Pvt Ltd Company Registration in India
In India the registration of companies can be done online using Vidhinyas. Private limited companies are the most commonly used form of legally-constituted entity popular with millions of Indian entrepreneurs and well-known startups such as Flipkart, PhonePe and Swiggy.
What is a
Private Limited Company?
The term
"private limited company" refers to a Private Limited Company (PLC)
is among the most popular kinds of legal entity in India. Private Limited
companies are governed under the Companies Act, 2013 and need a minimum of two
Directors and two Shareholders, with one of the Directors having to be an
Indian Resident and an Indian citizen.
In order to
register a business in India there are the following the minimum requirements
to meet:
Two Directors: 1
person must be Indian National
2 Shareholders:
Directors may be shareholders
A Registered
Office has been established in India
Documents Required for Company
Registration
Directors who
are proposed for a private limited company need to provide these documents as
proof of identity to be able to register an entity.
Indian Nationals: PAN card mandatory
Foreign Nationals: Passport is mandatory
As
well as the previous document, Directors are required to provide any of these
documents which include the director's address. Director.
Indian Nationals: Passport / Driver’s License / Election ID / Ration Card / Aadhar ID
Foreign Nationals: Drivers License / Bank Statement / Residence Card
As proof of residency, directors who are aspiring have to produce
one of the following documents. This document should be created within
the last 2 months:
Indian Nationals: Bank Statement / Electricity Bill / Phone Bill
Foreign Nationals: Bank Statement / Electricity Bill / Phone Bill
If one of the company's shareholders is a company based in India or abroad, the following documents must be submitted:· Board resolution authorizing investment in the company
· Incorporation Certificate of the Company
· Address proof of the company
Capital Required to Start a Company
A business can be set up in India with just a small sum of money. There isn't any set amount, and the shareholders of the
business which is being formed are able to decide on the amount they want to
contribute. When establishing the company's
capital structure The following are a few of the ideas to consider:
Face Value of Share: Face
value an share is the value per share at the company in which it is registered. The face value of shares is one rupee. 1. 10 or 10 or Rs. 100 or 100 or Rs. 1000 or
1000 Rs. 10,000.
Authorised Capital: The
authorized capital represents the amount of shares that a company is able to
offer to its shareholders. In general, all businesses are formed
with the authorized capital amount of 1 lakh or Rs. 1 lakh or 10 lakhs or. 10
lakhs. If a larger authorized capital is needed
the business would be required to pay an additional fee in addition to fees
paid by the Ministry of Corporate Affairs. The
capital authorized by the company may be raised at any time following
incorporation.
Paid-up Capital: The
paid-up capital of a business is the amount of shares distributed to
shareholders who have received or paid money into the business. Paid-up capital of a business must not exceed the share
capital authorized by the business.
Company Registration Process
The following are the steps involved in registering a company in India:Step
1: RUN Name Approval
A request for name approval must be made at the Ministry of
Corporate Affairs to secure the company's name. When submitting the name approval form one or two names with
business-related objectives may be submitted. If
an approval for a name is not granted then 1 or 2 additional names can be
submitted. Typically the MCA will approve all
applications for name approval within less than 5 working days.
Step
2: Digital Signature for Directors
In India The Ministry of Corporate Affairs does not permit wet
signatures. Signatures on filings submitted with the
MCA are required to be signed with digital signatures that are provided by an
official Certification Authority in India. Thus
digital signatures are mandatory required by Directors prior to incorporation.
Digital signatures for directors will only be available by the
process of an Authorized Certifying Authority by Vidhinyas. In order to obtain Digital Signature, the Directors must
submit an identification proof and go through an online KYC procedure. When the Director is non-native national, the passport as
well as other documents submitted should be authenticated by an embassy in the
country of origin.
Step
3: Incorporation Application Submission
Once digital signatures have been received, the incorporation
application is filed using SPICe Form to the MCA along with the relevant
attachments. In addition to the incorporation form
and it is also necessary to file the Memorandum of Association (MOA) and
Articles of Association (AOA) of the company must be filed.
If the MCA
considers the application for incorporation to be valid and complete The
Incorporation Certificate is granted , along with PAN of the company. The MCA generally accepts all incorporation requests within less
than 5 working days
Private Limited Company Compliances
After a company has been registered in India the various
compliances have to be adhered to from time the point of avoidance of penalty
and the possibility of prosecution. These are some of the formalities a
company must meet following registration of the company:
Auditor Appointment: Companies
that are registered in India have to appoint a qualified as well as a certified
Chartered Accountant registered with the ICAI within 30 days of the date of
incorporation
Director DIN KYC: Everyone who
holds an Director Identification Number (DIN) that is assigned during
incorporation must submit DIN KYC every year to verify the phone number and
email address in the database of the Ministry of Corporate Affairs.
Commencement of Business: Within
180 days after incorporation the company needs to establish a Current Account
and shareholders are required to make a deposit of the amount for subscriptions
mentioned within the MOA of the company.
Thus, if the firm was to be established with a capital investment
of the amount of Rs. 1 lakh, then shareholders have to make a
deposit of the sum of Rs. 1 lakh in the
company's account in the bank and then send the bank statement to the MCA for a
beginning of Business certificate.
