A private limited company is a type of business entity in “private” ownership used in many jurisdictions, in contrast to “public” ownership, with some differences from country to country.
Ministry of Corporate Affairs is the governing body in India which regulates all Private Limited Companies in India. The Companies Act of India is now called as Companies Act, 2013.
What is a “Private Limited Company”?
A Private Limited Company is a Company that has a Minimum of Two members and a maximum of 200 Members. To calculate members, present and past employees are excluded.
The characteristics that ascribe to a private limited company are:
- A Private Limited Company cannot invite the general public to subscribe to its securities.
- A Private Limited Company offers Limited Liability or Legal Protection for its Shareholders.
- A Private Limited Company lies between a partnership and a widely owned public company.
- A Private Limited Company is identified by the company name, a number of members, formation, directors, meetings, shares, etc.
A Private Limited Company is “Limited by Shares” i.e. there are shareholders associated with the company and the theoretical value of the shares & any paid in return for the issue of shares by the corporation is limited to the capital which is initially invested.
Why do people prefer “Private Limited”?
Almost 93 percent of the companies incorporated in India are registered as Private Limited Companies. Also, most of the newly established companies prefer to start as a private due to its inability to trade publically which concentrates the power and control within the company and its board of directors rather than diluting it among thousands, if not millions, of small shareholders. Due to this, the decision making process is quicker, which subsequently allows the management to implement their strategies and lay down their vision of the company, and in case one or the other plan goes awry, again the control allows them to stay flexible, quickly adapt to the changes and go with the plan B or just make a correction in case the mistake isn’t fatal. Clearly, at least in the initial stages, the benefits of a “private limited” are immensely pivotal for the long-term future of the company.
- Copy of PAN card
- Copy of Adhaar card or Voter id or Passport or Driving License
- Copy of Bank Statement or Mobile or Landline Bill
- Passport size photo of Directors
For Registered Office
- Copy of Electricity Bill (not older than 2 months) or
- Water or Gas Bill
- NOC for use of premises or
- Sale Deed or Rental Agreement
Steps or procedure to start a company are given below:
- Apply for Directors Identification Number (DIN) and Digital Signature.
- Select the type of company
- Select a name for your company
- Drafting of a memorandum of association (MOA) and article of association (AOA)
- Stamping and e-filing of various documents with the registrar
- Payment of fees
- Obtain a certificate of incorporation
- Filing of a prospectus in lieu