Private Limited companies are those companies which are privately held by the people. They are mostly preferred as a common business organization in India. Shareholders may operate the business themselves, or hire directors to manage the company. A private limited company follows a legal structure for businesses.
Characteristics of a private limited company
Number of members
To start a private limited company, a minimum of two members and a maximum of two hundred members are required according to the Companies Act, 2013
The liability of every member or shareholder of a private limited company is limited. This means that if in case the company faces any loss, the shareholders are liable to sell the assets that they own and the personal assets will never be at risk.
The company will continue to exist legally even in case of death, insolvency or bankruptcy. This is called the perpetual existence of a company.
Number of directors
A private limited company needs to have only 2 directors.
A private limited company needs to have a paid-up capital of one lakh.
Detailed information of the company affairs that is issued by the company for the public is called a prospectus. However, it is not mandatory for a pvt ltd company to issue prospectus as the public is not invited to hold shares in the company.
Private limited company shares can be allotted to the public without receiving the minimum subscription.
Choosing an acceptable name is one of the most vital steps in the formation of a private limited company.
The name has to be acceptable and unique. The name that is chosen needs to fulfil the definition given by the Companies Act, 2013. The name chosen cannot be similar to that of an existing company or LLP or trademark in the same industry type.
The name should include an object part where the nature of the business entity should be defined.
Constitution part defines the type of business entity that is defined in the name. It is mandatory for all the private companies to use the word private limited after its name.
Minimum requirements to register a private limited company
- A minimum of two shareholders and directors
- Shareholders and directors can be the same person
- Foreign nationals and NRIs can also be directors as well
- It is mandatory for all directors to have DSC (Digital Signature Certificate)
A pvt ltd company is a company that is the most preferred type of business entity among Angel investors, Venture capitalists and other budgetary organizations. The liability of members of a private limited company is limited by the shares that are held by them.