Private limited company registration or just a firm registration, there are certain things that every startup & business owner should learn before application. You can register your business either with a Private limited company, Limited Liability Partnership (LLP), One Person Company (OPC), Partnership Firm, and Sole Proprietorship.
Although companies registered under Private Limited Companies, One Person Company, and Limited Liability Partnership will get additional benefits. The Companies Act of 2013 governs all limited companies registered under the Ministry of Corporate Affairs (MCA).
What is Private Limited Company?
A private limited company is a sort of business entity that you may establish to conduct your own business. In a Private Limited Company, shareholders own most shares.
This is one of the most common forms of registration, and it is extensively used because it provides more flexibility, minimal responsibility, and high growth potential.
Advantages of a Private Limited Company
The Private limited company concept is a tried-and-true business concept. You’ll hold all the shares of the company. Shareholders can run the company directly or engage directors to do it on their own.
If you are a startup, establishing as a private limited company will provide you with several advantages that will help you bring your concept to fruition. However, it depends on a variety of conditions.
So, here are some advantages of a private limited company;
Limited Liability Protection
Creating a limited liability corporation is a critical first step in protecting your assets. This is the common feature of companies incorporated under the Companies Act 2013.
In another word; If something occurs to the corporation, its shareholders are not impacted; shareholders are solely accountable for unpaid shares. However, fraud is not acceptable…
A Private Limited Company is its legal entity, so the business registered under this formation has perpetual succession. Shareholders’ and employees’ departure does not affect the company as they act as agents of the company.
If the owner dies or resigns, the shares are transferred to the remaining members to ensure business continuity. The company’s Articles of Association handles this.
This not only perks members but also protects employment and assets for the community.
Companies incorporated as private limited incorporation also benefit from lower taxes. These companies pay business taxes on their tax liability and are often excluded from higher personal income tax rates.
Easy Access to funding
Because of the obvious demarcation between shareholders and directors, as well as restricted liability, private limited corporations are readily accommodated for equity finance.
However, with OPCs and LLPs, the situation is unique. Whereas the LLPs need all the members and funds to become partners, the OPC just has one shareholder. So, these structures are unlikely to attract venture capitalists and private equity firms.
You can get more funds from banks and other financial institutions since a Private Limited Company has additional debt-taking choices.
Not only bank loans but the possibility of issuing debentures and convertible debentures is always accessible. You’ll receive more preferences than any other business structure.
Honesty and integrity
The Companies Act of 2013 governs the registration of private limited companies. Anyone may look up the company’s information on the Ministry of Corporate Affairs website (MCA). The capital amount, name of the directors, date of incorporation, and other basic information are made available in the public domain. Hence, Private Limited Companies are more trustworthy and have access to more commercial opportunities.
There are several more benefits to registering your firm as a Private Limited Company, such as business continuity, raising funds, and so on. Although you are aware of most of the advantages now and ready to take a decisions.
Private Limited company registration process
The method for registering your firm as a private limited company is extensive and entails many compliance. We have already added information about the registration procedure on our company registration page.
However, talking in more details;
There are few steps you need to follow in case of a Private Limited Company registration:
1. Getting a Digital signature certificate (DSC)
To file the paperwork via the MCA site, digital signatures are necessary. All prospective directors and subscribers to the memorandum and articles of association must have DSC. The validity of the DSCs is up to 2 years and must renew by CCA.
2. Apply for Director Identification Number (DIN)
DIN is a unique eight-digit number given under Section 153 of the Companies Act. DIN is the identification number of the company’s director. This must be got by any of the members if they are becoming the director of the company.
3. Apply online on the MCA Portal
Create a user account on the MCA portal and for filing an eForm, perform various operations, and pay the specified fees, you must first register a user account.
4. MOA & AOA
During the business registration procedure, applicants must produce charter papers such as the Memorandum of Association (MOA) and Articles of Association (AOA).
5. File a company name
The suggested business name should be distinct plus indicative of the company’s goods and services. It distinguishes them from their opponents in the same business.
For name registration, MCA has launched the RUN (Unique Name Reservation) service. Make certain that the chosen name is unique and fits all the standards outlined in the name proposal criteria. To register the name, the applicant needs to go through this process. If the application is denied, the applicant must resubmit the RUN form and pay the fees.
6. Provide other information on MCA
File Form 1 and submit it on the MCA portal. You will require selecting at least 4 alternative names for your company before you submit the form.
The relative agencies will review the form and process it further. The entire process will take up to 10 days.
The last step is to apply to PAN & TAN.
Documents required for incorporation of company
The required documents for Private Limited Company registration are extremely important because a fault in paperwork can cause a waste of time and effort throughout the entire process.
- Copy of passport-size photos.
- Directors PAN card copy.
- Scanned copy of electricity bill or bank statement for director’s address proof.
- Aadhar or Voter ID cards.
- Email IDs and Mobile numbers.
- Proof of registered office location. You should have electricity bill not older than two months for office address proof. Additional documents like lease deed/rent agreement/NOC. will be required if the office property is on rent.
A Private Limited company can be expansive to incorporate. The fee may vary and that would depend on the number of directors and complexity of the task.
However, by integrating online registration processes and technology, we can now register a private limited company for a far lower charge than you would pay to your typical CA.
Check our company registration page for more information on fee details.