Whenever we talk about starting a business the most important thing to ensure is the form in which we would run the business. Whether it will be Proprietary, Partnership or Corporate form. The choice although depends upon a various number of factors. Through this article we will examine the benefits of forming a private limited company as a form of business. We will also see the registration procedure and the compliance aspects of forming a private limited company
Overview of Private Limited Company Registration
The primary and foremost step is the name for the company. Once the name is decided, the subsequent steps got to be taken by the applicant:
Step 1: Application for DSC (Digital Signature Certificate) and DIN (Director Identification Number). DIN are going to be the core identity range for the directors, that if punched on MCA web site would show all the main points of the director and his directorships.
Step 2: Apply for the name accessibility through RUN to CRC, Manesar office.
Step 3: Filing of Prime Documents AOA and MOA to register the Private limited company. This portion has to be finished with utmost care as Articles and Memorandum governs the businesses activities.
Step 4: Application for PAN and TAN of the company through primary form SPICE.
Step 5: Certificate of incorporation to be issued by Registrar of companies at the side of PAN and TAN.
Step 6: Opening of an Current Bank account within the name of company for assortment of monies on shares issued to members.
Requirements for forming Private Limited Company.
Members- Minimum range of two members and a maximum number of 200 members or shareholders are needed as per the company’s act 2013 before registration of the company.
Directors– A minimum number of 2 Directors is required for registering the private Ltd. Every Director ought to have DIN i.e. director identification number that is given by the ministry of company affairs. One among whole of the directors should be a resident of India which implies he/she should have stayed in India for not below 182 days in a previous calendar year.
Name– The name of the company contains 3 elements i.e. the name, the activity, and word private limited company. It’s necessary for all private companies to use the word private limited company at the top of its company name.
Registered office address– The Registered office of the company is wherever the company’s main affairs are been conducted and where all the documents are placed.
Digital Signature– A digital signature is obtained by all the directors that are marked on all the documents by each director.
Professional certificate – numerous professionals like Company secretary, Chartered accountants, Cost accountants, etc are needed to provide their certification at the time of company incorporation.
Key advantages of a private limited Company/ Why private ltd. Company over alternative forms of business?
SEPARATE LEGAL ENTITY
A separate legal entity could be a person recognized by law – a legal person. The entity has its own legal rights associated obligations, separate to those running and or owning the entity.
OWNERSHIP OF THE BUSINESS
For a public company, regulation and ownership of shares may be oversubscribed to the general public on an open market. On the opposite hand, in a private limited company, shares can be sold or transferred to people by the selection of the owner. Shares of such firms are closely-held by founders, management, or a gaggle of personal investors. Shares here don’t seem to be sold within the open market.
MINIMUM NUMBER OF SHAREHOLDERS
For a private company, a minimum number of needed shareholders are 2, except for a public company; you need a minimum of seven shareholders.
Private limited companies have a relatively shorter list of legal formalities compared to public restricted Companies.
DISCLOSURE OF IMFORMATION
A public company is required to disclose their monetary reports to the general public each quarter, because it can have an effect on public investment; however just in case of private ltd. there aren’t any such mandate restrictions on the same.
MANAGEMENT AND HIGHER COGNATIVE PROCESS
Management and decision-making become additional advanced and in public companies or the other types of business association more range of shareholders is to be consulted. This advanced procedure is eliminated during a private limited company procedure because the range of stockholders is pretty less.
Managers of the private company are additional versatile within the short term and future business decisions.
LISTING COMPLIANCE AND STOCK MARKET REGULATIONS
Private companies don’t seem to be pressurized by the stock market and you don’t need to worry concerning shareholder expectations and interference as long as they work inside the law. Shareholders of personal restricted firms relish less SEBI intervention.
MINIMUM SHARE CAPITAL REQUIREMENTS
A public company needs a minimum share capital of Rs. 5,00,000. For a non-public company, the earlier minimum range of the share capital was Rs 100,000, however currently there’s no such minimum compulsion. So there is no pressure of fund requirements.
Confidential information such as executive compensation, legal settlements, and alternative essential information can’t be hidden in public companies but in private limited company an explicit confidential level might be maintained.
Best Structure for Startup Funding
No requirement of minimum capital
No minimum capital is required to line up a Private limited Company. It can be registered with even Rs.10000 of Authorized Capital
Separate legal identity. It means the assets and liabilities of such a business don’t seem to be the same as the assets & liabilities of the Directors. Each is distinctive during this regard. Such an entity separates possession & management.
Limited liability advantages make these entities damage-proof in terms of members. Just in case of debt, the member would be solely susceptible to pay their part, i.e. their shareholding. This is often most likely why Private Limited entities are thought of the best business structure for start-ups in India.
Raising of funds
Lowest exposure to risk makes these entities additional enticing for funding , which means their probabilities of procuring funds from Venture Capitalists or Angel investors are more associated more.
Free and easy transfer of shares
The transfer is less tedious than the transfer of an interest during a business run as a partnership or proprietorship. Filling & signing a share transfer form & turning in the share’s emptor at the side of the share certificate will seamlessly transfer shares.
Private Ltd. runs on the idea of perpetual succession which implies the company would be in existence though the members die.
Allowance of FDI
A low-risk profile permits the private ltd. company to draw in 100 percent Foreign Direct Investment. The overseas investors will create direct funding to those entities to reap additional profit. The seamless flow of overseas funding makes the private limited company the simplest business structure for start-ups in India.
Stories of Indian startups which were incorporated as Private Limited Company.
Founded in 2007 by Bansal brothers, Flipkart leads as startup giant in e-commerce segment of market leading e-commerce marketplace. It has over 100 million registered users. Including 21 state-of-the-art warehouses. It hits about 10 million daily page visits. Recorded a Turnover of Rs 30,931 crore (US$ 4.43 billion) in FY19. Another big names which started as a private limited company.
Started as Digital taxi service Founded by mastermind entrepreneur Bhavish Aggarwal
Ola has surged to be the biggest etaxi service Provider company in India. It has now taken the front foot in the electronic scooter business. Ola is a classic example of successful startup in the country.
Zomato today is the largest online food delivery company it has a story of its own in the food delivery sector. It started as a private limited company. It was been listed at BSE / NSE in the year 2021 with 1lac crore of market capitalisation which is something to watch out.
There are many such startups that started as private limited companies but are going to heights now. To conclude we can say that private limited companies are the best way possible for growing Startup businesses.
How can Compliance Calendar help you?
We at Compliance Calendar are a team of professionals eager to serve you on anything related to your company. If you desire to commence your startup or want to start a private limited company, our professionals will do the needful while you just have to sit back and wait a bit.
We will need all the documentation which can be also remotely given if not possible in physical form. The list of documents would include all the KYC related information as well as the desired name of the company. The person who shall be named as directors and subscribers shall submit the desired Documents. Once the name is reserved the certificate of incorporation of the company would be granted within a span of 4-5 days.
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