Private Limited Company Registration in India
In India, company registration can be completed online through Indiabizfiling. Private limited company is the most common type of legal entity that is preferred by millions of Indian Entrepreneurs and popular startups like Flipkart, PhonePe and Swiggy. A private limited company can be registered online in less than 10 days at a very affordable price of just Rs. 7999.
What is a Private Limited Company?
A Private Limited Company (PLC) is one of the most common types of legal entity in India. Private Limited Companies are governed by the Companies Act, 2013 and require a minimum of 2 Directors and 2 Shareholders with one of the Directors being an Indian Resident and Indian Citizen.
To register a company in India, the following are minimum requirements:
- 2 Directors – 1 Person should be an Indian National and Indian Resident
- 2 Shareholders – The Directors can be shareholders
- Registered Office in India
100% Foreign Direct Ownership (FDI) is permitted in most sectors in India and there is no restriction on foreign shareholding of a private limited company. Hence, most foreign subsidiaries are established in India as private limited company.
Documents Required for Company Registration
The proposed directors of a private limited company must present the following documents as proof of identification in order to register a company:
Indian Nationals: PAN card mandatory
Foreign Nationals: Passport is mandatory
In addition to the above document, the Directors must submit one of the following documents that contain the address of the Director.
Indian Nationals: Passport / Driver’s License / Election ID / Ration Card / Aadhar ID
Foreign Nationals: Drivers License / Bank Statement / Residence Card
Finally, as proof of residency, the prospective Directors must produce one of the following documents. This document must have been generated within the last two months:
Indian Nationals: Bank Statement / Electricity Bill / Phone Bill
Foreign Nationals: Bank Statement / Electricity Bill / Phone Bill
If one of the company’s shareholders is a company based in India or abroad, the following documents must be submitted:
- Board resolution authorizing investment in the company
- Incorporation Certificate of the Company
- Address proof of the company
Capital Required to Start a Company
A company can be started in India with a very minimum amount of capital. There is no fixed amount and the shareholders of the company being incorporated can determine the capital they wish to contribute. While setting up the capital structure of the company, the following are some of the concepts to be kept in mind:
Face Value of Share: The face value of a share is the price per share with which the company is incorporated. Normally, the face value of share is Rs. 1 or Rs. 10 or Rs. 100 or Rs. 1000 or Rs. 10,000.
Authorised Capital: Authorised capital is the total value of shares a company can issue to shareholders. Normally, all companies are incorporated with an authorized capital of Rs. 1 lakh or Rs. 10 lakhs. If a higher authorized capital is required, the company would be required to pay additional fees to the Ministry of Corporate Affairs. The authorised capital of a company can be increased at any time after incorporation.
Paid-up Capital: Paid-up capital of a company is the number of shares issued to shareholders for which they have paid or deposited money to the company. Paid-up capital of a company cannot be more than the authorized share capital of the company.
Company Registration Process
The following are the steps involved in registering a company in India:
Step 1: RUN Name Approval
An application for company name approval is first submitted to the Ministry of Corporate Affairs to reserve the company name. In the name approval application, 1 or 2 names with business objectives can be submitted. If a name approval is rejected, 1 or 2 more names can be resubmitted. Normally, the MCA approves all name approval applications in less than 5 working days.
Step 2: Digital Signature for Directors
In India, the Ministry of Corporate Affairs does not allow wet signatures. All signatures for filings with the MCA must be completed with a digital signature that is issued by a Certification Authority in India. Hence, digital signatures are mandatorily required for the Directors before incorporation.
Digital signature for the Directors will be obtained through an Authorized Certifying Authority by Indiabizfiling. To obtain Digital Signature, the Directors will have to submit a copy of their identity proof and complete a video KYC process. If the Director is a foreign national, the passport and other documents submitted must be apostilled by a local embassy.
Step 3: Incorporation Application Submission
Once the digital signatures are obtained, the incorporation application can be filed in SPICe Form to the MCA with all relevant attachments. Along with the incorporation application, the Memorandum of Association (MOA) and Articles of Association (AOA) of the company are filed. If the MCA finds the incorporation application to be complete and acceptable, the Incorporation Certificate is granted along with PAN of the company. The MCA normally accepts all incorporation applications in less than 5 working days.
