How to register a Private Limited Company in India – An Overview
When it comes to small, medium or large business undertakings Private limited company is considered to be the most preferred entity in India due to several merits.
In India, Private Limited Company is known to be the most prevalent and prominent type of corporate entity. The company’s registration is governed by the Ministry of Corporate Affairs amended by the Companies Act of 2013. For a Private Limited Company to get itself registered, a minimum of two shareholders and two directors are required. An individual can be both a director as well as a shareholder, while a corporate legal entity can only be a shareholder. Moreover, foreign nationals, foreign corporate entities, and NRIs can become the shareholders or Directors of a company with Foreign Direct Investment (FDI). From the point of foreign promoters, Private Limited Company is the most preferred choice of entity.
A Private Limited Company has some unique features like limited liability protection to shareholders, separate legal entity, capacity to raise equity funds and perpetual existence make it the most preferred type of business entity for thousands of small and medium-sized business holdings that are family owned or managed professionally.
Why register a Private Limited Company and its Advantages
Getting a private limited company registered has many benefits that are explained as under;
- Separate Legal Entity
According to the Companies Act, a Private Limited Company is a legal entity. It consists of a range of legal capacities like opening a bank account, to hire employees, taking on equity or for obtaining licenses and more as an independent corporate entity. The members that include the shareholders and the directors have no personal liability to the creditors of a company for its debts.
- Uninterrupted Existence
One of the primary advantages of a Private Limited Company is its uninterrupted presence until it is legally liquidated. Being a legal entity, its business will not get affected by the death or exit of any members. Hence, irrespective of the changes in ownership it continues to be in existence.
- Easy Transferability
Another major highlight is that ownership can be easily transferred by way of shares of the company. The process includes signing, filing and transfer of share transfer form and share certificates are sufficient to transfer the ownership of the company. However, in some cases, the consent of other shareholders may be required to effect share transfers.
- Borrowing Capacity
Private limited companies reap the benefits of raising equity funds. They can issue equity shares, preference shares, debentures and accept deposits with approval from Reserve Bank of India. NBFCs, banks, and Investors prefer to provide funding to a private limited company rather than partnership firms or proprietary concerns.
- Owning Property
A private limited company has every right to acquire, own, enjoy and separate the property in its name. The property could be in the form of intangible assets, machinery, buildings, and land. As long as the company is in existence, no shareholder can make a claim in the property of the company.
What are the documents required for starting a Private Limited Company
- ID and Address proof
To get a company incorporated one need to have the identity and the address proof of all the directors and shareholders of the company. PAN is a must for Indian nationals while an attested or a notarized passport copy is mandatory for foreign nationals. Following documents are valid like Passport, Driving license, Aadhar card, a recent bank statement or an electricity bill. For proof of residence documents like bank statement or electricity bill has to be submitted which has to be not more than two months old.
- Registered office proof
The first and foremost aspect of a private limited company before the commencement of the business is to have a registered office in India. Having a registered office in India is a must as per the Company’s Act without which it cannot start the business operations. The documents that need to be submitted are the copy of electricity bill, latest property tax receipt or water bill. Along with these utility bills rental agreement, sale deed and a No Objection letter from the landlord for use of premises as a registered office has to be submitted.
- Obtaining DSC and DIN
The proposed directors of the private limited company have to obtain the Digital Signature Certificate (DSC) and Director Identification Number (DIN). The same can be obtained within 5 to 7 days prior to getting the company registered.
- Approval of Name
The directors have to propose with a minimum of one to a maximum of six names for approval. The names proposed must be submitted to the Ministry of Corporate Affairs (MCA) for approval subject to the availability, naming guidelines and the processing time. Under normal circumstances, it can be obtained within 5 to 7 working days.
Here are some frequently answered questions that will clarify your doubts about private company registration and its process.
- What is the procedure involved in starting a private limited company?
Starting a company is not a rocket science. It is a hassle-free process when all the guidelines and regulations are followed in a proper manner. All that one needs to possess is the PAN card of the promoters along with the required documents like ID and address proof. A company can start its operations in about 10- 15 days after submitting all the necessary documents.
- Who is required to start a private limited company?
A minimum of two persons is required to act as directors and shareholders to register a private limited company. In addition, for a private limited company to get registered it should possess a registered office in India.
- What is the time duration to register a private limited company?
It takes anywhere between 10- 14 working days for a private limited company to start its business provided all the documents are submitted and approved from concerned departments.
- Can NRIs and foreign entities register a private limited company in India? Are there any restrictions imposed on them?
Yes. NRIs and foreign entities are eligible to register a private limited company as there are no restrictions subject to the Foreign Direct Investment (FDI) norms set by the Reserve Bank of India. However, the rule implies that one Indian national to be a part of the company on the Board of Directors.
- Who can be a director in a private limited company?
Any individual who has attained the age of 18 and above can become a director in a company. There are no conditions on his or her citizenship or residency to become a director. Hence a private limited company can be easily started and managed by NRIs and foreign nationals in India.
- Is it mandatory to have an address to register a private limited company in India?
Yes, it is mandatory that every company registered in India must and should have a registered office where all the official communication is sent by the Ministry of Corporate Affairs. A private limited company can set up their registered office in any part of India.
- How will the company incorporation certificate be provided?
Company incorporation certificate is provided in a PDF format by the Ministry of Corporate Affairs (MCA). It does not provide a hard copy or a printed version of the incorporation certificate.
Private limited company registration in Bangalore
Being called the “Silicon City”, Bangalore is also known to be the “Start-Up” hub of India. According to a recent survey undertaken Bangalore is ranked as the number one position when it comes to start-ups. Factors contributing to this growth are sublime weather, good infrastructure, and rapid globalization. In recent times, many potential investors are eyeing to establish their base in the city. This has resulted in many start-ups mushrooming in and around the city. Off late many private limited companies are getting registered and looks like the trend is going upward.
Why Aavana Corporate Solutions?
Aavana help Entrepreneurs start and operate successful business not just in Bangalore but in India and around the world. It is India’s largest online business services platform dedicated to assisting individuals to start and manage their business at an affordable cost and hassle-free manner. Our top most priority is to help the entrepreneur on the legal and regulatory requirements. We are here to render support at every stage to ensure the business remains compliant and ever growing.
Aavana Corporate Solutions has a team of dedicated Chartered Accountants, Company Secretaries, Lawyers, Ex-Bankers and Financial Experts who offer a comprehensive range of services to small and medium-sized concerns.
Are you planning to register a private limited company?
If your answer is ‘YES’, then Aavana Corporate Solutions is the right place to be. With a vibrant team of professionals who are vastly experienced in their respective field. Aavana ensures that all your credentials and formalities are met in a professional way.