Private limited company is the most successful corporate entity in India.
Private Limited Company
A business entity registered with the Ministry of Corporate Affairs under companies act. It is the most popular business structure in India as it has many advantages and easy to operate. It is the best option to start the business as the owner and directors of the company have limited liability, and they are not personally liable to any debt and losses owned by the company as the company and management of the company are different from each other. Any business activity can start under the private limited company format, but it should be a legal activity. As per new rules of registration, it gets effortless to register the company by following the simple registration process.
Characteristics of Private Limited Company
Members : To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
Limited Liability : The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
Perpetual succession : The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
Index of members : A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
A number of directors : When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
Paid-up capital : It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.
Prospectus : Prospectus is a detailed statement of the company affairs that is issued by a company for its public. However, in the case of a private limited company, there is no such need to issue a prospectus because this public is not invited to subscribe for the shares of the company.
Minimum subscription : It is the amount received by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In the case of a private limited company, shares can be allotted to the public without receiving the minimum subscription.
Name : It is mandatory for all the private companies to use the word private limited after its name.
Requirements for Private Limited Company Registration
The requirements for private limited company registration are:
Members : A minimum number of two and a maximum number of 200 members or shareholders are required as per the companies’ act 2013 before registration of the company.
Directors : A minimum number of two directors is required for registering the private limited company. Each of the directors should have DIN i.e. director identification number which is given by the ministry of corporate affairs. One of the directors must be a resident of India which means he/she should have stayed in India for not less than 182 days in a previous calendar year.
Name : It is one of the major components of a private limited company. The name of the company contains three parts i.e. the name, the activity, and private limited company. It is necessary for all private companies to use the word private limited company at the end of its company name. Every company has to send 5-6 names for approval to the registrar of the company and all the names should be unique and expressive. The name for approval should not resemble any other companies name. So choosing the right company name is an important component is it will stay with the company throughout its life.
Registered office address : While going for the registration of the company, the owner should provide the temporary address of the company until it does not get register. However when the company has been registered then the permanent address of its registered office should be suited with the registrar of the company. The Registered office of the company is where the company’s main affairs are been conducted and where all the documents are placed.
Obtaining a digital signature certificate : In today’s modern world everything is done online. All documents are submitted electronically and for that, every company must obtain a digital signature certificate which is used to verify the authenticity of the documents. A digital signature is obtained by all the directors which are marked on all the documents by every director.
Professional certification : In a company there are many professionals which have required for many purposes. For incorporating a private limited company certification by these professionals are necessary. Various professionals such as company secretary, chartered accountant, cost accountant, etc are required to make their certification at the time of company incorporation.
Advantages of Private Limited Companies
Ownership : In a public company, regulation and ownership of shares can be sold to the public on an open market. On the other hand, in a private company, shares can be sold or transferred to other people by the choice of the owner. Shares of such companies are owned by founders, management or a group of private investors. Shares here are not sold in the open market. Thus there will be fewer shareholders. This means less complexity and confusion in decision making and management.
Minimum Number of Shareholders : For a private company, a minimum number of required shareholders is 2, whereas, for a public company, you require a minimum of 7 shareholders.
Legal Formalities : Legal formalities are sometimes very expensive and time-consuming, aren’t they? If you’re planning to start a public company, you better be prepared because there is a long list of legal formalities for forming a public company. Private companies have a comparatively shorter list.
Disclosing Information : A public company is required to disclose their financial reports to the public every quarter, as it will affect public investment; private companies are not subjected to any such compulsion.
Management and Decision Making : Management and decision making becomes more complex and confusing in public companies as more number of shareholders is to be consulted. This complex procedure is eliminated in a private company as the number of shareholders is less.
Focus of Management : Managers of Public companies are focused on increasing the value of shares, whereas managers of the private company are more flexible in the short term and long term business decisions.
Stock Market Pressure : Private companies are not pressurized by the stock market and you don’t have to worry about shareholder expectations and interference as long as they work within the law. Shareholders in public companies are focused on current earnings and they exert pressure on the company to increase earnings.
Long Term Planning : Managers of public companies are pressurized to increase earnings in the short term in order to increase the value of their stock. Private companies can focus on long-term earnings as such pressure is eliminated.
Minimum Share Capital : You will be needing a lot of money for a public company. A public company requires a minimum share capital of Rs. 5,00,000. For a private company, the earlier minimum number of the share capital was Rs. 1,00,000, but now there is no such minimum compulsion. Therefore there is no pressure of fund requirements.
Confidential : It is obviously not appropriate, for competitors to know about your business secrets. Confidential information such as executive compensation, legal settlements, and other essential information cannot be kept reserved in public companies. Such information is more secure in a private company.
Therefore, a Private Limited Company is less complicated compared to a Public company. It is comparatively less expensive and less time-consuming.
The Role of GST Suvidha Centers
GST Suvidha Centers play a crucial role in assisting individuals and businesses in registering their Private Limited Companies (PLCs) under the Goods and Services Tax (GST) regime. These centers provide a centralized platform for various GST-related services, including:
- GST registration: Guiding PLCs through the process of registering for GST.
- GST returns filing: Assisting PLCs in filing their periodic GST returns accurately and on time.
- GST compliance: Providing advice on GST compliance matters, such as input tax credit (ITC) utilization, invoice verification, and reconciliation.
- GST refunds: Helping PLCs claim GST refunds.
- GST audits: Representing PLCs during GST audits and providing necessary support.
Benefits of Using a GST Suvidha Center
- Expertise: GST Suvidha Centers are staffed with professionals who have in-depth knowledge of GST laws and regulations. They can provide expert guidance and assistance throughout the registration process.