Private Limited Company Compliances
Once a company is registered in India, various compliances must be maintained from time to time to avoid penalties and prosecution. The following are some of the compliances a company would be required to complete after company registration:
Auditor Appointment: All companies registered in India must appoint a practicing and licensed Chartered Accountant registered with the ICAI within 30 days of incorporation.
Director DIN KYC: All persons who hold a Director Identification Number (DIN) – which is allocated during the incorporation process must complete DIN KYC each year to validate the phone and email address on record with the Ministry of Corporate Affairs.
Commencement of Business: Within 180 days of incorporation, the company must open a Bank Current Account and the shareholders must deposit the subscription amount mentioned in the MOA of the company. Hence, if the company was to be incorporated with a paid-up capital of Rs. 1 lakh, then the shareholders must deposit Rs. 1 lakh in the Company’s bank account and file the bank statement with the MCA to obtain a commencement of business certificate.
MCA Annual Filings: All companies registered in India must file a copy of the financial statements with the Ministry of Corporate Affairs each financial year. If a company is incorporated between January – March, the company can choose to file the first MCA annual return as a part of the next financial year’s annual filing. MCA annual return consists of Form MGT-7 and Form AOC-4. Both these forms must be digitally signed by the Directors and a practising professional.
Income Tax Filing: All companies must file an income tax return using Form ITR-6 each financial year. Income tax filing must be done for each financial year before the due date – irrespective of the incorporation date. The income tax return of a company must be digitally signed using one of the Director’s digital signature.
Registered Office of Company
All companies registered in India are required to maintain a registered office in India. The registered office must have a board with the name of the company and should be a place where notice or communication if any can be served. Hence, the registered office of a company cannot be vacant land or under construction premises.
After incorporation, the registered office of a company can be changed if required. In case the registered office is changed within the same city or same Registrar of Company, the process can be completed easily. In case the registered office of a company is changed from one state to another, the process would be longer and more cumbersome.
GST Registration after Company Registration
During the company registration process, the Directors can opt to obtain GST registration along with the incorporation. However, it is not mandatory for a company to be registered under the GST unless certain turnover limits are crossed. You can know more about the turnover limit and process for obtaining GST registration in our detailed guide on GST registration in India.
GO TO GST REGISTRATION
Bank Account for Private Limited Company
After company registration, a bank current account must be opened in the name of the company within 180 days and the subscription amount must be deposited. If the above steps are not completed, the commencement of business certificate would not be issued and a penalty would be applicable.
The following are documents required to open bank account for a private limited company:
- Incorporation Certificate of Company
- Directors KYC Documents
- Board Resolution Authorizing the Directors to open Bank Account
- Address Proof of the Company
At Indiabizfiling, we work with various banks to help our clients open a current accounts for their companies in a seamless fashion.
Advantages of Private Limited Company
The following are the major advantages of incorporating a private limited company in India versus other entity types.
Separate Legal Entity
A company is both a legal entity and a juristic person. Therefore, a company has broad legal rights to like acquiring property, incurring debts, hiring people, etc. As a company is a separate legal entity, the company’s members (shareholders or directors) are not personally liable for the company’s liability.
A private limited company is a separate legal entity with limited liability provisions. Therefore, the shareholders are not liable for the losses of the company – for an amount more than what was invested by them into the company as share capital.
A company has ‘perpetual succession,’ which means it will continue to exist until it is legally dissolved. Because a company is a separate legal entity, it is unaffected by the death or other departure of any of its members, and it continues to exist regardless of membership changes.
A private limited company has multiple options for fundraising. A company can raise funds from shareholders, investors, angels, venture capital funds, private equity funds, foreign funds, NBFCs, banks and other financial institutions. Only a company can raise debt and equity funds from investors.
Disadvantages of Private Limited Company
While a company has various advantages, registering a company may not be ideal for all entrepreneurs due to the following reasons:
A company has to mandatorily maintain various compliances irrespective of business turnover or activity. Hence, operating a company involves a minimum recurring cost each year.
Documents Required For Private Limited Company
PAN is mandatory for Indian Directors.
Passport (Foreign Nationals Only)
Passport is mandatory for Foreign Directors or Shareholders.
Aadhaar is mandatory for Indian Directors.
Foreign Government – Address Proof
Any document issued by a Foreign Government having photo and address of the Director or Shareholder.
Latest bank statement of the Directors and Shareholders.
Latest Electricity Bill
Latest electricity bill for the registered office premises.
Latest Telephone Bill
Latest telephone bill for the registered office premises. Electricity bill preferred.
