All about private limited company
There are multiple factors an entrepreneur should consider before choosing the type of business one plans to register. The size and nature of business, fund raising, scale, etc should be considered before choosing the type of business entity. Here are some of the reasons why you should register your business as a private limited company.
- Limited Liability: One of the most significant advantages of forming a private limited company is that it provides limited liability protection to its shareholders. This means that the personal assets of the shareholders are protected from the company's debts or legal issues.
- Perpetual Existence: A private limited company has a separate legal entity from its shareholders, which means it can continue to exist even if the shareholders change or if one of them dies. This gives the company longevity and stability.
- Credibility: A private limited company is seen as a more credible and trustworthy business structure than a sole proprietorship or partnership. This can help the company attract investors, customers, and employees.
- Easy Access to Funding: Private limited companies can issue shares to raise capital, making it easier to access funding from investors. Additionally, banks and other financial institutions are more likely to lend money to a private limited company than a sole proprietorship or partnership.
- Tax Benefits: Private limited companies may be eligible for various tax benefits and exemptions, which can help the company save money and increase its profits.
How to Register a Company Online: The Registration Process
Company registration in India benefits start-ups since it offers them an advantage over those who have not registered. The process of registering your company is complex and involves many compliances. However, you needn’t worry as long as you have AMpuesto, as our professionals can help you with every step of the private limited company registration process.
- Obtain Digital Signature
- Apply for the DIN
- Application for the name availability
- Submission of MoA and AoA to register a private limited company
- Apply for the PAN Card and TAN of the company
- RoC issues a certificate of incorporation with a PAN and TAN
Prerequists for Private Limited Company Registration
The requirements for registering a private limited company are as stated below:
- A minimum of two adult persons are required to act as directors of the company
- Minimum of 2 directors and can have a maximum of 15 directors
- One of the directors of a private limited company has to be an Indian citizen and Indian resident
- The other director(s) can be foreign nationals
- Two persons are required to act as shareholders of a company
Compliance relating Private Limited Company
As a private limited company, there are several compliance requirements that you need to fulfill. Here are some of the key compliance requirements:
- Incorporation Compliance: When incorporating your private limited company, you need to ensure that you fulfill all the legal requirements, such as filing the necessary documents with the Registrar of Companies (ROC) and obtaining a Certificate of Incorporation.
- Annual compliance: Private limited companies need to comply with various annual compliance requirements, such as filing holding an annual general meeting (AGM) and filing annual returns with the ROC.
- Tax compliance: Private limited companies need to comply with various tax requirements, such as obtaining a permanent account number (PAN) and filing income tax returns. You also need to comply with Goods and Services Tax (GST) regulations if your business is involved in the supply of goods or services.
- Statutory compliance: Private limited companies need to comply with various statutory requirements, such as maintaining proper books of accounts, issuing share certificates, and filing various forms with the ROC.
- Corporate governance compliance: Private limited companies need to comply with various corporate governance requirements, such as appointing directors and auditors, maintaining board minutes, and ensuring proper internal controls and financial reporting.
Failure to comply with these requirements can result in penalties and legal repercussions. Therefore, it is important to ensure that you are aware of all the compliance requirements and fulfill them in a timely and accurate manner. You may also consider seeking the help of AMpuesto, to ensure that you are complying with all the requirements.
Key differences between a private limited company and other types of business structures
When starting a business, one of the key decisions you need to make is choosing the right business structure. Two popular business structures are private limited companies and sole proprietorships/partnerships. Here are some of the key differences between these structures:
- Liability: One of the main differences between a private limited company and a sole proprietorship/partnership is the level of liability. In a sole proprietorship/partnership, the owner(s) have unlimited liability, which means that they are personally responsible for all the debts and obligations of the business. In a private limited company, the liability of the shareholders is limited to the amount of share capital they have invested.
- Ownership: In a sole proprietorship, the business is owned and operated by a single individual. In a partnership, the business is owned and operated by two or more individuals. In a private limited company, the business is owned by the shareholders, who may or may not be involved in the day-to-day operations of the business.
- Management: In a sole proprietorship, the owner is responsible for managing the business. In a partnership, the partners share the management responsibilities. In a private limited company, the management is handled by the directors, who are appointed by the shareholders.
- Funding: Sole proprietorships and partnerships typically rely on the personal funds of the owner(s) for funding. Private limited companies, on the other hand, can raise funds by issuing shares to investors.
- Compliance: Private limited companies are subject to more compliance requirements than sole proprietorships/partnerships. For example, private limited companies are required to hold annual general meetings, file annual returns, and maintain proper accounting records.
These are just some of the key differences between private limited companies and sole proprietorships/partnerships. When choosing a business structure, it is important to consider the specific needs of your business and seek the advice of a professional if necessary.