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All you need to know about private limited company

PUBLISHED ON: Jun 21 2022
PUBLISHED IN: Uncategorized

What is a Private Limited Company?

A private limited company is a type of company registered under the company act 2013, helped privately by individuals or groups of individuals. The members of a private limited company have limited liability; that is, their liability is limited to the extent of shares held by them in the company. The shares of a company cannot be traded publically. We will discuss everything you need to know about a private limited company, including its characteristics, features, and private limited company registration.

In India, the start-ups face a lot of problems registering their businesses. The process is complex and requires extensive documentation and time in the case of a public company. Hence, most entrepreneurs register their companies as private limited companies. It is because of the ease and various advantages of a Pvt ltd company registration which is discussed below in comparison with the public company.

Ownership

Since the shares of a private limited company are not publicly traded and exclusively held by the founders, management, or private investors, there are fewer chances of confusion and complexity in the company’s direction as there are fewer shareholders. Whereas for a public company, the shares can be sold to the public in the open market.

Number of shareholders

For a private company, a minimum of 2 shareholders are required, whereas, for a public company, a minimum of 7 shareholders are required.

Legality

The legal formalities involved in the registration of a company can be costly. For a public company, the legal formalities and the whole process are very lengthy and time-consuming. It is also costly as compared to a private company.

Information disclosure

A public company has to release its financial reports publically while a private company can keep its financial reports confidential.

Decision-making and management

The management and decision-making become very complex in a public company because of the huge number of shareholders. However, in a private limited company the management and decision making and easy and less complex because of the limited number of shareholders.

Stock market pressure

Stock market pressure refers to the pressure exerted by shareholders on the company to increase its earnings. In the case of a private company, there is no stock market pressure and you don’t have to worry about shareholder expectations and interference as long as they work within the law.

Long-term planning and growth

Managers of public companies are forced to increase the value of their stocks in the short run whereas a private company can focus on the long-term goals as such pressure is eliminated.

Share Capital

Capital is the most concerning part while opening a private or public company. In India to start a public company a minimum of 5 lakh share capital is required which makes it very expensive. However, there is no limit on capital for starting a private company. Previously, the private limited company should at least have a minimum capital of 1 lakh but now there is no such restriction.

Company registration in India involves a lot of documentation and complex procedures. However, it’s easier now to get Pvt ltd company registration in India with the help of consultancies whose main business activity is to provide such services. There is a particular procedure that should be followed for private limited company registration in India which is explained below.

Steps involved in Pvt ltd company registration in India

Step 1 Obtaining DSC (digital signature certificate) and DIN (director identification number)

Step 2 Decide a name for the company and apply for it to check whether some other company already exists with that name or not.

Step 3 Draft and file the Memorandum of association and article of association for further registration process of the company.

Step 4 Apply for PAN and TAN of the company to support the banking procedures

Step 5 Obtain the COI (certificate of incorporation) which would be issued by the Registrar of the company along with PAN and TAN

Step 6 The last step after obtaining COI is to open a current account with any bank to carry out all the business transactions.

There are the steps that should be followed for private company registration in India. In the case of the public company, the number of steps is more and it’s comparatively costlier than a private company. The procedure of registering a public company is more complex than that of a private company. So, a private company is easy to start in India as compared to a public company.

Apart from the registration, there are certain important things that need to be done after getting your company incorporated. These things are very important to do and mandatory for all the private companies registered in India. These are as follows-

GST Registration- When the annual turnover of the company is more than 40 lakhs, it needs to get its GST registration done.

GST Return- Once the registration is done, the company needs to file GST returns every year.

Accounting- It is mandatory for the companies to maintain their books of accounts for various purposes.

Statutory Audit- Within 30 days of incorporation, the company is supposed to appoint an auditor to audit the financial statements every year.

MAT Audit- Minimum alternate tax is the minimum tax that should be paid by every company every year. It is compulsory for Pvt ltd companies to get their accounts audited under Minimum Alternate Tax.

Trademark Registration- Trademark registration should be done for full protection against copying and imitation of your brand name, logo, business name, etc, by any other company.

Company registration in India can be a daunting task as it involves complex procedures and documentation. Companies like lawgical India prove company registration services in India for easy and hassle-free registration. Lawgical India with its team of experts can assist you with your private limited company registration and get everything done within a few days at a very reasonable rate.

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