Private Limited Company is the most prevalent and popular type of corporate legal entity in India. Private limited company is governed by the Companies Act 2013. Today, startup and young generation entrepreneurs prefer private companies over traditional proprietorship and partnership firms due to its many advantages.

1. Features of the Private Company

  1. Members – Minimum 2 members and maximum 200 members.
  2. Directors – Minimum two directors for private company.
  3. Paid up capital – Private Companies can be start with Rs. 2/-.
  4. Limited Liability – The liability of each member is limited upto unpaid amount of shares.
  5. Name – Must include ‘private limited’ after its name.

2. Benefits of Private Companies

Separate Legal Entity – A company is a legal entity and a juristic person established under the Companies Act.

Limited Liability – Unlike proprietorships and partnerships, in a limited liability company the liability of the members in respect of the company’s debts is limited only upto the unpaid amount of shares.

Easy transferability of shares – Shares of a company limited by shares are easily transferable by a shareholder to any other person. So, it provides easy mechanism to enter and exit the company.

Borrowing Capacity – A company enjoys better avenues for borrowing of funds. Banking and Financial Institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.

Trusts of foreign parties – Foreigners prefer to deal with the registered companies. So, Companies create trust and preference for import and export.

Low Tax Rate – Tax rate on Companies having turnover upto Rs. 250 crore is reduced to 25% unlike partnership firms which is tax rate having 30%.

3. Process of Incorporation 

a. Get Digital Signature of Proposed Directors and First Subscribers 

Get Class 2 DSC of first subscribers and Directors from the Certified Authority or consultants. 

b. Apply for Name Approval 

File “Reserve Unique Name” in MCA Portal. RUN is an online form in which applicants have to fill the information like proposed name, activity and type of company online. You can attach proposed object and NOC of trademark owner, if proposed name is subject to trademark. You can propose maximum 2 names and the fees of RUN is Rs. 1000/-. Name reserved shall be valid for 20 days from the date of approval of Name.

c. Preparation of Documents for Incorporation of Company

After approval of name or for Incorporation of Company applicant have to prepare the following below mentioned Documents:

  • INC-9: Self Declaration by first subscribers and directors (on plain paper);
  • DIR-2: Declaration from first Directors along with Copy of Proof of Identity and residential address (On plain paper);
  • NOC from the owner of the property;
  • Proof of Registered office address (Conveyance/Lease deed/Rent Agreement etc);
  • Copy of the Electricity/Telephone/Municipality Tax bills (not older than two months);
  • PAN Card and Aadhar Card of all Subscribers and Directors;

d. Filling Incorporation Form Online

Once all the above mentioned documents are executed then applicant has to fill the information in the e-form SPICe -32, E-MOA and E-AOA in 33 and 34. SPICe form is a single window clearance form and use for the following purposes:

  • Application of DIN (up to 3 Directors)
  • Application for Availability of Name
  • No need to file separate form for first Director (DIR-12)
  • No need to file separate form for address of registered office (INC-22)
  • No need to file separate form for PAN & TAN

4. Post Incorporation Compliances

  • Open Bank Account
  • Appoint Auditor for book-keeping and Auditing (CA)
  • Appoint CS for Corporate Law Compliances, Consultancy and to avoid heavy penalties
  • File TDS Returns quarterly
  • File GST Return Monthly/Quarterly (If turnover exceeds Rs. 20 Lacs)
  • File Income Tax Return upto 30th September
  • File Tax Audit Report upto 30th September (If Turnover exceeds Rs. 1 crore)
  • File Audit Report, Balance Sheet and Annual Return with ROC within 30th October
  • Intimate changes in Directors, Shareholders, Auditors, Registered office, Loans, Capital etc to the ROC.

Author Bio

Qualification: CS
Company: DVG & Associates
Location: Mumbai, Maharashtra, IN
Member Since: 02 Feb 2018 | Total Posts: 50
CS Dhaval Gusani is a founder of DVG & Associates, Company Secretaries and Corporate Law Professionals. He is a Commerce Graduate and an Associate Member of the Institute of Company Secretaries of India (ICSI). He has cumulative experience of more than 3 years with Listed Company, Chartered Acco View Full Profile

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