages. Hence, the creditors will be unable to sue you for the money.
- Raising Capital – Although creating a PLC entails regulatory requirements, it is favored by entrepreneurs because it allows them to raise funds through stock, expand, and restrict liability.
- Trustworthiness – Under the Companies Act 2013, companies in India are registered with the Registrar of Companies (ROC). The Ministry of Corporate Affairs website allows anyone to search for the company’s details. Furthermore, information about all of the directors is supplied during the formation of the company. As a result, a PLC company structure is more trustworthy.
- Perpetual Succession – A company has ‘perpetual succession,’ which implies it will exist until it is legally dissolved. A business, as a separate legal person, is unaffected by the death or termination of any member and continues to exist regardless of membership changes.
Private Limited Company Disadvantages
After looking at the advantages of a Private Limited Company, now let us have a look at the disadvantages of a private limited company.
The Registration Procedure
Private limited company formation takes roughly 10 – 15 days on average and costs Rs.15899 (all included) through IndiaFilings.com. As a result, registering a private limited company entails a process and charges that are not applicable to an unregistered business such as a proprietorship. However, once incorporated, a private limited company has a wide range of functions and rights, making it simple to open a bank account or obtain a payment gateway. Unregistered business organizations, proprietorships, and partnership businesses frequently face difficulties after registration when attempting to open a bank account or obtain a payment gateway.
Formalities of Compliance
Following incorporation, a private limited company must comply with a number of requirements. Every year, all firms are expected to hold board meetings and general meetings, have their accounts audited, keep a statutory register, and file an annual return with the Ministry of Corporate Affairs. In addition to corporate compliance procedures, a company must also comply with tax and labor rules, which apply regardless of the kind of business entity.
A significant disadvantage of a private limited corporation is that it requires at least two people to function as Directors and shareholders. As a result, any solitary entrepreneur who desires to start and run a firm by himself or herself cannot form a private limited company. As a result, any key decision made by a firm would always require the approval of two people. The corporation would also require two shareholders, even if one individual held little ownership.
How much time does it take to form a Private Limited Company?
The entire process, including DIN, Name, and Incorporation approval, takes about 10 working days. However, registering a company is now a quick process because all paperwork is brought into a single application form with MCA. It is a significant step toward e-government and for firms seeking to expand their operations.
Company Compliances to be Observed
Once the firm is registered, it must adhere to specific compliances on an annual basis. The firm must adhere to regulations, such as appointing its first auditor within 30 days of incorporation at the first board meeting. During the calendar year, every corporation must hold a minimum of four board meetings at predetermined intervals.
Every fiscal year, it must keep and file a profit and loss account, annual return, and balance sheet, as well as an auditor’s report, with the Registrar of Companies by the due date. Every business is obligated to keep certain Statutory Registers.
Read compliances under the Companies Act 2013 for more information on the company’s responsibilities.
Certain annual forms must be filed with the Registrar of Companies. In our post-ROC Compliance Calendar, we provide details on all forms as well as the due date for filing these forms.
Private Limited Company Examples
If you are beginning a new business and have determined that forming a limited company is the best legal structure for you, you will most likely be founding a private limited company. A private limited company can serve as the foundation for any form of business, such as a plumber, hairdresser salon, photographer, law firm, dental practice, accountant, or restaurant.
Flipkart, Ola, Snapdeal, Carat Lane, and Zoom Car are all privately held companies, whereas Zomato, MakeMyTrip, and Infibeam are among the first Indian online startups to go public. They are examples of one of the top private limited companies.
There are numerous processes involved in registering a company. Before forming a company, the structure of the firm should be determined, i.e. whether the company will be registered as an OPC, LLP, PLC, or Public Limited Company. After determining the structure, the company name must be determined, and the directors must obtain DIN and DSC before applying for company registration.
Following the selection of a company name and the acquisition of a DIN and DSC, the company registration form must be submitted to the MCA portal. The SPICe+ form, also known as the company registration form, must be completed, and the necessary papers must be uploaded and submitted online via the MCA site, along with the prescribed payments.
The ROC will provide the company incorporation certificate after verifying the SPICe+ form. The incorporation certificate serves as a confirmation of the business’s registration, and the company will come into existence as a separate legal entity.
Every year, many small businesses pay the government thousands of dollars in penalties for failing to file various statutory filings on time. Such a penalty or late fee is not tax deductible and reduces profitability. Our objective at InstaSpaces is to deliver the cheapest services to our consumers while also assisting them in avoiding all late fees. To accomplish our purpose, we have developed enterprise-grade technologies to assist you in anticipating imminent compliance and avoiding penalties. Check out our compliance services below, contact us, and stop incurring late fees.
You don’t even have to leave your house to register your private limited business because the process is entirely online. At InstaSpaces we execute the company incorporation process swiftly and easily. You’ll be well on your way to starting your own Pvt Ltd firm with this. It is advised that you talk with specialists before making the best selection for smoother progress.
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