- Efficiency: These centers often streamline the registration process, reducing the time and effort required by PLCs.
- Convenience: By offering a one-stop shop for GST-related services, GST Suvidha Centers eliminate the need for PLCs to visit multiple government offices.
- Cost-effective: While some GST Suvidha Centers may charge a nominal fee for their services, the overall cost can be significantly lower than hiring a professional accountant or tax consultant.
The GST Registration Process for Private Limited Companies
The GST registration process for a PLC typically involves the following steps:
- Obtain Digital Signature Certificates (DSCs): Obtain DSCs for the authorized signatories of the company.
- Gather necessary documents: Prepare the required documents, such as proof of identity, address, and business premises.
- Choose a GST Suvidha Center: Select a nearby GST Suvidha Center that offers the services you need.
- Submit application: Fill out the GST registration application form and submit it to the GST Suvidha Center along with the necessary documents.
- Verification and approval: The GST authorities will verify the information provided in your application. If everything is in order, your registration will be approved.
Obtain GSTIN: Once your registration is approved, you will receive a Goods and Services Tax Identification Number (GSTIN)
Tips for a Smooth Registration Process
- Gather all necessary documents in advance: Ensure that you have all the required documents ready before visiting the GST Suvidha Center.
- Choose a reputable center: Research and select a GST Suvidha Center that has a good reputation and positive reviews.
- Be prepared to provide additional information: The GST authorities may request additional information or documents during the verification process.
Seek clarification if needed: If you have any doubts or questions, don’t hesitate to ask the staff at the GST Suvidha Center for clarification
Additional Considerations for Private Limited Companies
- Certificate of Incorporation: Obtain a Certificate of Incorporation from the Registrar of Companies to establish your PLC.
- Memorandum and Articles of Association: Prepare a Memorandum and Articles of Association that outline the company’s objectives, powers, and internal governance.
- GST Return Filing: Understand the GST return filing requirements based on your PLC’s turnover and the nature of your business.
- ITC Utilization: Claim input tax credit (ITC) as per the applicable rules and maintain proper documentation.
GST Audits: Be prepared for potential GST audits and maintain accurate records to facilitate the audit process.
Conclusion
Registering a Private Limited Company (PLC) under the GST regime can be a straightforward process with the assistance of a GST Suvidha Center. These centers provide valuable guidance, support, and expertise, helping PLCs navigate the GST landscape effectively. By following the steps outlined above and seeking assistance from a reputable GST Suvidha Center, you can ensure a smooth and successful GST registration process for your PLC
FAQ'S
Private Limited Company Registration in India
What is a Private Limited Company?
Run and managed privately by its directors and shareholders, a private limited company is not entitled to sell its shares to outside public investors and hence, it cannot trade on the stock exchanges, like the public limited companies do. Consequently, a private limited company is required to make much lesser administrative and financial disclosures to, and regulatory and annual compliances with the concerned authorities than those performed strictly by the public limited companies. Again, the shareholders of a private limited company in India, could be natural persons or companies, including the foreign companies.
Is a Private Limited Company Suitable for making FDI in India?
Yes, immensely suitable!The private limited companies have been a hugely popular form of business entity amid foreign investors for making the direct foreign investment (subject to FDI Guidelines) in any country, by means of a wholly-owned subsidiary, a joint venture, etc.
Can a Foreign National/Company be a Director/Shareholder in any Private Limited Company in India?
Yes. Any foreign national or company, or an NRI (non-resident Indian) can become a director, or hold share of a private limited company in India. But, at least one director on the Board of Directors of a private limited company in India must be a Resident in India. However, holding shares of a private limited company in India by foreign nationals/companies will be subject to the contemporary FDI Guidelines of India.
What are the Primary Requirements for setting up a Private Limited Company in India?
The statutory requirements for the incorporation of a private limited company anywhere in India, are the following:
- A minimum of Two Directors and Two Shareholders (The Directors can also be Shareholders). The maximum number of shareholders in a private limited company in India has been extended to 200 (from 50) under the new Indian Companies Act of 2013.
- No governmental recommendation regarding the Minimum Paid-up Share Capital required for incorporation of a private limited company anywhere in entire India, as per the latest Companies (Amendment) Act of 2015. The mandatory requirement of getting the certificate for business commencement has also been repealed by this Amendment Act of 2015.
- Xerox copies of the PAN Cards of the Directors/Shareholders (Indian Nationals) or Copy of Passport (Foreign Nationals).
- DINs (Director Identification Numbers) and DSCs (Digital Signature Certificates) of the Directors.
- Xerox copies of the Identity Proof and Address Proof of All Directors.
- Address Proof of the proposed Registered Office of the company (along with the No Objection Certificate from Landowner, etc.)
What is the general Procedure for Incorporating a Private Limited Company in India?
After obtaining the DSCs and DINs, the next task is to ensure the availability of the proposed name of the private limited company through filing the Form INC-1. Then, drafting appropriate Memorandum of Association (MOA) and Articles of Association (AOA) of the company will be made. And, finally, Form INC-29 will be filed with the concerned ROC for incorporation of the proposed company, together will all required documents.
What is the Tentative Time-period Lapsed in the Incorporation of a Private Limited Company in India?
Based on the requirement of obtaining diverse requisite documents, authenticity of the documents submitted by the directors/shareholders, the speed of processing and filing forms & documents, and the briskness of the proceeding performed by the concerned government authorities, the approximate time taken by the entire procedure for incorporation may range from One to Two Weeks.
