WHAT IS PRIVATE LIMITED COMPANY? A private limited company is a company incorporated under the Companies Act, 2013 having minimum number of 2 directors. It is a form of business entity which limits the liability of the members to the extent of their contribution. It also restricts the shareholders from publically trading shares. PRIVATE COMPANY REGISTRATION PROCESS: 1) OBTAIN DSC/DIN: The first step in the process of incorporation is obtaining the DSC and thereafter obtaining the DIN. Every proposed director has to obtain the Digital Identification number in order to proceed for the name approval. Thus, the first step in the incorporation of private limited company is obtaining the Digital signatures of directors and also the director identification number. 2) NAME APPROVAL: Form INC-1 needs to be filed to MCA with maximum 6 proposed names of the company. The registrar after evaluation of the proposed names, shall grant the name for a period of 60 days. This is reservation of name, obtained in the form of name approval certificate issued by ROC. 3) FILE INCORPORATION DOCUMENTS AFTER NAME APPROVAL: The incorporation documents such as Memorandum of Association, articles of Association, declaration to act as director, professional’s declaration along with other required documents are filed to ROC. 4) ISSUANCE OF CERTIFICATE OF INCORPORATION: The ROC after the verification of documents if finds appropriate issues, the certificate of Incorporation and thereby the company commences the business.
BENEFITS OF REGISTERING A COMPANY IN INDIA 1) Limited Liability: the company exists as a separate legal entity from its members. The liability of the company is apart from the members of the company. Private limited Company thus has a limited liability among its members. 2) Transfer of ownership is easy: Under the companies act, 2013 the compliance to be done for transfer of ownership has become easy and therefore is less complex. The shares and other interest of any member in the company shall tend to be a movable property and can be transferable in the manner so provided by the Articles of such Company. Therefore, it is easier to subscribe or leave the membership of the company. Also it is easier to transfer the ownership. 3) Taxation: this is something everyone wants, that is to minimize tax burden. Thus Company as per the Income Tax Act, 1961 has another benefit of incorporation towards taxation. Companies are often taxed at a lower rate and are provided with better taxable benefits as compared to other forms of business organization.
4) Raising Money: Raising money as a small business and a sole proprietorship or partnership can be difficult. But as per Companies Act 2013 a company can sell shares to the public or can accept deposits from public and can therefor raise money easier than other business structure types. The modes of financing business carried on by company is numerous. Moreover, since the companies are governed by particular law and have to comply with stringent disclosure norms, therefore they enjoy good credit worthiness with various financial institutions. 5) Selling the business: It is easy to sell business for a Company than any other business form. As business corporation value will be based on the business, not the owner, therefore making it easy to sell the Company. 6) Capacity to Sue: As a juristic legal person, a Company can sue in its name and be sued by others. 7) Governance is better: Companies are governed by the Companies Act, 2013 and have to follow various other regulatory procedures during the course of its governance, moreover they have to comply with the stringent disclosure norms so imposed by the Authority, which let to better governed organizations and creation of value for owners.
What is the difference between a private company and public company?
S.no 1.
3. 4.
Minimum number of shareholders Maximum number of shareholders Transfer of shares Name restriction
5.
Paid up capital
2.
Private Company 2
Public Company 7
200
No limit
With restriction A private company has to add private limited to its name Rs. 1 Lakh
No restriction A public company has to add
Rs. 5 Lakh