MCA Annual Filings: Every
company that are registered in India have to file a copy of their accounts at
the Ministry of Corporate Affairs each financial year. If a company is registered between
January and March, the business can decide to file its first MCA annual return
as part of the following fiscal year's filing. MCA annual returns are made up of Form MGT-7 as well as Form
AOC-4. Both of these forms should be signed electronically by the
Directors as well as an experienced professional.
Income Tax Filing: All
businesses are required to submit their income tax report on the Form ITR-6 for
each fiscal year. Tax filing for income tax is required at
the beginning of each fiscal year, prior to the due date - regardless of the
date of incorporation. The tax return for the
income of a company has to be signed digitally using one of the Director's
electronic signature.
Registered Office of Company
All businesses that are registered in India are required to have
an official registered office in India. The
registered office should have an office with the company's name and be a place
where notices or communications is delivered. Therefore
an office registered to a business is not a vacant property or a building under
construction.
Following incorporation, the official address of a business can be
changed as needed. If the registered office of a company is
changed in the exact same town or company's Registrar of Company, the process
can be accomplished easily. If the registered
office of a business is transferred between states the next the procedure would
be more lengthy and cumbersome.
GST Registration after Company
Registration
In the process of registering a company Directors may choose to
register GST when they incorporate. But, it's not required for a business to
register under GST in the event that certain limits on turnover are reached.
Find out more about the threshold for turnover and the
process to obtain GST registration by reading our comprehensive guide to GST
Registration in India.
Bank Account for Private Limited
Company
Following the registration of the company and registration, a
current bank account needs to be opened under on behalf of the business within
180 days. The subscription amount has to be paid. If the above steps aren't completed, the business
certificates will not be issued, and penalties will be in place.
The following documents are needed to open a bank account the
private limited business:
Incorporation Certificate of the Company
Directors KYC Documents
Board Resolution authorizing the Directors to open a Bank Account
Address Proof of the company
At Vidhinyas we collaborate with banks across the country to
assist our clients in opening an account with a current status for their businesses
in a smooth manner.
Advantages of Private Limited Company
The following are the top advantages of incorporating the private limited company in India in comparison to other types of entities.Separate
Legal Entity
A business is legally constituted and an juristic individual. So, a business has wide legal rights, such as buying
property, owing debts, hiring employees as well as other things. Since a business is an entity that is legal in its own right
that is, its participants (shareholders and directors) are not personally
accountable for the liability of the company.
Limited
Liability
Private limited companies are an entity that is legal in its own
right with limitations on liability. So,
shareholders are not responsible for losses incurred by the company unless it
is the amount that is greater than what was put into the company in capital for
shares.
Uninterrupted
Existence
A company is considered to be a perpetual succession' that means
it will exist until it is legally dissolution. Since a business is an independent legal entity that is not
affected in the event of death, or removal of any of its members. It exists
regardless of any changes to its membership.
Fund
Raising
Private limited companies have many options to raise funds. The company may raise funds from investors, shareholders angels and venture capital funds. Private equity funds, foreign funds NBFCs, banks and other financial institutions. A company is the only one that can obtain equity and debt money from investors.
Disadvantages of Private Limited
Company
While companies have many
advantages, the process of registering a business is not the best choice for
every entrepreneur because of the following factors
Compliances
A business is required to keep various compliances in place
regardless of its turnover or activities. Thus,
operating a business requires a minimum cost every year.
Limited numbers of members: The most
obvious problem is that its members are only allowed to join in small numbers. Since the maximum number of members is limited, it results
in certain disadvantages for the business. When
a company needs an additional or more skilled and experienced Owners, there is
no option of expanding the business. .
Restriction on transfer of shares: The
restriction basically is based on the concept that, if a shareholder of an
unincorporated company wants to sell shares, existing shareholders have the
right to be given these shares first. If they decision to not take action
within the timeframe the shares may be sold to a third-party.
Difficulties in the expansion: It's not
simple to expand or transfer the operations of a private limited company
because of the small numbers of shareholders as well as a shortage or small
amount of capital, the requirement no transfer or sell shares, etc. However, the growth in economics could be aided by the fact
that the maximum number of shareholders that can be allowed is 50.
Misrepresentation and Fraudulent
Accounts: It
is not required to make public the financial statements of the business or
other reports to the registrar or the public there are the possibility of
committing fraud or false representations in accounting or any other financial
transactions. Sometimes, accountants mislead
themselves and attempt to make that the earnings are lower in order to reduce
the tax obligation to the government.
Centralized Authority: Since the
authority and management responsibility of the company is entrusted to the
hands of a handful of individuals on boards, it results in an centralized
system of power. Thus, owners who aren't connected to the
management or operation of the business may be denied rights.
Autocracy & Nepotism: The
management of a Private Limited Company enjoys the absolute control and
independence, they usually seek to influence critical decisions, and
particularly with regard to selection process and other issues which are in
their personal concerns.
Small capital: Private
limited companies are not the type of business that is large in scale thus that
amount available is not large, which can pose as a significant issue for those
involved. Often, the business is unable to benefit
from its future potentials due to the absence of sufficient funding.
The possibility of dissolution: The companies of this type are
very likely to be subject to liquidation and dissolution because of the lack of
capital, autocratic behavior in management, a drawback in expanding business,
dissolution among directors, etc. Sometimes the private limited
corporation is governed in the name of the public limited corporation for the
reasons mentioned above.
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