Latest Mobile Bill
Latest mobile bill for the registered office premises. Electricity bill preferred.
Board Resolution Authorising Investment
If the proposed shareholder is another company or legal entity.
Investing Company Address Proof
If the proposed shareholder is another company or legal entity.
Passport Size Photo
Passport size photo of the Directors and Individual Shareholders.
Recent Utility Bill
Proprietorship vs Limited Liability Partnership (LLP) vs Company
Unregistered type of business entity managed by one single person
A formal agreement between two or more parties to manage and operate a business
A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company.
Registered type of entity with limited liability to the owners and shareholders
· Sole Ownership
· Min 2 Partners
· Max 50 Partners
· Designated Partners
· Min 2 Directors
· Min 2 Shareholders
· Max 15 Directors
· Max 200 Shareholders
For One Person Company
· 1 Director
· 1 Nominee Director
7-9 working days
· GST Registration
· Partnership Deed
· LLP Deed
· Incorporation Certificate
· Incorporation Certificate
Under Partnership Act
LLP Act, 2008
Under Companies Act,2013
Transferable if registered under ROF
· Income tax filing if turnover is more than Rs.2.5 lakhs
· ITR 5
· Form 11
· Form 8
· ITR 5
· ITR 6
· MCA filing
Private Limited Company FAQ’s
1. What is authorized capital and paid-up capital?
Authorized capital is the maximum value of equity shares that can be issued by a company. On the other hand, paid up capital is the amount of shares issued by the company to shareholders. Authorized capital can be increased any time after incorporation to issue additional shares to the shareholders.
2. What is limited liability protection?
Limited liability is the status of being legally responsible only for a limited amount of debts of a company. Unlike proprietorships and partnerships, the liability of the shareholders with respect to the company’s liabilities is limited.
3. How do I open a current account?
Once the company is incorporated, a current account needs to be opened in the name of the company for transactions. Your advisor will guide you through the process of choosing the bank that you want to open the account with and get the documents like certificate of incorporation, Memorandum and Articles of Association, board resolution, copy of PAN allotment letter, and utility bill.
4. Can NRIs or foreign national or foreign entities register a company in India?
Yes, NRIs, foreign nationals, and foreign entities can register a company and invest in India, subject to the Foreign Direct Investment norms set by the RBI. However, incorporation rules in India require for one Indian national to mandatorily be a part of the company on the Board of Directors.
5. How do I check the availability of names for my company?
You can use the Indiabizfiling company name availability search tab to search for available names in India. It is important to note that Indiabizfiling would just provide available choices, based on identical names already registered.
6. Is GST registration mandatory at this stage?
GST registration is mandatory for certain businesses. Companies dealing with e-commerce operations or any other interstate activity and companies with turnover of more than Rs. 40 Lakhs are required to obtain the same. GST registration takes just 3-5 working days with Indiabizfiling.
7. What are the compliances of a Private Limited Company?
A company is required to maintain certain compliances once it is incorporated. An auditor needs to be appointed within 30 days and income tax filing and annual return filing need to be done every year. Apart from these, mandatory compliances like ‘Commencement of Business’ forms, and DIN eKYC also need to be done.
8. When is the statutory auditor to be appointed?
The Board of Directors is required to appoint a practicing Chartered Accountant within 30 days of Incorporating a Private Limited Company.
9. Which Form is to be filed for the ITR filing of Private Limited Company?
The Private Limited Companies that are registered in India have to file the ITR returns each year in Form ITR 6.
10. Which form is to be filed for filing the annual returns of a Company?
The companies registered in India are required to file the MCA annual return each year informs AOC 4 and MGT 7.
11. How many members are required to start a Private Limited Company?
Minimum 2 number of members are required to start a Private Limited Company which can be extended to 200 members.
12. How can ownership be transferred?
The ownership of a Private Limited Company can be transferred by the way of shares.
13. How are the Companies taxed? What are the tax rates?
Private Limited Companies are taxed at 30% plus the surcharge and cess as applicable.
14. Who governs and controls the functioning of a Private Limited Company?
The MCA and Companies Act,2013 controls the functioning of a Private Limited Company.
15. What are the benefits of registering a Private Limited Company?
There are various of registering as a Private Limited Company like Limited Liability, Access to funding, borrowing capacity, greater capacity, easy exit, and scope of multiple opportunities.