Private Limited Company
A private limited company is a privately held small business entity and limits owner liability to their shares. The minimum no. of members is 2 and maximum is 200 with a minimum paid up share capital of 1,00,000/- and which by its articles restricts the right to transfer its shares. Where 2 or more persons hold one or more shares in a company is treated as a single member.
Advantages of Private Limited Company:
Limit the risk to Personal Assets
- With the limited liability protection, the assets of the business are at risk and not the promoter’s personal assets such as personal bank accounts, cars and houses.
Improve Business Credibility
- The information relating to the company, such as name of the company, date of incorporation, registered office address, status of the company, and other information are made available in a publicly searchable database. This feature makes it easy to authenticate the existence of the business, improving business credibility.
- Private limited company has a better scope for funds. It can borrow in its own capacity from banking and financial institutions. It can also debentures, secured as well as unsecured and accepts deposits from the public.
Separate Legal entity
- A Private limited company is a separate legal entity from that of its owners. It can own property in its own name and can also incur debts. The members (shareholders/directors) have no liability to the creditors of the company.
- A Private Limited company is unaffected by the death or departure of any member. It is considered as a separate legal entity and continues to remain in existence.
An Exit Plan
- Private limited companies offer the best type of exit strategy for all promoters. Only shares of a company can be sold or transferred in part or whole to another entity easily without any hassles, while the business remains a going concern. Therefore, starting a private limited company provides a tremendous edge in planning and executing a business exit plan.
FAQ on Private Limited Company:
Why Private Limited Company?
- Reasons to choose private limited company are:
- Number of people required to form a company are low.
- Limited liability of members.
- Further, private limited company can be converted into public limited company but llp cannot be converted into private limited company.
- Limit the risk to personal assets.
- Continued Existence irrespective of its members.
What are the types of private limited company?
- Limited by Guarantee: It is a company without shares but is guaranteed by the members who agree to pay a fixed amount of capital in the event of the company liquidation.
- Limited by Shares: The company has shareholders with limited liability and its shares are not generally offered to public.
How many directors are required to form a private limited company?
- A minimum of 2 which cannot exceed 15.
What are the documents required to start a private limited company?
- PAN Card
- ID-proof (Voter ID/Aadhar Card/Driving License/Passport)-Any 1 of Directors
- Address Proof (Electricity Bill/Telephone Bill/Bank Statement)-Any 1 e)
- For Residential Address:
- Rent agreement along with latest rent receipt (in case premises are rented)
- House Tax Receipts (in case premises is owned)
- Electricity Bill
- NOC from the owner (for format)
Is an office space required to open a company?
- No, the company can be opened with the residential address also.
What is Digital Signature Certificate?
- Digital Signature Certificate (DSC) is an electronic signature, which is in the form of codes. It is used for signing electronic forms, filed with ROC. It cannot be used in physical forms.
What is Director Identification Number (DIN)?
- It is a unique identification no. required to be mentioned in all documents by the director of the company. A director after obtaining DIN shall have to inform the company.
What is MOA and AOA of company?
- MOA mean Memorandum of Association and AOA is Articles of Association. These are the bylaws or rules which defines the objects, scope and legal liabilities of the company. Any company registered with Taxoservice, we will be providing a hard copy of MOA and AOA along with a soft copy.
Can the registered address of the company be changed?
- Yes, the registered address can be changed anytime after incorporation.
Does the capital amount have to be deposited in a bank account?
- Yes, a bank account need to be opened after the company is incorporated and the capital need to be deposited within 2 months of incorporation.
How long is the company valid for?
- Once a Company is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time. A struck-off Company can be revived for a period of upto 20 years.
What are the basic requirements for naming a company?
- First ensure that company name is not similar to any other Private Limited, OPC, LLP or Public limited company. Also, do check if your first is not a registered trademark taken by anybody under the IP Act. Also, make sure the name is not too generic; try not to use abbreviations, adjectives. While choosing the name make sure that name should contain the objective of the business like if the objective is consultancy or technology then word is Technology, Technosoft, IT consultancy.
What are the steps required to incorporate a private limited company?
- Getting DSC(Digital Signature Certificate) and DIN(Director Identification Number)
- Approving the name of the Company • Registering the Company address
- Drafting MOA(Memorandum Of Association) & AOA(Article of Association)
- Filing of e-form(INC-7) with the ROC(Registrar Of Company)
- Payment of ROC fees & getting a stamp on the documents.
- Verification by the ROC
- Finally the certificate of incorporation to be given by ROC
Does PF, Service Tax, VAT is automatically applicable to private limited company?
- No, these are applicable after certain threshold limits are crossed.
What is Certificate of Incorporation?
- This certificate is issued by ROC to document the incorporation of the company. The certificate will record the company name, number and date the company is incorporated.