Private Limited Company Incorporation
A private limited company, is a type of privately held small business entity. This type of business entity limits owner liability to their shares, limits the number of shareholders to 200, and restricts shareholders from publicly trading shares.
Documents Required from Directors, Shareholders
Documents Required for Registered Office Address
What is a Private Limited Company?
As Per Section 2 (68) of The Companies Act, 2013
“Private Company” means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed, and
which by its articles,—
(i) restricts the right to transfer its shares;
(ii) Except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
1. persons who are in the employment of the company; and
2. persons who, having been formerly in the employment of the company, were members of the company while in that employment and have
continued to be members after the employment ceased, shall not be included in the number of members;
(iii) Prohibits any invitation to the public to subscribe for any securities of the company
Advantages of a Private Limited Company?
Separate Legal Entity
An entity means something which has a real existence; a thing with distinct existence. A company is a legal entity and a juristic person established under the Act. A juristic person is a person who is not a natural person or human being. Therefore a company form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts. Hence, a pvt ltd company is a legal entity separate from that of its members.
A company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership. Perpetual succession is one of the most important characteristics of a company.
Limited Liability means the status of being legally responsible only to a limited amount for debts of a company. Unlike proprietorships and partnerships, in a limited liability company the liability of the members in respect of the company’s debts is limited. In other words, the liability of the members of a company is limited only to the extent of the face value of shares taken up by them. Therefore, where a company is limited by shares, the liability of the members on a winding-up is limited to the amount unpaid on their shares.
Free & Easy transferability of shares
Shares of a company limited by shares are transferable by a shareholder t any other person. The transfer is easy as compared to the transfer of interest in business run as a proprietary concern or a partnership. Filing and signing a share transfer form and handing over the buyer of the shares along with share certificate can easily transfer shares.
A company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No shareholder can make any claim upon the property of the company so long as the company is a going concern. The shareholders are not the owners of the company’s property. The company itself is the true owner.
Capacity to sue and be sued
To sue means to institute legal proceedings against or to bring a suit in a court of law. Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and also be sued in its own name.
In the company form of organization it is possible for a company to make a valid and effective contract with any of tis members. It is also possible for a person to be in control of a company and at the same time be in its employment. Thus, a person can at the same time be a shareholder, creditor, director and also an employee of the company.
A company enjoys better avenues for borrowing of funds. It can issue debentures, secured as well as unsecured and can also accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.
Source : https://www.indiafilings.com/learn/advantages-private-limited-company/
Disadvantages of Private Limited Company
Private limited company is an ideal business entity for a majority of medium and large sized business, as it offers a host of advantages from liability protection to easy transferability. However, operating as a private limited company is not ideal for all businesses, especially micro or small enterprises. In this article, we look at some of the disadvantages of a private limited company.
Private limited company registration on average takes about 10 – 15 days and costs is higher than any other registration. Hence, registering a private limited company involves a process and costs which are not applicable for an unregistered entity like proprietorship. However, once registered, private limited company enjoys a wide variety of powers and rights, making process for opening bank account or getting a payment gateway, easy. Proprietorships or partnership firms often encounter difficulty post registration while having to open bank account or obtain a payment gateway, as they are considered to be unregistered business entities.
A private limited company requires a range of compliance post incorporation. All companies are required to hold board meetings, general meetings, get the accounts audited, maintain statutory register and file annual return with the Ministry of Corporate Affairs each year. In addition to the corporate compliance formalities, a company would also have to maintain compliance with tax and labour laws, which are applicable irrespective of the type of business entity.
Division of Ownership
A major disadvantage of private limited company is that it requires a minimum of two persons to act as Directors and shareholders. So, any sole entrepreneur who wishes to start and operate a business by him/herself cannot start a private limited company. Hence, any major decision to be taken by a company would always require the consent of two persons. The company would also need to have two shareholders, even if one person hold a negligible amount of shareholding.
To empower entrepreneurs who wish to start and operate a business by themselves, the Government introduced the concept of One Person Company. However, a one person company also has a few disadvantages, key being a mandatory requirement to convert to private limited company on crossing an annual sales turnover of Rs.2 crores.
The company itself is fully liable for its debt and has unlimited liability. Only the members of a company enjoy limited liability protection. However, in some cases as follows, personal liability of directors and members would also arise:
When in any act or contract, the name of the company has been mis-described, those who have actually done the act or made the contract, shall be personally liable for it;
when in the course of winding up of a company, any business of the company has been carried out to defraud the creditors, persons who are knowingly parties to such conduct shall be personally liable for the debts of the company;
Winding Up of Company
The procedure for winding up of a company can be complicated, time consuming and costly, when compared to a unregistered partnership firm. Hence, its important to register a company only when the promoters are serious about using the company to operate a business.
Compay Incorporation Process
How long does it take?
How does it works?
- Our expert will understand your requirements
- They will provide basic details and documents list required for registration
Make the Payment
- You make the initial fee payment through secure payment gateway towards stamp duty and out of pocket expenses.
Application for company registration
- Application for company name registration under SPICe+
- Procurement of Digital Signature Certificate (DSC)
- Documents drafting including MOA and AOA
- Application for Company registration
- Application PAN and TAN