Private Limited Company Registration in India
In India, starting a business is a challenging task
In India, starting a business is a challenging task. Entrepreneurs need to go through a lot of legal processes & formalities to setting up a new company. However, with the advancement of technology, company registration can now be completed online through the VARTC website. This has made the process of registering a new company in India quick, efficient and affordable.
Among the various types of legal entities, the private limited company is the most common type of company preferred by millions of Indian entrepreneurs and popular startups like Flipkart, PhonePe and Swiggy. In this article, we will discuss how to register a private limited company online through VARTC.
VARTC offers a user-friendly platform that allows entrepreneurs to register their companies online without any hassle. To start the registration process, you need to submit your details & get a expert advice of complete procedure & requisites.
What is a Private Limited Company?
- To register a Private Limited Company in India, there are certain minimum requirements that need to be fulfilled. As per the Companies Act, 2013, the following are the requirements:
- Directors: Minimum of 2 directors are required for a Private Limited Company in India. At least one of the directors must be a resident of India & hold an Indian citizenship.
- Shareholders: A minimum of 2 shareholders are required for a Private Limited Company in India. The shareholders can be either individuals or entities.
- Registered Office: A registered office address must be provided while registering a Private Limited Company in India. The address can be either commercial or residential address.
- Capital: There is not any minimum capital requirement for registering a Private Limited Company in India. However the company must have an authorized shared capital of at least Rs.1 lakh.
Once the requirements are fulfilled, the registration process for a Private Limited Company can begin.
VARTC offers a simple and efficient way to register a Private Limited Company online. The process is entirely digital, which means that the paperwork and communication are all done online, saving time and effort.
100% Foreign Direct Ownership (FDI) is permitted in most sectors in India & there is no regulation on foreign shareholding a private limited company. Hence most foreign subsidiaries are established in India as a private limited company to start their businesses.
Documents Required for Company Registration
The proposed directors of a private limited company must present the below mentioned documents as proof of identification in order to register a company:
- Indian Nationals: PAN card (mandatory)
- Foreign Nationals: Passport ( mandatory)
In addition to the above mentioned document, the Directors must submit one of the following that contain the address of the Director.
- Indian Nationals:Driver’s License / Election ID / Ration Card / Aadhar ID/ Passport
- Foreign Nationals: Bank Statement / Residence Card /Drivers License /
Finally, as proof of residency, the prospective Directors must presentone of the following documents.& must have been generated within the last two months:
- Indian Nationals: Electricity Bill / Phone Bill/ Bank Statement
- Foreign Nationals: Electricity Bill / Phone Bill / Bank Statement
If anyone 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
When starting a company in India, the capital required is very minimal, & there is no fixed amount that the shareholders need to contribute. Instead, they have the liberty to decide the capital they wish to contribute. While setting up the capital structure of the company, there are a few concepts to be kept in mind.
The face value of any share is the price per share with which the company is incorporated. In India, the face value of a share is usually Rs. 1, Rs. 10, Rs. 100, Rs. 1000 or Rs. 10,000. The authorized capital of a company is the total value of shares that a company can issue to shareholders. Normally, all companies in India are incorporated with an authorized capital of Rs. 1 lakh or Rs. 10 lakhs. If a higher authorized capital is required, the company would need to pay additional fees to the Ministry of Corporate Affairs. It is important to note that the authorized capital of a company can be increased at any time after incorporation.
The paid-up capital of a company is the number of shares that have been issued to shareholders & they have paid or deposited money to the company. The paid-up capital of applied company cannot be more than the authorized share capital of the company. It is worth mentioning that the paid-up capital of a company has an impact on the valuation of the company & its ability to raise funds from investors.
In conclusion, while setting up the capital structure of a company in India, the face value of shares, authorized capital & paid-up capital are important concepts that should be taken into consideration. The flexibility provided to shareholders in determining the capital to be contributed makes India an attractive destination for entrepreneurs looking to start a business as a private limited company.
Company Registration Process
The following are the steps involved in registering a company in India
RUN(Reserve Unique Name) Name Approval
Once the company name is approved the company incorporation application can be filed with the Ministry of Corporate Affairs (MCA).
With the introduction of the SPICe+ form, company can be registered online within 7 days. To incorporate a private limited company the following documents are required:
- Directors’ Identification Number (DIN): All Directors must obtain a DIN, DIN is a unique identification number that is provided by the Ministry of Corporate Affairs.
- Digital Signature Certificate (DSC): All Directors must obtain a DSC, which is an electronic signature & used for signing the incorporation documents.
- Memorandum of Association (MOA): MOA is a document that outlines the company’s main objects and the scope of its activities.
- Articles of Association (AOA): AOA is a document that outlines the rules and regulations of the company and how it will be managed.
- Address Proof: The registered office address of the company must be provided along with the necessary address proof documents.
- PAN and TAN: PAN and TAN are unique identification numbers provided by the Income Tax Department.
