Private Limited Company Registration

Private limited company

If you have a great business idea and want to bring it to life. You might have come across this term "Private limited company" but what is a private limited company and why you might choose to form one? Just take a look at this.

The word 'private' simply denotes that the public cannot be allowed to purchase its shares and 'Limited' denotes that liabilities of the directors and shareholders are Limited. A private limited company or LTD is basically a privately held small business entity. This type of entity limits the owner liability to their shares, Limit the number of shareholders to 50 and also limit the shareholders from publicly trading shares. The owner of the company will not be involved in this. The company is registered into the contracts by the company's official name and the company's owner is not liable to take any actions or finances. The company itself is responsible for any kind of actions, Finances, and liabilities. It must have a minimum of 2 shareholders and 2 directors. 10-12 working days are needed to register a private limited company, subject to the government processing time and the client document submission.

A private limited company is a type of company that offers limited liability or legal protection to the shareholders of the company but that places certain restrictions on its ownership. These restrictions are also defined in the company's regulations and bylaws and are meant to prevent any hostile takeover attempt. A private restricted organization is viewed as a standout amongst most prominent corporate element among the entire little, medium, and the extensive organization in India because of its different point of interests.

Registration of private limited company is governed by the ministry of corporate affairs under the companies act, 2013 and the companies incorporation Rules, 2014. The private restricted business has many unique features i.e. ability to raise the equity funds, limited liability protection to shareholders, Separate legal entity status and the perpetual existence. This makes the firm as one of the most recommended types of business entities for the small and medium-sized of businesses that are owned by the professionally managed people. A minimum paid up share capital of private limited company is one lakh rupees. So before starting the business, the owners need to invest a minimum of one lakh rupees as the capital of their own pocket. Corporations over other legal entities prefer private limited companies more. In India, 900 LLP's and 8000 Companies are registered on an average on a monthly basis.

A private limited company is the most popular legal structure for business in India. It should be chosen by everyone who is establishing a corporate entity and raise funds in the future. An example of a private limited company is often local retailers such as a shop or a restaurant, that does not have a national presence

Pvt. Ltd Company is ideal for

  1. Entrepreneurs who want a separate legal entity with perpetual succession and limited liability

  2. An entrepreneur who wants to issue ESOP's (Employee stock ownership plan) to their employees

What are the restrictions imposed on the owners of a company

  • The company's shareholders cannot sell or transfer their shares without offering them to the other shareholders for purchase.

  • The number of shareholders cannot exceed 50.

  • Shareholders cannot offer their shares to the general public over the stock exchange.

There are two different kinds of a private limited company

1. Private Limited company by shares

This means that the company is owned by the shareholders and the liability of each +shareholder is limited to the original value of the shares that are issued to them.

2. Private Limited company by guarantee

When a company is limited by guarantee, it means it has members who act as its guarantors. When a company is in trouble these members contribute an amount that was previously agreed in order to support the company.

When you are setting up your business it’s a good idea to look into the future to decide where you want to be and where you wish to take your business. If you want to grow your business setting up a private limited company will be a great idea and will help you to share a load.

Who can set up a private limited company?

The owners of a private limited company are the shareholders and each shareholder holds a certain number of shares in the business. This means you can set up a private limited company by yourself. You would own 100% of the shares or diving the shared available shares between the shareholders. To become a shareholder you must purchase one or more shares that are issued by the company and these shares are issued when you form the company with each share representing an equal percentage of the business.

Additional shares can be issued after the business is incorporated. More the shares you hold, Larger the business percentage you own.

Advantages of Private limited company

1. Limited Liability

One advantage of a private limited company is that shareholders financial liability is limited to their shares. So if a private limited company is in trouble and has to close shareholders would not risk losing their personal assets.

2. Restricted trade of shares

Restrictions imposed on the sale or transfer of shares is an advantage or disadvantage depends on your outlook. It is n advantage for some shareholders because shareholders who want to sell shares cannot sell them to outside buyers. It is also a disadvantage as shareholders have limited options for liquidating shares.

3. Continued Existence

Another advantage of a private limited company is that even after the owner dies or leaves the business private limited company is continued unlike others such as sole proprietorship leave its existence after the death of owner.

4. Easily transferable

You can easily transfer ownership of a business by simply transferring the shares of the firm. The filling, signing and transfer of a share transfer form and the share certificates are sufficient to transfer the ownership of an organization.

5. Finance and Resources

When more resources of large-scale production are required for a business. Registering the individual firm in India protects the interest of the lenders. One can also raise funds with such type of company registration. A company can produce goods at a lower price with adequate funding and thus it helps in increasing the profit and also customer satisfaction.

Disadvantages of Private limited company

1. High cost

Registering with the company's house you have to pay a fee. These firms require a high set up cost as compare to other firms in running such big companies.

2. Shared profit

The profits of a private limited company are shared among shareholders into the business but on the other hand, private limited companies benefit from this because more the investments more will be the profit.

3. Company account

When you are registered as a private limited company. The financial information you file is more complex. However, this information will also help you to keep an eye on the company's productivity and profitability.

4. Decision making

Making a decision in private limited company is difficult because of the involvement of other directors in the decision making.

Documents required for private limited company Registration
  1. PAN Of all directors

  2. Voter Id / Driving License / Passport Of All Directors

  3. Bank Statement Of All Directors

  4. Electricity Bill Of Business Premises

  5. Passport Size Photo of all Directors

  6. NOC from land lord (format will be provided by us)

Private limited company registration fees in India

An approximate of Rs. 10,000/- inclusive of all documents without including the fee charged by the accountant is required for this type of company registration. If in case you are not doing any transaction in your company, then you don’t have to file any return.

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