The success of any business entirely depends on registering the right type of company that is utmost crucial. This article gives you an insight briefly at the options that you can look for.
The start-up scene in India may look bleak than what it was a couple of years back. However, it does not mean that the enthusiasm has gone flat or for that matter, there is a lack of talent.
One may notice that the funding may have dried out to some extent, but that does not mean the end of the road. There is the next batch of entrepreneurs who are passionate and raring to go with the launch of their new innovations.
However, every big idea needs a stepping stone to gain momentum. If you are planning to start your own business one of the first question that comes in your mind is “What type of company registration should I go for?”
As per a recent study undertaken almost 93% of the companies registered in India are Private Limited Companies. A private limited company is considered to be the most popular corporate entity amongst small, medium, and large scale businesses in India due to various advantages. It is governed by the Ministry of Corporate Affairs as per the Companies Act of 2013.
Private limited companies are considered to be the most chosen option for any business set-ups or start-ups in India that is looking at scaling up by funding from an external source. It is very easy to issue fresh equity shares in lieu of funding received as in the case of Pvt Ltd Company. A private limited company is recommended for any business that is considering Foreign Direct Investment (FDI), Employee Stock Options, Equity Funding, or Venture Capital Funding.
Why a private limited company stands out from the rest of the business entities it offers its promoters a better image or standing as against a Limited Liability Partnership, a One Person Company, a Proprietorship Firm or a Partnership Firm. It also enjoys better access to funding from banks and other Non-Banking Financial Services (NBFS) and Foreign Direct Investment (FDI).
Meaning and definition:
As the name says a private limited company is “privately” owned by at least two owners and directors whose liability is restricted to the number of shares held by them. It has a separate legal entity than that of its owners. It is one of the most convenient ways of establishing a new business. Features like to raise funds from investors, to operate after the owner’s death and fewer tax liabilities make a Pvt Ltd company the most sought-after choice among business owners who want to make an entry into the competitive market.
No matter how complex your business questions, we have the solutions and experience to deliver the answers you need to move forward. Being one of the leaders in financial consulting, Aavana Corporate Solutions help you take decisive action and achieve success in your business endeavors.
Make a Smart Move: Private limited company Vs Public limited company “THE BALL IS IN YOUR COURT”
Benefits of a Private Limited Company
- Separate Legal Entity
A private limited company in the eyes of law will be treated as a distinct legal entity. It has the ability to enter into an agreement in the subject to certain duties and obligations, to sue or to be sued of its own rights. What distinguishes a private limited company from individuals or other business set-ups is its legal personality that is enjoyed.
- High borrowing capacity
Another feature of a private limited company is that it can borrow the available finance by the issue of shares to the public. Apart from this, banks and financial institutions prefer to offer financial assistance since the company separates from its owner.
- Limited Liability
It means the liability should not exceed the invested amount in a company. In a PVT ltd company, the liability is limited to the members according to the number of shares held by the shareholders or the members.
- Owning of the property
In a private limited company, the ownership of property like land, buildings, machinery can be legally acquired by its own name. The company has every right to own the property.
- Easy transferability of ownership
Transfer of ownership in a private limited company is very easy and hassle-free. As explained earlier a private limited company enjoys being a separate legal entity the directors who want to exit from the business can hand over his/her stake to the new owner or partner by selling the proposed shares and the stocks.
- Access to easy debts
A private limited company has the access to finance from banks, venture capitalists and other financial institutions by looking at its strength. A private limited company enjoys more debt opportunities than Limited liability partnership (LLP) or a One Person Company (OPC).
Requirements for private limited company registration
- A private limited company must have 2 directors of which one of them has to be an Indian resident.
- Let the name of the company be unique. Select a name that does not resemble any other business.
- To obtain the Digital Signature Certificate (DSC) and Director Identification Number (DIN) permitted by the Ministry of Corporate Affairs.
- Get your company office address registered.
- Submit all important documents like identity proofs, residential proofs signed registration papers for the purpose of private limited company registration.
What is the procedure one needs to know while going for private limited company registration?
- Approval of Name
Before proceeding with your private limited company registration, the founder has to select a name that is a unique and desirable name by using Reserve Unique Name (RUN) service through the portal of Ministry of Corporate Affairs. One has the option to choose up to 6 names.
- Obtaining the Digital Signature Certificate
Obtaining the Digital Signature Certificate is mandatory for the directors for e-filing on The Ministry of Corporate Affairs portal. A digital signature certificate is a secured electronic signature. It needs to be filed along with the identity and address proof. It must be duly attested by a gazetted officer.
- Obtaining the Director Identification Number
Director Identification Number (DIN) is a unique 8 digit number assigned by the Ministry of Corporate Affairs (MCA) to the proposed director of a company. It is a must needed primary proof for a Director. One can apply directly through the SPICe e-form.
- To possess Memorandum of Association and Articles of Association
A Memorandum of Association is a key document required to register a company in India. It defines the scope, activities and the relation of the company with the outside world. An article of Association is a legal document that defines the rules, regulations and the responsibilities of the directors, shareholders along with accounts and audit details.
- To apply for the Company Incorporation
After filing the necessary forms and documents for your company on the MCA website, the regional concerned Registrar of Companies (ROC) will further take it for verification. After verification, a Corporate Identity Number (CIN) will be generated. Finally, you will be receiving your Certificate of Incorporation (COI) issued by the Registrar of Companies (ROC) along with the PAN and the TAN number issued by National Securities Depository Limited (NSDL).
- To apply for Permanent Account Number (PAN) and Tax Collection Account Number (TAN)
During the company registration process, you would have applied for company PAN and Tax Collection Account Number (TAN) through SPICe e-Form. After receiving your Certificate of Incorporation (COI) from the Registrar of Companies you will be intimated about the PAN and the TAN number in the certificate. It may take about 7 working days to receive your PAN and the TAN which will be dispatched to your registered office address.
Do you require any documents for private limited company registration?
For running any form of business organization, you need to have certain documents which are laid down in the Companies Act, 2013. Obviously without these documents, one cannot run the show. The same applies to private limited company registration too.
To register a private limited company in Bangalore or anywhere in India, the rule applies the same. Some key documents like passport, driving license, voter ID card, Aadhaar card, telephone bill, and electricity bill, statement of bank account, rental agreement, Sale deed, and property tax receipt are mandatory. To know more about the documentation procedures, you can visit this Pvt LTD Company Registration page where financial experts are available for consultation.
What happens if the director of a private limited company resigns from the services?
According to Section.168 if a director resigns, a private limited company has to file a return. Further, the director also needs to file a copy of his/her resignation with the Registrar of Companies (ROC). Initially, the word used was ‘shall’. But now it has been replaced with ‘may’. Thus it is at the sole discretion of the director to submit the details ie, he/she may or may not submit the details of his/her resignation to Registrar of Companies. But to be on the safer side it is advisable to do so.
Hope by the time you have read the article, you would have gained a fair knowledge about the private limited company registration. Hope this article has provided you with all the relevant details required with respect to private limited company registration.