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Characteristics/Features of Private Limited Company

August 1, 2024 by Team Instabizfilings

Characteristics/Features of Private Limited Company

 

 

 

As per clause (68) of Section 2 of Companies Act, 2013, private company is understood as a company that:

 

  • Incorporation of minimum paid-up share capital required or prescribed by the law

  • Restricts the transfer of its shares through its articles of association

  • Bars membership to a maximum of 200, this being the case where it is a One Person Company.

  • Prohibits any public invitation to subscribe to its securities

 

Characteristics of a Private Limited Company

 

Here are some of the main features of a private limited company:

 

1. Membership Structure

 

2. Limited Liability Protection

 

3. Separate Legal Entity

 

4. Minimum Paid-Up Capital Requirement

  • To operate a private limited company, you need to maintain a minimum paid-up capital of ₹ 1 lakh. This amount may increase over time, as prescribed by the Ministry of Corporate Affairs (MCA). This requirement ensures that your company has a solid financial foundation to support its operations.

 

Registering a Private Limited Company

 

To register a private limited company, you need to fulfill certain statutory requirements. Below are features that ought to be fulfilled:

 

1. Members and Directors

  • A private limited company must have a minimum of two and a maximum of 200 members. Additionally, the directors must meet the following conditions:

  • One director out of the company directors must be resident in India, that is he/she spends not less than 182 days in the country in the last calendar year.

 

2. Choosing a Company Name

  • A private limited company must ensure its name includes three essential elements:

  1. Main name
  2. Activity to be carried out

Pro Tip:

 

3. Registered Office Address

  • On registration, the company is to present to ROC the registered office which is permanently fixed.

 

4. Obtaining Essential Documents

 

Different Company Registration Options

 

Here's a breakdown of the six main options:

 

1. Sole Proprietorship

 

2. Partnership Firm

 

3. Limited Liability Partnership (LLP)

 

4. One-Person Company (OPC)

 

5. Private Limited Company (PLC)

 

6. Public Limited Company

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Documents Required for Applying Private Limited Company

 

Here are the 10 essential documents required for company registration:

 

1. Identity Proof

  • Verify the identity of directors with documents such as:

 

2. Address Proof

  • Confirm the residential address of directors with documents like:
  1. Utility bills
  2. Rental agreements

 

3. Director Identification Number (DIN)

 

4. Digital Signature Certificate (DSC)

 

5. Memorandum of Association (MoA)

 

6. Articles of Association (AoA)

 

7. Declaration by Directors and Subscribers

 

8.

 

9. Shareholding Pattern of the Proposed Company

  • Purposes of dissemination of share include summarising the distribution of shares with shareholders of the company.

 

10. Proof of Registered Office Address

  • Make sure that you make copies of these documents accurate and complete so that it will not cause a problem in the company registration.

 

 

That is an all inclusive guide that can assist anyone with the registration process:

 

For a private limited company Registration in India the following steps are compulsory:

 

  • Step 1: Choose a Unique Name

 

  • Step 2: Obtain Digital Signatures

 

  • Step 3: Obtain Director Identification Number (DIN)

Submit application for DIN online through the MCA portal by filing the form DIR-3 along with the documents of identity proof, address proof and photographs of each of the directors for applying for DIN.

 

  • Step 4: Prepare Memorandum and Articles of Association

 

  • Step 5: Get Consent and Declarations

the Companies Act, 2013, and the rules made thereunder by entering the details on Form No. INC 9 and affixing their Digital Signature Certificate (DSC).

 

  • Step 6: Apply for Company Name Approval

 

  • Step 7: File Incorporation Documents

 

  • Step 8: Pay Registration Fees

 

  • Step 9: Verification and Approval

 

  • Step 10: Obtain PAN and TAN

 

  • Step 11: Open a Bank Account

You have to open a current account of your company and deposit the required minimum paid-up capital which is ₹ 1 lakh for a private limited company.

 

  • Step 12: Obtain Business Licence

These may include:

  • Trade license from Municipality or Panchayat

 

  • Step 13: Compliance with Taxation

 

  • Step 14: Commence Business Operations

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How Much are the Registration Fees of a Private Limited (Pvt Ltd) Company?

 

The incorporated registration fees of Private in India involves share capital, number of directors, state specific stamp duty, and other costs. Below is a trend of the estimated costings regarding the same;

 

Particulars

Amount (in ₹)

Name Reservation

₹ 1,000

DIN Application Fee

₹ 500 per DIN

DSC Fee

₹ 1,500 per DSC

Memorandum of Association Fee

₹ 200 per lakh of authorized share capital or part thereof

Articles of Association Fee

₹ 300 per lakh of authorized share capital or part thereof

PAN Application Fee

₹ 66

TAN Application Fee

₹ 65

Stamp Duty

Varies from state to state

Professional Tax Registration Fee

Varies from state to state

 

The Registration Process of a Private Limited Company & Their Registration Time Line

 

How long does it take, documents required, business available, appropriateness of the company name are some of the factors that exist in the timeline of the process.

 

 

Advantages of Private Limited Company

 

  • Limited Liability

 

  • Several Shareholders 

 

  • Ownership 

 

  • Uninterrupted Existence 

 

Disadvantages of Private Limited Company

 

  • Administrative Burden: 

Recruitment in a private limited company might not be very costly but there are many paper forms to complete and many requirements that the company is expected to fulfill including preparing statutory records, preparing and submitting the company’s annual returns, and organizing the annual general meetings.

 

  • Costs and Financial Obligations: 

In order to incorporate and run a private limited company one may require to spend a fair amount of money on registration fees, annual filing fees and auditor fees.

 

  • Restrictions on Company Activities: 

The operations of the private limited companies are somewhat regulated through certain restrictions for example they cannot invite the public to subscribe for securities or accept money from the public in the form of deposits.

 

  • Limited Stock Exchange Access: 

For instance, while most private limited companies are legally restricted from floating their securities in an exchange, they may have a problem of poor capital mobilization.

 

  • Personal Guarantees and Liability:

 

Disclaimer

 

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.


Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.

 


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