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WHAT IS PRIVATE LIMITED COMPANY?



An individual wants to launch a business however, confused about the kind of legal structure of business he should opt for. His decision is going impact on how much money is required for launching business, cost of registration, amount of paperwork, how much he has to pay in taxes and personal liability he will have to face. While making such decision, Private Limited Company is likely to jump in his mind first. Private Limited Company is the most popular option to start a business.

Private Limited Company is the standard form of business structure which an individual can look for. A private limited company is a company privately held for small businesses. Private Limited companies are governed by the Companies Act, 2013.According to Section 2(68) of the Companies Act, 2013, private company means a company which by its articles,-

  1. restricts the right to transfer its shares;

  2. except in case of One Person Company, limits the number of its members to two hundred: Provided that where two or more persons hold one or more share in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

    Provided further that –

    1. persons who are in employment of the company; and

    2. persons who, having been formerly in the employed of the company, were members of the company while in that employment and have continued to be members after employment ceased, shall not be included in the number of members; and

  3. prohibits any invitation to the public to subscribe for any securities of the company.

Basically, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them. This is the basic criterion that differentiates private companies from public companies.

The government has introduced the concept of private limited companies to help the small traders. In case, profits of sole trader are increasing and he want to be more tax efficient or if he is looking to raise business funding or he want to boost his business reputation and image in the eyes of existing and future customers, then it would be good idea to switch over to private limited company.

Moreover, sole trader is responsible for both his personal and business debts. His personal assets such as house and car could be at risk if something goes wrong. In comparison, a limited company’s finances are separate from the shareholders’ or directors’ personal finances so they are only responsible for the amount of money that they put into the business.

WHY SHOULD YOU OPT FOR PRIVATE LIMITED COMPANY ?

  1. No minimum capital required

  2. Shareholders/Members

  3. Directors

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WHAT ARE THE TYPES OF PRIVATE LIMITED COMPANIES ?

Private companies are of three types depending on their members’ liabilities:

  1. Limited by shares

  2. Limited by guarantee

  3. Unlimited liability

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WHAT ARE THE DOCUMENTS REQUIRED FOR REGISTRATION OF PRIVATE LIMITED COMPANIES ?

LIST OF DOCUMENTS REQUIRED (IN CASE DIRECTOR/SUBSCRIBER IS INDIAN):

  1. ID proof

  2. Address proof

  3. Passport size photograph of subscribers for MOA and AOA

  4. Registered Office Proof

DOCUMENTS REQUIRED FROM FOREIGN NATIONAL

  1. ID proof

  2. Declaration by foreign national

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How to Register a Private Limited Company ?

  1. Apply for Name of the company

  2. Apply for DSC

  3. Apply for registration

  4. Certificate of Registration

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WHAT ARE THE LIMITATIONS OF PRIVATE LIMITED COMPANY ?

  1. Limited numbers of members

  2. Centralized Authority

  3. Small capital

  4. Restriction on transfer of shares

  5. Restriction on public deposits

  6. Stock exchange

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