What is a Private Limited Company?
A private limited company in India is a type of company that is owned by a limited number of shareholders. The maximum number of shareholders in a private limited company is 200. Private limited companies are not allowed to offer their shares to the public.
The liability of the shareholders in a private limited company is limited to the amount of money that they have invested in the company. This means that if the company goes bankrupt, the shareholders will not be liable for the company's debts.
Private limited companies are a popular choice for businesses in India because they offer a number of advantages, such as:
- Limited liability for shareholders
- Separate legal entity from the owners
- Easier to set up and manage than a public limited company
- Lower compliance requirements
If you are considering starting a business in India, a private limited company is a good option to consider.
Here are some of the key features of a private limited company in India:
- Limited liability: The liability of the shareholders in a private limited company is limited to the amount of money that they have invested in the company. This means that if the company goes bankrupt, the shareholders will not be liable for the company's debts.
- Separate legal entity: A private limited company is a separate legal entity from its owners. This means that the company is responsible for its own debts and liabilities, and the owners are not personally liable for the company's debts.
- Minimum number of shareholders: The minimum number of shareholders in a private limited company is two. The maximum number of shareholders is 200.
- Minimum share capital: There is no minimum share capital requirement now as it is waived by the Government of India.
- Annual filing requirements: Private limited companies are required to file annual returns with the Registrar of Companies (ROC). They are also required to file financial statements with the ROC.
What are the benefits of a private limited company?
A private limited company is a common type of business entity in India that offers many benefits for small businesses. Some of the benefits of registering a private limited company in India are:
- Limited liability protection:
The owners of a private limited company are only responsible for the company's debts and obligations up to the amount of their shareholding. They do not have to risk their personal assets to pay for the company's liabilities . - Separate legal entity:
A private limited company has its own existence in the eyes of the law. It can own property, enter into contracts, sue and be sued in its own name. The owners and managers of the company are separate from the company itself. - Access to funding:
A private limited company can raise funds from various sources, such as equity, debt, venture capital, etc. It can also issue shares to its existing or new members, subject to certain conditions. A private limited company has more credibility and trustworthiness than other forms of business entities . - Professional image:
A private limited company has a formal and structured way of doing business. It has to comply with various legal and regulatory requirements, such as filing annual returns, maintaining books of accounts, conducting board meetings, etc. These compliance activities enhance the reputation and goodwill of the company among its stakeholders . - Tax benefits:
A private limited company can enjoy some tax benefits, such as lower corporate tax rate, deduction for research and development expenses, carry forward of losses, etc. It can also claim tax credits for certain activities, such as investing in startups, employing new workers, etc.
What are the prerequisites for incorporating a Private Limited Company?
- DSC
- DIN
- Aadhar of the directors (Address proof covered)
- PAN of the Directors
- Passport size photograph of the Directors
- Aadhar of the Shareholders (Address proof covered)
- PAN of the Shareholders
- Passport size photograph of the Shareholders
- Holding percentage of each shareholder
- Recent Bank statement of directors and shareholders
- Name preference of the company
- Rent agreement or NOC from the landlord of place which will be the place of business
- Utility bills