Digital Signature (DSC) for Directors
When it comes to registering a company in India, digital signatures (DSC) is an essential requirement for all the Directors & this is because the Ministry of Corporate Affairs does not allow wet signatures for filings. All signatures to be completed with a digital signature that is issued by a Certification Authority in India.
To obtain digital signatures, the Directors will have to submit a copy of their identity proof and complete a video KYC (Know Your Customer) process. This is a requirement of the Authorized Certifying Authority, which is VARTC in this case.
It is important to note that if the Director is a foreign national, additional documentation will be required. The passport and other relevant documents must be apostilled by a local embassy before being submitted for the digital signature process.
At VARTC, we make this process as seamless and hassle-free as possible. Our team of experts will guide you through the entire process, ensuring that all necessary documentation is in order and that the digital signature is obtained without any delay.
Submission of Incorporation Application
After obtaining the digital signatures, the next step is to file the incorporation application in SPICe form to the Ministry of Corporate Affairs along with all necessary documents. This includes the Memorandum of Association (MOA) and Articles of Association (AOA) of the company. If the application is found to be complete and satisfactory, the MCA will issue the Incorporation Certificate along with the Permanent Account Number (PAN) of the company. Typically, the MCA processes and approves all incorporation applications within 5 working days.
Private Limited Company Compliances
Private Limited Companies in India are required to comply with various statutory and regulatory requirements. These compliance requirements ensure that the company operates in a transparent and compliant manner. Some of the key compliance requirements for Private Limited Companies are:
- Annual General Meeting (AGM): Every Private Limited Company is required to hold an AGM within six months from the end of the financial year. The AGM must be held to discuss the financial statements of the company, appointment of auditors, and other important matters.
- Financial Statements: Every Private Limited Company is required to prepare financial statements such as a balance sheet, profit and loss account, and cash flow statement. These statements must be audited by a Chartered Accountant and filed with the MCA.
- Annual Return: Every Private Limited Company is required to file an annual return with the MCA. The annual return must be filed within 60 days from the date of AGM and must contain information about the company’s shareholders, directors, and other important details.
- Income Tax Return: Every Private Limited Company is required to file an income tax return on or before the due date specified under the Income Tax Act.
- TDS Returns: If the company is liable to deduct tax at source, it must file TDS returns on a quarterly basis.
- GST Returns: If the company is registered under GST, it must file GST returns on a monthly or quarterly basis.
- Other Compliances: Private Limited Companies must comply with various other compliances such as maintenance of statutory registers, appointment of auditors, and filing of forms for changes in the company’s structure or operations.
Registered Office of Company
In India, all registered companies are required to maintain a physical registered office address within the country. This address must be displayed on a board with the company’s name and should be a place where any official communication can be delivered. It is not permissible for the registered office to be located on vacant land or within a building under construction.
If necessary, the registered office of a company can be changed after incorporation. If the new office is located within the same city or jurisdiction of the Registrar of Companies, the process is relatively simple. However, if the registered office is being relocated to a different state, the process can be more complex and time-consuming.
Bank Account for Private Limited Company
After a company is registered, it is mandatory to open a current account in the name of the company within 180 days and deposit the subscription amount. Failure to do so will result in the non-issuance of a commencement of business certificate and may attract a penalty.
To open a bank account for a private limited company, the following documents are required:
- Incorporation Certificate of the Company
- KYC documents of the Directors
- Board Resolution authorizing the Directors to open a bank account
- Address proof of the Company
At VARTC, we assist our clients in opening current accounts for their companies in a seamless manner by working with various banks.
GST Registration after Company Registration
During the company registration process, the Directors can opt to obtain GST registration along with the incorporation. However, it is not mandatory for a company to be registered under the GST unless certain turnover limits are crossed. You can know more about the turnover limit and process for obtaining GST registration in our detailed guide on GST registration in India.
Advantages of Private Limited Company
There are several advantages to setting up a Private Limited Company (PLC) in India, including:
- Limited Liability: Shareholders of a PLC have limited liability, which means their personal assets are protected in case the company faces financial difficulties or incurs losses.
- Separate Legal Entity: A PLC is a separate legal entity from its owners/shareholders, which means that the company can own assets, enter into contracts, and sue or be sued in its own name.
- Continuity of Existence: A PLC has continuity of existence, which means that the company continues to exist even if the shareholders or directors change.
- Credibility: A PLC is seen as more credible and trustworthy than other types of business structures, which can help in building business relationships and accessing financing.
- Tax Benefits: A PLC is eligible for various tax benefits and incentives offered by the government, which can help in reducing the tax liability of the company.
- Easy Transfer of Ownership: Shares in a PLC can be easily transferred or sold to other individuals or entities, which can help in raising capital or exiting the business.
Overall, a PLC offers several advantages that make it a popular choice for entrepreneurs and investors in India.
Disadvantages of Private Limited Company
There are some disadvantages of a Private Limited Company, which are as follows:
- Restrictions on Share Transfer: Private Limited Companies have restrictions on the transfer of shares, which means that shares cannot be sold or transferred to the general public. The transfer of shares is only allowed with the approval of the board of directors, and in some cases, the shareholders as well.
