What is a Private Limited Company.

Why start a Private Limited Company?

Private Limited companies have a Limited Liability. Thus, the liability is same as the shareholding capital. This kind of business doesn’t need active participation of a shareholder. Because, a board of directors is appointed to manage the work in the company. Shareholders have the final decision-making power. While, the directors make day to day decisions. Therefore, the shareholder can earn a profit without being an active part in the company.

In addition, it has relaxed taxation.  The Income Tax slab is 30% in general. While, for a company with a turnover more than 400 crores the income tax slab is 25%. A business can take funding. A person can be both a shareholder and director in a Pvt. Ltd. Company. Last but not the least, shareholding cannot be transferred to any other person without the acceptance of the company. Unlike, the public companies.

In short, here are the key advantages of a Pvt. Ltd. Company:

• Limited Liability.
• Better management.
• Simple Tax Structure.
• Opportunities for External Funding.
• No pressure of Stock Market.
• Shareholding is not transferable without consent.

 

How to start a Private Limited Company?

A Private Limited Company needs at least 2 shareholders.  Unlike an OPC.  Also, it should have a minimum of 2 directors. Thus, 2 people are enough to start a private company. But, for a foreign official to start a Private Limited Company in India, there needs to be at least one Indian director. Thus, one director has to be an Indian National in the Board of Directors. Thus, the first step is to decide the shareholders. And, finalize the directors.  Shareholders appoint the directors.  Apply for the registration. It is done under The Companies Act of 2013. 

The Ministry of Corporate Affairs is the main governmental body that carries out the process. One has to apply for MOA and AOA. The two very important certificates.

After the registrations apply for DSC certificate. DSC stands for Digital Signature Certificate. It contains the soft copy of the important documents. And, helps a lot in case of signing online. In addition, apply for DIN. DIN is Director Identification Number. It is a unique 8-digit number. every single director is appointed a DIN. The DIN stays the same, irrespective of the number of companies of the director. 

One needs to apply for the naming under MCA. Naming is an important process under this form of business.  Hence, no companies can share the same name. Thus, make sure to come up with a new name. Hence, making it unique.

The company also requires to have a Certificate of Incorporation. It is issued by the government once the registration is done. It is mandatory to have a Certificate of Incorporation.

MCA issues the PAN in the name of the firm. Not an individual.

Apply for GST once done with the above registrations. Lastly, open a Bank Account for the company.

 

Requirements of Documents for a Private Limited Company.

For Registration.

1. PAN Card- PAN Card should be of individual shareholders and directors.
2. Aadhar Card.
3. Address proof.

 

For GST Registration.

1. PAN Card- PAN Card of the Company.
2. Certificate of Incorporation.
3. Office Proof- That is a registered Office Proof of the Company.
4. Board’s Resolution.
5. Directors’ KYC.

 

For Bank Account Opening.

1. PAN Card- PAN Card of the Company.
2. Certificate of Incorporation.
3. Office Proof- That is a registered Office Proof of the Company.
4. Board Resolution.
5. Directors’ KYC.

 

Timelines.

• MCA Registration- It takes 10-15 working days.
• GST Registration- It takes 7-10 days.
• Bank Account Opening- It takes 7-10 working days. While, in some cases it might take a month as well.

 

Summary.

A Private Limited Company is a simpler form of Public Company. Hence, one can opt for Private Limited Company for a large-scale business. Private Limited Companies have less taxation. Further, government gives relaxations to these businesses. External funding is given to these firms. This type of business has a quite low limit for the number of shareholders. Therefore, allowing it to be easy to start. Private Limited Companies are easier to start and manage. Banks prefer to give loans to companies. Same is the case for venture capitalist. Thus, they have multiple opportunities to raise funds.