How to start your Private Limited Company in India?

how to start pvt ltd company

2020 has been the best year so far for many of those who wanted to do something independently. The startup company air is freely flowing throughout the country, with many people wanting to quit their full-time jobs and build their own businesses or startup company with that said, a business can’t be set up without being registered. To register, you need to be well acquainted with the registration types: Sole Proprietor, Limited Liability Company, and Private Limited Company. And, in this blog post, we are discussing in detail the Private Limited Company.

What is a Private Limited Company?

A private Limited Company is a privately owned business entity. In this type of business or startup company there are a limited number of shareholders, and these companies’ stocks are not for trade in public.

Section 2 (68) of the Companies Act, 2013 defines a private company as: 

“A Company having a minimum 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; (iii) prohibits any invitation to the public to subscribe for any securities of the company.”

Advantages of a Private Limited Company

  1. Ownership: the directors, members, private investors are the only owners and the shareholders of the company.
  2. Limited Liability: The shareholders’ liability is limited only to the shares held by them in the company, and the private assets held by them are not at risk.
  3. Members/shareholders: a private company can be started with a minimum of 2 shareholders, unlike a public company, which requires more.
  4. Continued existence:  the company continues to exist in the eyes of the law (even if one of the members/shareholders dies) until and unless the company is shut down legally.

Requirements to start a Private Limited Company

  1. Members: As per the companies act 2013, the minimum required members to start a private limited company is 2and the maximum number of members can go up to 200.
  2. Name of the company: The company’s name has to be decided and sent to the ministry of corporate affairs to be approved. The name chosen shouldn’t be similar to any other company’s name as no two companies can run with the same name.
  3. Registered office address: Soon after the company’s name gets registered, the next thing to do is register the company’s main address from where all the operations of the business would take place from.
  4. Obtaining other documents:  The Company has to verify the authenticity of its documents and certificates of the professionals to use them digitally.

How to register a private limited company?

The Ministry of Corporate Affairs (MCA) has simplified the process of incorporating a company to a great extent. The process to register a Private Limited Company are:

1. NAME APPLICATION – You must select at least two names for the Company. In case you don’t know How to decide on a startup business name, read our blog by click link. The name should not be generic or shouldn’t be taken by another company or an already registered trademark.

2. DSC APPLICATION – A Digital Signature Certificate is the certificate obtained after registering your signature (the signature which will be used to sign the business documents online). If you don’t have Digital Signature Certificate already, you must apply for DSC within the time your name application is pending with MCA.

3. MOA / AOA PREPARATION – Nowadays, Memorandum and Articles of the Company need to be prepared online and signed using DSC unless the Company has foreign directors or body corporate subscribing to the shares which case documents need to be signed physically.

4. DIN APPLICATION – DIN application for directors can be made at the time of filing to incorporate the Company.

5. INCORPORATION – You must file the documents along with the application. MCA will see the documents submitted. If they find the documentation to be in order, they will issue a Certificate of Incorporation of the Company and the company’s PAN and TAN.

6. CURRENT BANK ACCOUNT: With a certificate of Incorporation, you need to open a current bank account in the name of the Company.

Once the bank account is incorporated and you start operations of the Company, you will need to file a Certificate for Commencement of Business to the MCA informing you that you have commenced the company’s business.

That’s all! You are all set to launch your business now. However, consulting an expert is advised for personalized guidance.

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