- Compliance Requirements: Private Limited Companies are subject to various compliance requirements under the Companies Act, which can be time-consuming and expensive. Failure to comply with these requirements can result in penalties and legal consequences.
- Limitations on Number of Shareholders: Private Limited Companies cannot have more than 200 shareholders, which can limit the ability to raise capital.
- High Cost of Incorporation: The cost of incorporating a Private Limited Company can be high compared to other forms of business entities.
- Separation of Ownership and Management: In a Private Limited Company, the ownership and management are separate, which can lead to conflicts of interest between shareholders and management.
- Exit Strategy: It can be difficult to exit a Private Limited Company as there is limited market for selling shares and no public market for initial public offerings (IPOs).
It is important to weigh the advantages and disadvantages before deciding to incorporate a Private Limited Company.
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FAQ on Private Limited Company Registration
On average, it takes 7 to 12 days for the registration of a private limited company to be completed, as two different approvals (Name Approval and Final Approval) are required from government bodies. The duration of the registration process. It may also depend on the workload of the Central Registration Centre (CRC) of the Ministry of Corporate Affairs (MCA).
Any person or organization, including foreigners/NRIs, can become a member or shareholder of a private limited company. However, they must be at least 18 years old and have a valid PAN card.
To incorporate a company, a unique name need to be reserved with the Ministry of Corporate Affairs (MCA), & it must meet the guidelines prescribed by the MCA.
There is no minimum capital requirement prescribed for starting a company in india. However, if there are two shareholders, then the company must be started with a minimum capital of Rs. 2.00.
A shareholder or member is an owner of a company is one holds certain number of shares in that company & his name is entered in the register of members of the company. On the other side, a Director is a person who manages the day-to-day functions of the business. A Director & shareholder may or may not be the same person.
You can incorporate a private limited company with a maximum of 200 shareholders & 15 directors. However, only 3 Director Identification Numbers (DINs) can be obtained through the SPICE+ form. If the remaining directors do not have a DIN, they can be appointed as directors after the company is incorporated..
No, the registration process for a private limited company is completely online. All necessary documents are filed electronically, and physical presence is not required. You would only need to send scanned copies of all required documents and forms to complete the registration process.
For a Private Limited Company, there must be a minimum of two directors & at least one director should be a permanent resident of India.
A private limited company is a separate legal entity established under the law & It is treated as a distinct person that can own property and have debts or creditors. The members, directors & shareholders of a company have no personal liability to the company's creditors in case the company cannot pay its debts.
Yes, private limited companies have perpetual succession as per the law. However, it is important to note that the company must complete important annual compliance requirements. Failure to comply with these requirements may result in the Registrar of Companies (ROC) striking off the name of the company.
- Name must be short & simple – The name must be concise and not be too long. People should be able to easily say it and able to recollect your company’s name the first time they read it or hear it.
- It must be meaningful – The name of the company should be related to the conducting business. It must fit with the company’s branding.
- It must be unique – The name of the company will not be the same or identical to an already existing company or a trademark. One must also preferably avoid the plural version.
- Add Suffix – The name of the company must end with the suffix “Private Ltd” in a case of a Private limited company and “LLP” in case of a limited liability partnership.
- It shouldn’t be illegal / offensive – The name of the company shouldn’t be against the law. It should not be abusive or against customs & beliefs of any religion.
How many names can I submit for name reservation to MCA?
Initially, you can submit two names for name reservation to the MCA, out of which one name will be approved based on its availability. If both initial names are rejected, you have one more chance to submit a fresh application with two more names. In total, four names can be applied for in a single application.
No, for incorporation of a Private Limited Company, minimum of two directors or shareholders required. However, a single person can register a One Person Company (OPC) alone.
Yes, a salaried person or any employed person can become a director of a Private Limited Company, Limited Liability Partnership (LLP), or One Person Company (OPC). However, it is important to check the employment agreement to ensure that it allows for such provisions. In many cases, employers are comfortable with their employees being directors in another company. However, if there are restrictions on becoming a director of a company, one can hold shares in a company & become a shareholder instead.
Yes, a person who is under employment, a government servant, or a professional carrying on their practice can be a shareholder in a Private Limited Company. However, it is important to check if there are any restrictions from governing bodies, authorities, or ministries.
Yes, it is possible for directors and shareholders to be the same person in a company. However, if you want to have a separation between ownership & management, you can appoint different individuals as shareholders and directors.
No, a minor cannot become a director or shareholder in a company. However, a minor can become a member/shareholder of a company through gift and/or inheritance. It is important to note that a minor cannot enter into an agreement to buy shares.
Yes, it is open to register a company using your residential address. However, you will need to submit a utility bill as proof of address & No Objection Certificate from the owner of the premises.
Yes, a private limited company should get its book audited & file the same with the Registrar of Companies (ROC) every year.