PRIVATE LIMITED COMPANY REGISTRATION

Any natural person or entity having separate legal identity can become member in the private limited company, but there shall be at least 2 members to form a private limited company.

A private limited company should have atleast 2 directors and maximum 15 directors.

Yes for formation of private limited company registration with registrar to companies is mandatory. To know the process click here

In case of companies the area of operation i.e. business activities, its relation with outsiders, restriction on transfer of shares, directorship and internal mode of operation of company are governed and is written in documents which is called Memorandum of association and Article of association. The Memorandum and Article of association are the basic documents of the company which are mandatory and just like constitution of the company. To know more about Memorandum and association and article of association click here.

There is no upper limit, however minimum paid up capital of Rs100000/- (One Lac rupees) is required to be introduced in order to incorporation/form private limited company. In the private limited company paid capital of the company is restricted to the extent of authorized capital of the company and in order to enhance the paid up capital, one has to increase the authorized capital of the company.
 

In private limited company whether it is subscribers initial capital or further issue of shares (except right issue or sweat equity shares) investment is required to be made through proper banking channel separate bank account of the company. Refer section 42 of the companies act, 2013.

Yes, with the certificate of incorporation and Memorandum of association  bank account after complying with other RBI Norms can be opened, there is no need to apply any other registration with government department like VAT or Service Tax etc.. To know more about how to open bank account click here.

No, only applicable government registrations are mandatory like if sales/supply of services exceed specified limit of turnover then registration with Goods and Services Tax Department is mandatory. To know about registration with government departments click here.

In private limited company maximum number of shareholders cannot exceed 200 (two hundred). Further there is restriction on right to transfer share of the company publicly.

1. LIMITED LIABILITY: It means that if the company experience financial distress because of normal business activity, the personal assets of shareholders will not be at risk of being seized by creditors.

2. CONTINUITY OF EXISTENCE: Business is not affected by the status of the owner.

3. MINIMUM NUMBER OF SHAREHOLDERS: Need to start the business are only 2.

4. MORE CAPITAL: Can be raised as the maximum number of shareholders allowed is 200.

5. SCOPE OF EXPANSION: Is higher because easy to raise capital from financial institutions and the advantage of limited liability.

6. BRAND VALUE: Company’s brand value will get increased because people come to know about the company very well.

7. VALUATION: Since the share price reflects the company’s financial healthiness it would become easy to arrive at a price in case of mergers and acquisitions.

8.  EQUITY FUNDING OR BANK FINANCE: A private limited company are favourites of angle investors or venture capitalists, they give preferences to this type of business structure and can invest money through equity investment. All banks and financial institutions give more preference to advance loans and funding to companies rather than proprietorship and partnership firms.

9. NO LIABILITY IN CASE OF FRAUDS BY DIRECTORS: The day to day operations and business decisions in the companies are taken by the board of directors, and if any fraud is made by them, then they will personally liable for the fraud and they will also be liable for prosecution. However there is no shareholders liability in case of fraud by the management of the company if shareholders are not involved.

1. TRANSFER OF SHARES:

The law restricts shareholders of a privately held company from transferring shares freely to non-shareholders without consent of other shareholders. This leads to inefficiencies since the investment decisions should be timely so that a shareholder can sell his shareholding in the company without informing the other shareholders.

2. ISSUE OF SHARES:

Privately held companies cannot issue shares to the public. This means that they are not able to raise large amounts of capital through issuing shares. This is because the law restricts these companies to a limited number of members. Therefore, they have a limit to the amount of capital they can raise from the issue of shares.

3. ACCESS TO CREDIT:

The risk of loss is high for a financial institution funding a privately held company. This is because the existence of these companies is dependant on the life and wealth of its shareholders. The death or bankruptcy of a majority shareholder is a big blow to the existence of these companies. Therefore, financial institutions have restrictions when advancing loans to companies of this type, and the directors of these companies have to act as guarantors of these companies. This makes it hard for privately held companies to access loans to finance their operations and expansion as the amount that directors can guarantee is limited on their wealth. This also limits the value of assets they own.

4. RISK OF LOSS:

Shareholders in a privately held company face a high risk of personal loss since they can easily lose all their investment. This is because it the individual shareholders mainly fund the assets of the company. This is because a privately held company comprises only a few members who contribute capital to the firm. Thus, the company’s value reflects the wealth of its shareholders. The death or bankruptcy of a major shareholder has a negative impact on the company’s performance and continuity since the company’s value is dependent on the value of individual shareholders.

Yes, a private limited company are favourites of angle investors or venture capitalists, they give preferences to this type of business structure and can invest money through equity investment. All banks and financial institutions give more preference to advance loans and funding to companies rather than proprietorship and partnership firms.

No unlike partnership firm, in case of limited liability partnership and companies name of an existing company cannot be taken by any other person. If anyone tries to take same name it will not be approved by the registrar of companies. So it provide protection of theft of name irrespective of whether trademark of name is taken or not. Further taking name of the company requires approval from the registrar of companies and should company with the guidelines issued from time to time. To know more about such guidelines click here

To know the forms which are required to filed with registrar of companies, click here.

To know the due date of filing forms with registrar of companies, click here.