15 Jun 2019

How to Open a Private Limited Company

by | posted in: Companies Act, Compliance | 1
Open a Private Limited Company

How to Open A Private Limited Company

This article is about how to open a private limited company in India. When starting a business, the first thing to do is decide on the organisational structure. The earlier stages of establishing a business are quite crucial. The various options one would come across while choosing the structure would be –
  1. Private Limited Company
  2. One Person Company
  3. Limited Liability Partnership (LLP)
  4. Partnership firm
  5. Proprietorship
In truth, most would prefer to open a private limited company. In this article we share the procedure to open a private limited company in brief. We also share some the legal formaties involved in the entire process.

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How to Open a Private Limited company

Background

There are 2 parties required to open a private limited company. The Directors and shareholders. A private limited company at minimum needs 2 directors and 2 shareholders. The Subscriber is the promoter of the company and the proposed shareholder. The shareholders file e-MOA and e-AOA by affixing DSCs.

The following steps are a guide to open a private limited company in India.

Step 1: Digital Signature Certificate Application

Indeed in the first step of the process, we apply for DSCs. That is, Digital Signature Certificates (DSC). So all individuals who intend to become a director must have a DSC. Even shareholders require DSCs. A DSC is mandatory in all cases. There is no specific requirement of physical presence for incorporation. Because the entire process is online. Similarly, We use DSCs for signatures on the eforms. There are multiple classes of DSCs. Also, their validity is also different. The validity of DSC ranges from 1 to 3 years. The 2 year DSC is certainly the most common one. Above all, almost all documents uploaded on the MCA portal require DSCs.

Step 2: Reservation of Name

There are two ways to apply and reserve a name. On one hand through RUN and the other through SPICe form. RUN form gives more flexibility to the name approval process. Accordingly, we usually reserve names using RUN (Reserve Unqiue Name) form. Also, RUN allows applying for 2 names at one go. We enter names in order of preference. We enter the one preferred the most first. The fee for filing RUN form is Rs. 1,000/-.
 
In case of rejection, the ROC shares the reasons through email. Also, we get another opportunity to share 2 more names. So in total we apply for 4 names through a single payment for a RUN form. In case of rejection again, we need reapply for the name and pay the fee again. Along with the name application we mention the objects of the company. Also, we share the meaning of any coined words or names or significance of words chosen. Approval for a name lasts for 20 days. So we should complete the entire process within 20 days of getting name approval.
 

Things to remember while applying for the name:

We recommend to check for similar names or trademarks before submitting the application. The registrar rejects the names in case they are too similar to existing names. Or if they are similar to any trademarks relevant to the industry of the proposed company. The Registrar has full discretion for approval of name application. The promoters with the help of Professionals should certainly make the application within time. If we do not submit the application in time, the name will lapse. And a fresh application for name reservation shall be made.

Step 3: Preparation of Documents

Both, MoA and AoA are charter the document for a Private Limited Company. Furthermore, MoA is the Memorandum of Association and AoA is the Articles of Association. Above all, the MOA and AOA define the company. The MOA contains the scope of operations of company in brief. It specifically defines the main object and activities of the company. Whereas the AOA defines how the objects will be archived. And how the company manages day to day operations. Both documents are extremely important. And should be drafted very carefully after consultation of professional.
The MOA and AOA are filed together with the SPICe forms. The SPICe form is in fact the main application for company formation and registration. Although DSCs are used for signing in the MoA and AoA. As both the MOA and AOA are e-forms. Now, we make the application for online registration for the company. We submit the SPICe form (Simplified Proforma for Incorporating Company Electronically) online.
 

Director Identification Number

DIN stands for Director Identification Number. Its a unique number allotted to the directors. All individual who want to become directors specifically need to have a DIN. DIN has no expiration date. As allotment is for a lifetime. At any rate, a director can surrender his DIN. Also, it may be withdrawn or expire incase of non compliance with KYC formalites.
 
Having a DIN is mandatory for becoming a director. Hence, obtaining DIN is mandatory to be appointed as Director in any Company. Designated partners in LLPs also required a DIN.

 

Step 4: Submission of Application and Documents

 
We submit the application after paying the Fess and Stamp Duty as applicable. The Stamp duty varies from state to state. The Government has brought in many ease of doing initiatives. As a result of these initiatives, we’ve seen significant improvements in the process. Now, the ROC processes the PAN and TAN of the company while incorporating the company.
 
The registrar reviews the entire application in detail. The registrar certainly reviews all the SPICe forms, AOA, MOA and attachments. On satisfaction, he completes his review and issues the COI. The COI is the certificate of incorporation. The Certification of Incorporation (COI) bears the registration number of the company. Along with the PAN number of the company. The PAN will be compulsorily required for opening a bank account.

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Above all, the Certificate of Incorporation proves that the Company has come into existence. The promoters and directors may now finally open a bank account and issue shares. And deposit the amounts subscribed in the account of the company. Also issue shares against those amounts. After incorporation, details of the company are always available on the MCA portal. Both, the details of the company and directors will be available. The general public may access these documents on payment of prescribed fees.
 

Summary

In brief, the registration of a company takes anywhere from 1 to 3 weeks. In particular, the DSC, KYC of directors and shareholders and registered office are the primary requirements. We do of course recommend that the MOA and AOA be drafted by professionals. Consulting professionals will surely make the entire process more simple. This post – open a private limited company should help you in the process. Contact us if you need any help in this matter.

 

FAQs

How much time does it take to open a private limited company?

The registration of a company takes anywhere from 1 to 3 weeks. Although It may take more depending on the structure and documents.

What documents does an application for Digital Signature Certificate require?

  1. Passport size photograph of applicant;
  2. Self-attested Address proof and
  3. Self-attested PAN card

What documents does a DIN application require?

  1.  Passport size photograph of applicant;
  2. Self-attested Address proof; and
  3. Self-attested PAN card.

What documents does company Incorporation require?

  1. NOC and utility bill from the owner for the proposed Registered Office address;
  2. In case premises is rented, rental Agreement with the owner of registered office & Rent receipts;
  3. Consent to act as a Director in form DIR – 2;
  4. Declaration by first subscriber(s) and director(s) in form INC – 9;
  5. Self-attested Identity proof of the first subscriber(s) and director(s).

Are there any general practices for application of Name?

We apply for name approval considering the provisions specifically laid down by the Act. Further, we should understand the following general practices while choosing a name –
 
  1. The name of course should be easy to spell and remember;
  2. The name shall be able to provide a distinct identity to the company;
  3. It should be short & simple;
  4. The name should not contain any word as opposed to public policy or prohibited;
  5. Again, it should not infringe any trademark registered;
  6. Also, it should not resemble a name similar or identical to any existing company/ LLP.

From where to download the forms?

Download the forms from here.

Accordingly, incase you have any doubts, certainly contact us from here. More FAQs coming soon.

We can be easily reached at communications@goforfiling.com incase you have any questions about the article.

Need help with any registration services, filing or any other compliances or services, we can be reached at the above email.

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