Private Limited Company

The most common business and startup structure is the private limited company. Private Limited Companies readily accept Foreign Direct Investment and outside finance.  All businesses operating in India are required by law to register. With the help of Lawgical Adda, let us attempt to understand the process of registering a private company in India. 

The Ministry of Corporate Affairs (MCA) website offers online registration for private limited companies in India. 

The procedure entails filing the company's articles of association and memorandum of association, receiving a Certificate of Incorporation, and acquiring a Digital Signature Certificate (DSC) and Director Identification Number (DIN). Entrepreneurs choose private limited companies because of their higher legal standing, simplicity of capital raising, and limited liability.

 The quick and easy online registration process can be completed in a few days if all the paperwork is in place. For private limited companies, a minimum of two directors and shareholders and an authorized capital of Rs. 1 lakh are necessary. 

Obtaining a Digital Signature (DSC) application

A DSC is needed for your private limited business to submit the essential forms for company formation.  In accordance with the Memorandum of Association (MOA) and Articles of Association (AOA), this DSC is required for all subscribers and witnesses.  

You must first get digital signature certifications from any government-recognized certifying authority, such as the IDRBT Certifying Authority, the National Informatics Center (NIC), and many others, to receive this DSC.  As a result, the precise cost of getting your DSC depends on the certifying body you choose and the payment method you require.  

Getting the name of your company approved

Your firm's name is crucial for registering a private limited company in India, even if it seems minor. It establishes your brand and how the public perceives your organization. Thus, there are also two primary approaches to the problem of getting name approval.  

First, on February 23, 2020, the Ministry of Corporate Affairs (MCA) launched the SPICe+ web service, which enables businesses to incorporate online. Part A of this form offers the option to reserve a name.  This reservation enables the company to obtain two suggested names and one resubmitted name.  Consequently, your company may reserve a distinctive name under Part A of SPICe+ Form. 

But, if your company name is rejected because it sounds too close to the names of already registered businesses or trademarks, you must submit another SPICe+ form and a charge. You can also register your company name by simultaneously submitting Part A and Part B of the SPICe+ form.   However, only one business name may be included in this combined application for name recognition and incorporation.  It takes two to three days to complete the entire name approval and incorporation process. 

Incorporating your company

Your business must now be incorporated using Part B of the same form if you decide to go with the first choice and have successfully filed your business name through Part A of Form SPICe+.  The effectiveness and ease of the entire incorporation procedure can be increased by conducting this process online.  

Part B of the most recent SPICe+ form combines multiple applications into a single submission. Therefore, after filling out the SPICe+ form, the business should download it in PDF format and attach its unique DSC so that the form may be digitally signed.  A qualified individual's digital signature is also required.

The electronic versions of the articles of association (e-AoA) and memorandum of association (e-MoA)

The e-MoA (INC-33) and e-AoA (INC-34) are forms designed to ensure that India's new business registration process remains easy and uncomplicated. The e-MoA contains the company's charter, and the e-AoA contains all internal policies and procedures.  

These articles of association and memorandum of association, which previously had to be filed in person, can now be submitted electronically as a form connected to the SPICe+ form that was previously described. Please be aware, nevertheless, that subscribers to the Memorandum and Articles of Association must digitally sign both of these forms.

Application for Tax Deduction Account Number (TAN) and Permanent Account Number (PAN)

As mentioned, the SPICe+ form is the only way to complete the PAN and TAN application. The web system will automatically generate the appropriate forms after your SPICe+ form has been filed. When your SPICe+ form has been approved, the income tax department of India issues a certificate of incorporation with your PAN for your private limited company. Following that, your business will receive its PAN and TAN cards from the income tax authorities, allowing you to start operating your business formally.  

Documents Required for Private Company Registration

1. Documentation belonging to the directors, owners of the business
2. Identification of each director and the company's owners. Any of the following records may be presented as proof of identity:

• The pan card
• The Aadhar card
• Driver’s license
• The passport

Proof of address is required for all directors and shareholders. You can use any of the following documents as evidence of your address:

1. The latest phone bill (no more than two months old)
2. The latest electricity bill, no more than two months old
3. Addressed bank account statement DSC of each director and DIN 

Documentation for the company/LLP

The following documents must provide proof of the company's address:

• The lease between the business or LLP and the landlord
• A letter or NOC from the landlord approving the use of the space as the LLP or company's registered office.
• Sale document for office space in the name of the firm or LLP
• The company's objectives and the members' responsibilities are described in the Memorandum of Association (MoA), which also serves as the company's incorporation document.

Benefits of a Private Limited Company

Absence of a Minimum Capital

No minimum capital is needed to establish a private limited company. A mere 10,000 rupees can be used as the authorized share capital to form a Private Limited Company.

Independent Legal Body

The assets and liabilities of a Private Limited Company are distinct from the assets and liabilities of the Directors since the former is a different legal entity in court. Each is valued differently. 

Restricted Liability

Members' assets will not be used to settle the company's debts if it experiences financial difficulties since their responsibility is limited.

Fund Raising

The only company structure allowed to raise capital from venture capitalists or angel investors in India is a Private Limited Company, except for Public Limited Companies.

Share transfers are simple and free.

A shareholder may transfer their shares to any other individual in a firm restricted by shares. The transfer is simpler than transferring an interest in a company operated as a partnership or a private concern. Shares can be transferred easily by completing and signing a share transfer form and then giving the buyer of the shares the paperwork and a share certificate.

FDI Permitted

100% Foreign Direct Investment is permitted in Private Limited Companies, which implies that any foreign business or individual may make direct investments in a Private Limited Company.